Profit Maximization of Ethanol Distribution on Manifold Surfaces: A Stochastic Nonlinear Programming Approach

Background. Ethanol distribution in the energy supply chain can be maximized by solving a Location Routing Problem (LRP). Manifold LRP (MLRP) expands on the classic domain assumptions of LRP to manifold surfaces, and it can be applied to profit maximization in ethanol supply chains. Methods. In this work, a hybrid MLRP (H-MLRP) is introduced as a new mixed integer nonlinear programming NP-hard problem assuming discrete facility allocation that requires a mix of truck and train transportation for ethanol distribution from the facility to its customers. Ethanol supply chain profit can be maximized by solving a stochastic nonlinear integer programming problem (SNLP) using ethanol raw materials, production quantity, logistics, railcar shipments, and transit times as the decision variables. H-MLRP and SNLP are combined as a two-stage optimization methodology to design a biofuel energy distribution system for making optimal decisions to maximize ethanol profit. Results. A case study demonstrated the effectiveness of the proposed method on the relocation of an ethanol producer that is currently located in North Dakota (ND) to Oklahoma (OK). In this case study, customer demand destinations and suppliers of raw materials are located in different regions of the United States. Conclusions. The results indicate a good use of the new model for decision-making.