Plant location problem for a biomass supply chain with supplier selection under quantity discount policy

Abstract

Biomass is a very import renewable energy source that can be used to generate power. To optimize the design of supply chain from biomass field to power plant, a variety of factors need to be considered due to the complex and uncertain nature of the biomass network. In this thesis, a case in lower Northern region of Thailand was studied. Nine rice husk suppliers and nine candidate power plants were considered to optimize the location of plants with consideration of supplier selection under incremental quality discount policy. After data was prepared, a mixed-integer mathematical model was built to identify the best locations of power plants with the objective of minimizing the total cost of biomass purchase, transportation, inventory holding, and fixed cost of opening plants. Five scenarios were analysed.

The result shows the fixed plant cost is the primary factor deciding the plant opening, and the initial inventory affects the electricity satisfaction level. When the fixed cost is assumed to be constant among all plants, the opening of plants is decided by the combination of purchase cost and transportation cost. Regarding supplier selection, transportation cost is the main influencing factor. However, once quantity discount scheme changes the weight of purchase cost to a certain degree, it becomes more important for supplier selection, and it is a key factor for determining the purchase quantity at different discount levels. Overall, the result of the thesis gives the insights about the strategic and tactical decisions such as which candidate plants to open and how much to order from each supplier under incremental quantity discount to meet the demand of electricity at a desired level.