A comparison between individual factories and industrial clusters location in the forest supply chain

•A mathematical model for the optimal forest supply chain design and planning is proposed.•The model involves a novel formulation for considering cluster formation.•Economical and strategic analysis is made according to the applied discounts.•The tradeoffs between clusters and individual facilities configurations are evaluated.

A mathematical model for optimal supply chain design and planning is presented in this work. The concept of cluster, where several facilities producing different products are closely located, is introduced and specially considered. In order to analyze facilities integration, discounts on investment and production costs are assumed. In addition, tradeoffs between clusters and individual facilities configurations are assessed. The proposed approach is applied to a forest supply chain, where some production plants use the same raw materials while others compete for the use of byproducts and residuals. Results allow for costs reduction when resources and services are shared by plants within a cluster, where, besides, the effect of production scale on the overall SC is also taken into account.