Optimizing transportation and storage of final products in the sugar and ethanol industry: a case study

Abstract

COPERSUCAR Ltda (the acronym for the Sugarcane and Ethanol Producers' Cooperative in Sa˜o Paulo state) is a Brazilian cooperative of sugarcane producers and the largest sugar and ethanol manufacturer in Brazil, producing 4.4 million metric tons of sugar and 2.7 billion liters of ethanol. The cooperative is composed of 34 sugar mills with centralized sales and marketing. This organization establishes the amount of each product that will be manufactured in each mill to reduce total transportation and storage costs and, consequently, increase overall gain. Critical aspects of this problem are seasonal production and, therefore, the need to store final products to meet demand during the off-season period. This study focuses on the application of a multi-period linear programming model that provides optimal assignment of production, transportation, and storage of final products subject to manufacturing and flow capacity constraints. The expected annual benefits of implementing the proposed solution are 3.3 million dollars. In addition, a sensitivity analysis was carried out to investigate the possibility of increasing the capacity of the installed mills.Founded in July 1959, COPERSUCAR is composed of 34 sugar mills, 31 of which are concentrated in the state of Sa˜o Paulo, as shown in Fig. 1. With centralized management of sales and marketing, this group serves clients throughout Brazil. This cooperative is the largest sugarcane manufacturer in Brazil, with a production of 4.4 million metric tons of sugar and 2.7 billion liters of ethanol (data for the 1999/2000 crop). It is also the market leader, accounting for 26% of the sugar market and 23% of the ethanol market in the central and southern regions of Brazil.This study focuses on the application of a linear programming (LP) model that provides the optimal assignment of production, transportation, and warehousing for each period within the logistics system managed by COPERSUCAR. Critical aspects of this problem are seasonal production and the resulting need to store final products to meet demand during the off-season. Thus, production planning involves decisions such as distribution of the production mix between several plants according to their individual capacity, the need for totally external storage, and management of inventory levels for each plant.Numerous mathematical programming models applied to production and distribution problems can be found in the literature. Gehring et al. (1991) used LP in the integrated planning of production and distribution of cement. Gutierrez (1996) developed a multi-period, multiproduct LP model to optimize production, inventory placement (raw materials and final products), and distribution of a company that deals with agricultural input with high seasonal demand. Schuster and Allen (1998) approached the problem of aggregate planning for a manufacturer of fruit-derived products, minimizing transportation, manufacturing, and storage costs. Hindi et al. (1998) presented an application of a multi-product transshipment model for the ...

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