A paper company own a number of mills that produce paper with different processes, e.g., the thermo-mechanical process (see Figure 1), the cold caustic soda process, etc. They procure raw materials for each of their processing machines from a number of different suppliers.

Figure 1 Thermo-mechanical Processing Machine

Their suppliers consist of 3 forestry operations: Kaingaroa, NSW and Taupo. They also own a recycling plant where they receive waste paper.

They own mills at Kawerau (NZ), Boyer (Tasmania) and Albury (NSW). The following table summarises the processing machines at each mill: | Mill | Thermo-Mechanical Process (TMP) | Refiner-Mechanical Process (RMP) | Stone Groundwood Process (SGW) | Cold Caustic Soda Process (CCS) | Recycled Fibre Process (RCF) | | Kawerau | yes | yes | yes | no | no | | Boyer | yes | no | no | yes | no | | Albury | yes | no | no | no | yes |

The paper company purchases three types of raw materials: woodchips, pulp logs and waste paper. The thermo-mechanical, refiner-mechanical and cold caustic soda processes use woodchips, the stone groundwood process uses pulp logs and the recycled fibre process uses waste paper. The requirements (in tonnes) for their different machines are given below:

| Mill | Thermo-Mechanical Process (TMP) | Refiner-Mechanical Process (RMP) | Stone Groundwood Process (SGW) | Cold Caustic Soda Process (CCS) | Recycled Fibre Process (RCF) | | Kawerau | 10 | 15 | 52 | - | - | | Boyer | 15 | - | - | 10 | - | | Albury | 20 | - | - | - | 22 |

The supplies of the various raw material is given in the following table: | tonnes | Woodchips | Pulp Logs | Waste Paper | | Kaingaroa | 20 | 20 | 0 | |_NSW_ | 23 | 17 | 0 | | Taupo | 19 | 22 | 0 | | Recycling Plant | 0 | 0 | 24 |

The transportation cost of the raw materials is given in the following table: | $100/tonne of material | Kawerau | Boyer | Albury | | Kaingaroa | 4 | 10 | 8 | |_NSW_ | 12 | 6 | 3 | | Taupo | 5 | 10 | 7 | | Recycling Plant | 7 | 11 | 10 |

Note that pulp logs can be "chipped" into woodchips at the suppliers at a cost of $250/tonne and that waste paper can be "compacted" into woodchips at the recycling plant at a cost of $600/tonne. Any excess waste paper that is not used must be disposed of at a cost of $150/tonne.

Tree Chipper

The paper company want to know how to supply their mills at minimum cost. They also want to know how much "streamlining" their processes (i.e., reduce the amount of raw materials they use) will reduce their overall transportation costs.

For more detail see Supply Chain Optimisation in the Paper Industry, Philpott and Everett