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How energy price changes can affect production- and supply chain planning – A case study at a pulp company
Linköping University, Department of Science and Technology, Communications and Transport Systems. Linköping University, Faculty of Science & Engineering.
Linköping University, Department of Management and Engineering, Production Economics. Linköping University, Faculty of Science & Engineering.
Linköping University, Department of Management and Engineering, Energy Systems. Linköping University, Faculty of Science & Engineering.
2017 (English)In: Applied Energy, ISSN 0306-2619, E-ISSN 1872-9118, Vol. 203, 15 p.333-347 p.Article in journal (Refereed) Published
Abstract [en]

The process industry in general is very energy-intensive, and therefore models focusing on energy can be very important in order to reach higher profitability. In this study, an optimization model of the supply chain in a pulp company, where energy is included with respect to its revenue generating capabilities, is used. Using real company data, and through an analysis of the model’s results, we show that higher profitability can be achieved when integrating energy into the planning process. Our findings show that when energy-intensive raw materials not only provide fibre to the pulp process but also generate an energy surplus, there is room for different planning approaches in order to maximize the total profit. This paper reveals promising changes that can be made for improving the current planning process. The scenarios considered involve market changes for energy demand and price, and also alternative production opportunities. A cross-analysis compares the scenarios in order to reveal additional relations that are important to consider. Depending on a price change of energy, the model prioritizes in its selection of pulp products to produce. From this we provide guidelines on where and when to increase or decrease pulp production. The model shows that the company can increase its total profit no matter which of the included energy parameters that increase in price. The paper contributes to previous research by enhancing the usefulness of this model for not only the case company as such, but also by illustrating and describing how the approach applied can be useful for other cases within the energy intensive industry.

Place, publisher, year, edition, pages
Elsevier, 2017. Vol. 203, 15 p.333-347 p.
National Category
Energy Systems
Identifiers
URN: urn:nbn:se:liu:diva-138731DOI: 10.1016/j.apenergy.2017.05.146ISI: 000412379300024OAI: oai:DiVA.org:liu-138731DiVA: diva2:1113623
Note

The previous status of this article was Manuscript and the original title was How energy price changes can affect supply chain planningat a pulp company.

Funding agencies: Swedish Foundation for Strategic Research (SSF)

Available from: 2017-06-22 Created: 2017-06-22 Last updated: 2017-10-23Bibliographically approved
In thesis
1. Planning production and supply chain in energy intensive process industries
Open this publication in new window or tab >>Planning production and supply chain in energy intensive process industries
2014 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

To make a difference among the energy intensive process industries, this dissertation addresses production planning and supply chain planning problems related to industrial energy management issues. The energy issue is turning more and more important from different angles, involving price as well as environmental problems due to climate change leading to political pressure on all energy users. The process industry sector is one of the largest users of energy, and thus important to analyse. Process industries are also capital intensive and operate on large and expensive process equipment, making it imperative to plan their production well in order to reach preferable capacity utilisation. Therefore this dissertation strives to locate the most important energy management issues for the long term profitability of process industries, and investigates the  symbiotic effects of including energy issues in production and supply chain planning.

Three different studies at three case companies are carried out, analysed, and presented in five papers. The cases represent the process industry sectors: chemicals, pulp, and steel. Both qualitative case study methodologies as well as quantitative mathematical modelling and optimisation approaches have been practiced. The research questions are analysed from both an energy system and from a production process point of view, separately as well as combined. Energy is somewhat considered to be the main workforce for process industries and this dissertation exemplifies some of its most important dimensions in this context.

Several prerequisites for putting energy management on the strategic agenda are located in a specialty chemical industry where the importance of introducing a strategic perspective on energy, the way energy is used, and the possibilities of increasing alternative revenue from utilising by- and/or co-products differently are pinpointed. Approaches for including energy issues in planning processes are also suggested in terms of a MILP model for the entire supply chain of a pulp company, including decisions on purchase and transportation of raw maerials, production allocation, energy mix, and distribution. Another example is presented based on the perspectives of economics of scale and lot sizing through economic order quantity principles in a steel company. By using real company data, energy smart approaches in planning and scheduling are developed with respect to the most important intersections between the production processes and their supporting energy system. The accumulated resource intensity and embedded energy could, and probably should, hence be more fairly  reflected in the product price. The research finally shows some possible impact with including energy issues in a production and supply chain planning model. By planning differently, production prioritisations can be done, and it is not only possible without any large investments, but also prosperous with savings on both energy and money within reach.

To conclude, planning of production and supply chain has either a direct or an indirect impact on the energy cost-effectiveness of a company. This dissertation argues that such impact also exists in its mutual form, and is very important when the energy issues are large enough, as they often are in the energy intensive process industry sector. Decision makers should thus beware of the short end of the stick that might be  devastating in the long run, but also aware of all the possibilities that can bring success and prosperity when the future begins.

Place, publisher, year, edition, pages
Linköping: Linköping University Electronic Press, 2014. 75 p.
Series
Linköping Studies in Science and Technology. Dissertations, ISSN 0345-7524 ; 1635
Keyword
Process industry, Energy-intensive production processes, Energy system, Energy management, Production planning, Supply chain planning, Case studies, Mixed Integer Linear Programming, Modelling, Specialty chemicals, Pulp, Steel
National Category
Engineering and Technology Business Administration Economics and Business Energy Systems
Identifiers
urn:nbn:se:liu:diva-112289 (URN)10.3384/diss.diva-112289 (DOI)978-91-7519-173-7 (ISBN)
Public defence
2014-12-18, ACAS, A-huset, Campus Valla, Linköpings universitet, Linköping, 10:15 (English)
Opponent
Supervisors
Available from: 2014-11-21 Created: 2014-11-21 Last updated: 2017-06-26Bibliographically approved

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Waldemarsson, MartinLidestam, HeleneKarlsson, Magnus

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