Framework for margins-based planning: Forest biorefinery case study

• A framework for aligning production to different market scenarios is proposed.
• The framework integrates revenue management and exploits manufacturing flexibility.
• A tactical planning model maximizes profit and uses activity-based costing principles.
• The framework is illustrated by a newsprint and biorefinery case study.
• Significant benefits can be realized in operations by better alignment to market.

The biorefinery concept offers a promising solution to transform the struggling forestry industry. Not only will the implementation of new products and processes help to diversify revenues, it will also offer an opportunity to change the manufacturing culture by better managing the flexibility of assets to react to volatile market conditions. In this paper, an integrated supply-chain planning framework is presented. It is based on optimizing a superstructure to help decision makers identify different supply-chain policies to adapt to different market conditions. It integrates revenue management concepts, activity-based cost accounting principles, manufacturing flexibility and supply-chain flexibility in a tactical model to maximize profit in a price-volatile environment. A case study of a newsprint mill implementing a parallel biomass fractionation line producing several biochemicals is used to illustrate this approach. Results and benefits are presented for the traditional pulp and paper business and for the transformed biorefinery in different market scenarios.