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International Symposium on
Supply Chain Management for Forest Sector and
Its Contribution to Local Economy



   -Special Lectures-

   Mikael Rönnqvist (Norwegian School of Economics, Norway)

Supply chain management in the Swedish forest industry

      This presentation consists of four parts. First supply chain management (SCM) in general and its use in the forest industry is discussed. Then we describe three application areas arising in the Swedish forest industry. These are in turn collaborative logistics, logistics after a storm and forest biomass logistics.

      The pulp and paper industry depends on a long and integrated supply chain. Forest products start in forest harvest areas as trees and end up as multiple products used in the day-to-day life of all people. The lead time from the first step to the last is long and involves many steps operated by several companies and organizations. In this overview we describe the supply chain in its entirety, its participants and the planning problems arising along the chain. We divide the planning problems into strategic, tactical and operative in a supply chain matrix, describe their characteristics and provide applications as illustrations. We discuss the need for information and decision support for planners in each of these areas. This relates to planning within a single company as well as integrated planning across several.

      Transportation planning is an important part of the supply chain or wood flow chain in forestry. There are often several forest companies operating in the same region and collaboration between two or more companies is rare. However, there is an increasing interest in collaborative planning as the potential savings are large, often in the range 5-15%. There are several issues to agree on before such collaborative planning can be used in practice. A key question is how the total cost or savings should be distributed among the participants. In this part, we study a large application in southern Sweden with eight forest companies involved in a collaboration scheme. We investigate a number of sharing mechanisms based on economic models including Shapley value, the nucleolus, separable and non-separable costs, shadow prices and volume weights.

      The storm Gudrun hit southern Sweden in January 2005 and approximately 70 million cubic meters of forest was wind felled. Existing logistic planning at forest companies in the storm damaged area had to be changed over-night. There was a direct shortage in both harvest and transportation capacities. Key questions that arose were which terminals to use, where to harvest, where to store and which transportation modes (truck, train, ship) to use. In this part, we describe how the forest company, Sveaskog, made use of Operations Research (OR) as an important decision support in their supply chain planning in the aftermath of the storm. The necessary development of the support was carried out quickly and the OR models and methods enabled efficient and detailed re-planning continuously as more accurate information about supply and new customers became available.

      The use of forest fuel is increasing at heating plants in Sweden. Heating plants provide energy in the form of hot water for heating houses and apartments in local municipalities. Forest fuel are products obtained from harvesting in forests that cannot be used for further processing at sawmills and pulp and paper mills. Examples of such products are tree branches, tree tops and low quality logs. The optimization of the supply chain for round-wood (logs to sawmills, pulp and paper mills) and for forest fuel is similar but involves two main differences. First, forest fuel has to be converted into chips before delivery to the customer, and second, the demand for forest fuel varies over the year due to the temperature. To balance the chipping and transportation capacities over time, it is important to manage inventory levels at terminals. The optimization model developed provides decision support for questions regarding the choice of technology for chipping, where to perform the chipping operations, and the allocation of different assortments to heating plants. The system has been tested on a large case study from a Swedish forest energy company. The results show large savings and that the system is very useful for both planning and business development.

   Sophine D'Amours (Universitè Laval, Canada)

Value Chain Optimization in the Forest Sector of Canada

      Canadian forest value networks are complex adaptive systems driven by socio-economical, technological and environmental forces. They extend in “time” and “space”, as the resource may take up to a hundred years to regenerate and is normally widely spread. They are composed of many units which can be associated to three tightly connected sub-networks: the resource network, the production and distribution network, and the recovery network. The resource network is responsible for managing the forest as well as for delivering the wood to the mills. The production and distribution network transforms the wood into products or services. It then sells and delivers the goods to the markets. The recovery network recuperates the residues and the products at the end of their useful life and then either recycles, refurbishes, uses as bioenergy or disposes of the products. The ownership of the network units can be shared between public and private organizations (firms). The links between the units vary depending on country legislations and enterprise business models. The main business streams are pulp and paper (e.g. newsprint, fine paper, tissue and packaging), wood products (e.g. lumber, panels, engineered wood products for structural or appearance application) and energy (e.g. green biomass, pellets, biogas). General concepts of value chain optimization in the forest sector will be reviewed in this presentation

      In the FVN, one of the main challenges resides in the integration of the very long-term strategic planning of the resources network with the shorter time planning of its production, distribution and recovery networks; acknowledging the tight links between multi-objectives agents (e.g. collectivities, governments and industries) which either collaborate or, in some cases, compete for resources (e.g. logs, equipment, capital). Another challenge resides in the synchronization of the different activities (e.g. flows and resources allocation), conducted by different actors of the value networks, in order to meet market demands under strict resource constraints.

