Biomass Logistics Network Design Under Price-Based Supply and Yield Uncertainty

We consider an integrated supply pricing and biomass logistics network design problem in which yield rates are uncertain. The base supply amount is modeled via a farmers’ decision model that estimates the amount of land dedicated to biomass production under a given biomass wholesale price. We develop a two-stage stochastic integer program for integrated design of a network as well as biomass pricing decisions under yield uncertainty. To efficiently solve our model, we suggest a Benders decomposition–based algorithm in which the Benders cuts, one for each scenario, are aggregated by utilizing a scheme that takes into account yield rates as well as the geographical nature of the underlying problem. With further strengthening of the cuts, we present a significantly improved approach for solving relatively large instances and illustrate its performance via a computational study. We further present an extensive case study in Texas using realistic data to test our model’s capabilities and to demonstrate its eff...

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