Design under uncertainty of hydrocarbon biorefinery supply chains: Multiobjective stochastic programming models, decomposition algorithm, and a Comparison between CVaR and downside risk

TLDR

The supply chain model incorporates diverse conversion technologies, seasonal feedstock variability, geographic spread, biomass degradation, demand fluctuations, government incentives, and risk management. The study aims to simultaneously minimize expected annualized cost and financial risk in designing hydrocarbon biorefinery supply chains under supply and demand uncertainties. A bicriterion, multiperiod, stochastic mixed‑integer linear programming model using CVaR and downside risk is solved via a multicut L‑shaped decomposition and demonstrated on four Illinois hydrocarbon biorefinery case studies. Computational experiments confirm that the proposed stochastic design strategy effectively optimizes hydrocarbon biorefinery supply chains under uncertainty. © 2012 American Institute of Chemical Engineers AIChE Journal.

Abstract

Abstract A bicriterion, multiperiod, stochastic mixed‐integer linear programming model to address the optimal design of hydrocarbon biorefinery supply chains under supply and demand uncertainties is presented. The model accounts for multiple conversion technologies, feedstock seasonality and fluctuation, geographical diversity, biomass degradation, demand variation, government incentives, and risk management. The objective is simultaneous minimization of the expected annualized cost and the financial risk. The latter criterion is measured by conditional value‐at‐risk and downside risk. The model simultaneously determines the optimal network design, technology selection, capital investment, production planning, and logistics management decisions. Multicut L‐shaped method is implemented to circumvent the computational burden of solving large scale problems. The proposed modeling framework and algorithm are illustrated through four case studies of hydrocarbon biorefinery supply chain for the State of Illinois. Comparisons between the deterministic and stochastic solutions, the different risk metrics, and two decomposition methods are discussed. The computational results show the effectiveness of the proposed strategy for optimal design of hydrocarbon biorefinery supply chain under the presence of uncertainties. © 2012 American Institute of Chemical Engineers AIChE J, 2012