Scandinavian Working Papers in Economics

Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science

No 2006/17: Supply Chain Optimization in Pulp Distribution using a Rolling Horizon Solution Approach

David Bredström () and Mikael Rönnqvist ()
Additional contact information
David Bredström: Dept. of Mathematics, Linköpings universitet, Postal: Dept. of Mathematics, Linköpings universitet, 581 83 Linköping, Sweden
Mikael Rönnqvist: Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Finance and Management Science, Helleveien 30, N-5045 Bergen, Norway

Abstract: In this paper we consider a combined supply chain and ship routing problem for a large pulp producer in Scandinavia. The problem concerns the distribution of pulp to customers, with route scheduling of ships as a central part of modeling. It is an operative planning problem with daily ship routing decisions over a 40 days period. The pulp supply is determined by fixed production plans, and the transport flows and storages are modeled with the requirement to satisfy the demand in a cost-optimal way. We develop a mixed integer programming model with binary variables for route usage of a vessel. The problem is solved with a heuristic solution method, based on a rolling time horizon and a standard branch and bound algorithm. We apply the heuristic on problem instances with real world data, and compare results from reduced problem instances with the results from an exact branch and bound search. The computational experiments indicate that real world problems are solvable with the solution method and that it in many cases can be very efficient.

Keywords: Supply chain; Ships; Scheduling; Mixed integer programming

JEL-codes: Q21

18 pages, December 1, 2006

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