How energy price changes can affect production- and supply chain planning – A case study at a pulp company

Martin Waldemarsson, Helene Lidestam and Magnus Karlsson

Applied Energy, 2017, vol. 203, issue C, 333-347

Abstract: The process industry in general is very energy-intensive, and therefore models focusing on energy can be very important in order to reach higher profitability. In this study, an optimization model of the supply chain in a pulp company, where energy is included with respect to its revenue generating capabilities, is used. Using real company data, and through an analysis of the model’s results, we show that higher profitability can be achieved when integrating energy into the planning process. Our findings show that when energy-intensive raw materials not only provide fibre to the pulp process but also generate an energy surplus, there is room for different planning approaches in order to maximize the total profit. This paper reveals promising changes that can be made for improving the current planning process. The scenarios considered involve market changes for energy demand and price, and also alternative production opportunities. A cross-analysis compares the scenarios in order to reveal additional relations that are important to consider. Depending on a price change of energy, the model prioritizes in its selection of pulp products to produce. From this we provide guidelines on where and when to increase or decrease pulp production. The model shows that the company can increase its total profit no matter which of the included energy parameters that increase in price. The paper contributes to previous research by enhancing the usefulness of this model for not only the case company as such, but also by illustrating and describing how the approach applied can be useful for other cases within the energy intensive industry.

Keywords: Supply chain planning; Energy revenues; Energy-intensive production systems; Mixed Integer Linear Programming (MILP) model; Process industry (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:appene:v:203:y:2017:i:c:p:333-347

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DOI: 10.1016/j.apenergy.2017.05.146

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