A mixed integer programming model to evaluate integrating strategies in the forest value chain — a case study in the Chilean forest industry

When a company is integrated vertically, it can manage and plan its overall value chain in one direct and integrated approach. However in many cases, companies follow a decoupled approach where forests and production plants optimize separately their processes in a supply-driven strategy. In Chile, the two largest forest companies are vertically integrated (i.e., they own forest and mills that produce logs, lumber, plywood, pulp, paper, and bioenergy, etc.). Historically, they have coordinated their value chains using a make-to-stock strategy, for which the forest is the main driver of the value chain activities. In this paper, we propose an integrated planning approach to show the impacts of a demand-driven integration of the value chain in the forest industry. To compare this strategy with the decoupled strategy, we propose a mixed integer programming (MIP) model for the integrated strategy. To illustrate our proposal, we use forest and production information from a Chilean forest company. The decoupled ...

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