Designing logistics networks in divergent process industries: A methodology and its application to the lumber industry

This paper presents a generic methodology to design the production-distribution network of divergent process industry companies in a multinational context. The methodology uses a mathematical programming model to map the industry manufacturing process onto potential production-distribution facility locations and capacity options. The industrial process is defined by a directed multigraph of production and storage activities. The divergent nature of the process is modeled by associating one-to-many recipes to each of its production activities. Each facility may use different layouts and the plants capacity is specified by selecting appropriate technological options. Seasonal shutdowns of these capacities are possible and finished product substitutions are taken into account. The objective is to maximize global after tax profit in a predetermined currency. The methodology is illustrated by applying it to the case of the softwood lumber industry. Guidelines for the use of the methodology are provided. The resolution of the mathematical model with commercial optimization software is also discussed.