      In this presentation, we will review some ideas supporting planning of forest and industry investment decisions as well as tactical and operational collaborative planning. Web based technologies will be presented. SilviLab, is a tool permitting a group of decision makers to optimize collectively the forest planning. LogiLab permits government and businesses to optimize their industrial networks. Both are develop to support the integration of forest and industry investment decisions. They are also developed in order to permit “carbon mapping” of the long term forest and industry decisions.

      To improve the integration between industry and forest, we will discuss the need for coordination mechanisms. We will review traditional mechanisms and present the specific challenges of Canadian forest sector. We will present new ideas to integrate the planning process of different business units. We will conclude by illustrating how value chain optimization is serving the Canadian communities in their effort to reengineer their forest sectors. Models used to establish the economic potential of emerging bioproducts will be presented. The critical role of state policy will also be highlighted in the presentation. To conclude, Case studies of the Canadian forest industry will be used to showcase the research results. Methods proposed build on stochastic programing, agent-based simulation and game theory.

   Woodam Chung (University of Montana, US)

Recent Research Projects in the Western United States to Improve the Efficiency of Woody Biomass Supply Chains

      Sustainable use of renewable resources, such as woody biomass, for energy production can play a major role in mitigating climate change impacts around the world. This presentation will begin with a brief discussion on the status of energy production and renewable energy policies of the United States, followed by a discussion on the key components and issues of supply chain and logistics management for woody biomass utilization for energy in the western United States. Literature review and results from various research activities are presented with an emphasis on improving cost efficiency and feasibility of woody biomass utilization. Recent woody biomass projects funded by the US federal government are discussed as the focus of the presentation. A general discussion of research approach and trends in supply chain improvement for woody biomass feedstock will conclude this presentation.

   Katsuhiko Takata (Akita Prefectual University, Japan)

Expectation to SCM in Japanese Forest Sector from Local Societal Viewpoint

      One of the most important roles of forestry and wood industries in local area is to activate local society. Forestry and the wood industry, however, have had the sad history which recognizes each other as an un-friendly partner who produces a disadvantage for a long time. Basically, they have to be the good business partners, and try to build up a new relationship at the place beyond the past complications. It means that a new business unit "forest industry" with adequate cooperation between forestry and wood industries can give an opportunity of employment and "raison d'être" for peoples live in local society. Optimized supply chain management (SCM) in forest sector should be an essential tool to construct the "forest industry". In this presentation we will discuss four issues; 1) sustainable and cascade type use of renewable forest resources, 2) quantitative fit of demand from wood industries and supply from forestry, 3) well-balanced practice of "product out" and "market in" in marketing stage, and 4) potential to create a new environment-friendly "forest industry" by optimized SCM.

   Nobuyoshi Muto (Research Institute of Local Industries and Economy, Japan)

SCM in Forestry Sector from the End-User and Consultant Viewpoint

      Ⅰ. Mission of the Research Institute of the Local Industry and Economy (RILIE) are
            ①realizing growth of GDP and employment in local society, in order to achieve them
            ②establishing autonomous and continuous businesses, especially
            ③forming symbiotic environmental industry and the result of ①②③,
            ④through consolidation of rural and urban activities, the promotion of quality of life for each citizen can be expected to achieve.
      Ⅱ. In order to actualize the above mentioned mission, two resources held by the RILIE are effective. They are ①analysis capability backed by practical experience and ②broad human network over the industrial and academic field.
      Ⅲ. Methods to achieve the RILIE’s mission are at first ①excavating tangible and intangible resources locally held as a resources for commercialization, and at next ②developing the globally competitive products or services by utilizing local excavated resources. In order to realize item ②, there are 3 countermeasures. Regarding every component of supply chain related to the certain product or service, ③supply chain should be shortened , industrialized and consolidated. ④Essence of Japanese industrial technology should be introduced aggressively to each component of supply chain. Finally,⑤attempt to reinforce the design competitiveness for each product or service.
      Ⅳ. Standing in the above mentioned point of view, RILIE has been attempting small efforts for ①reconstruction of Japan Forest Industry and ②re-strengthening of Japan Agriculture, and Fisheries Industry.
Today I will report on item① that is reconstruction of Japan Forest Industry focusing on past achievement, current attempt and future expectations and trials.