Stochastic Supply Chain Optimization with Risk Management

Abstract

This paper presents the hypothetical case study of supply-chain management of the carbon dioxide-utilization products where its feedstock is sewage gas containing mostly methane and CO₂. This supply chain begins with three suppliers sending sewage gas of different average CO₂ compositions to two acid gas removal units (AGRUs) for CO₂ removal. CO₂ from AGRUs is transferred to two CO₂-utilization plants; producing products. The products are transferred to two distribution centers (DCs) from where they are sent to customers at three market places. The uncertainties occur in the compositions of sewage-gas from three suppliers and customer demands from three markets. The stochastic supply chain optimization under uncertainties with maximum expected profit is applied to find the optimal mass flow rates of sewage gas and CO₂ from suppliers to AGRUs and optimal mass flow rate of products between CO₂-utilization plants, DCs, and markets. The stochastic supply chain model is compared to deterministic one using fifteen random sets of the sewage-gas compositions and customer demands for thirty daily scenarios. For the validation part, the results show that the optimal stochastic supply chain mostly gives a higher profit than deterministic one about eight out of ten sets of random data. To be more practical, the supply-chain optimization using the risk model is developed to design a stochastic supply chain with high chance to achieve profit larger than the targeted profit.