Waste paper procurement optimization: An agent-based simulation approach

• We propose an agent-based model of a two-echelon recycled pulp supply chain.
• Extensive simulation experiments are based on industrial data from a partner.
• We examine how Production Flexibility impacts cost, quality and inventory level.
• We examine how contract flexibility impact cost, quality and inventory level.

This paper proposes an agent-based simulation model to study and analyse the performance of various procurement and production policies in the recycled paper industry. The proposed model includes the recycled pulp production process, as well as the waste paper inventory and procurement processes. A detailed simulation model developed in partnership with a large recycled pulp producer in North America was developed in order to emulate the procurement manager's behaviour. Therefore, based on the observed behaviour of the procurement manager, a procurement behaviour model, which takes both market price and inventory requirement into account, is introduced. This paper also introduces a waste paper market model that simulates a market price and enables the control of price forecast accuracy. Two series of experiments were carried out in order to study the performance of procurement and production policies in several productions contexts. Results show that production Volume Flexibility has a negative impact on costs, inventory and quality. However, it is possible to partially reduce these issues with the introduction of contracts with Volume Flexibility, although only a limited effect has been observed in our experiments. A more significant strategy to improve costs consists in reducing production rate to the minimum level required to meet demand.