The Impacts of By-products on Optimal Supply Chain Design

During the last half decade, the metal industry has been in a harsh situation seeing their profit margins squeezed to an extreme. Many companies have been forced to close down furnaces and plants. To help a major metal producing company manage this process, we developed a strategic mixed integer programming model. The main decisions addressed by the model involve the future plant structure and production capacities, the production portfolio at each plant and the by-product production. Here, we present the underlying MIP-model and give computational results. In addition, we show how the valuable by-product production can have impact on the optimal supply chain design.