Operational Planning Of Optimal Wood Supply-Chain Network With Focus On Inbound Logistics Constraints

Procuring enough raw materials is an important decision faced with industries’ logistic managers to sustain production lines and improve the competitiveness of an industry within the global market. Since 2017 a large numbers of forest companies in northern Iran have struggling with providing enough wood supply to retain their production-line demands as a result of the logging ban policy over commercial forests. Therefore, they have to buy commercial logs from far-distance domestic plantation and low-quality timbers, either from legitimate or illegitimate sources. This will negatively affect transportation and unit delivery cost of raw materials. The current study is aimed to provide an integrated modeling approach to analyze the current supply-chain network and propose possible logistic scenarios to improve inbound logistics. The model was applied to a realistic wood supply-chain network of 23,000 km² with 172 forest companies which stretch across 20 cities in Mazandaran province, located in northern Iran. To do so, supply sites, demand locations, cost data (transport, loading and unloading type of machine, etc.) and assortment types were collected. Then, an optimization model with in inventory management was formulated to integrate this information and provide an optimal solution. The results showed that the demand portfolio of the studied logistic network consisted of sawlogs (38%), low-quality timbers (15%) and farm-tree pruning woods (45%). Illegitimated timbers provided 22% of the small-sized mill’s demands, while the rest came from legal sources and/or wood yard terminals. The use of wood-yard terminal instead of purchasing woods from illegitimate wood dealers led to a saving of US$1.29 of available tonnes of wood fibers. We assessed the sensitivity of the solution, such as changing in the policy of illegitimate woods, which shows a significant effect on the total cost of network.