Optimization Model for the Energy Supply Chain Management Problem of Supplier Selection in Emergency Procurement

Abstract

In energy supply chain management (ESCM), the supply chain members try to make long-term contracts for supplying energy stably and reducing the cost. Currently, optimizing ESCM is a complex problem with two social issues: environmental regulations and uncertainties. First, environmental regulations have been tightened in countries around the world, leading to eco-friendly management. As a result, it has become imperative for the energy buyer to consider not only the total operating cost but also carbon emissions. Second, the uncertainties, such as pandemics and wars, have had a serious impact on handling ESCM. Since the COVID-19 pandemic disrupted the supply chain, the supply chain members adopted emergency procurement for sustainable operations. In this study, we developed an optimization model using mixed-integer linear programming to solve ESCM with supplier selection problems in emergency procurement. The model considers a single thermal power plant and multiple fossil fuel suppliers. Because of uncertainties, energy demand may suddenly change or may not be supplied on time. To better manage these uncertainties, we developed a rolling horizon method (RHM), which is a well-known method for solving deterministic problems in mathematical programming models. To test the model and the RHM, we conducted three types of numerical experiments. First, we examined replenishment strategies and schedules under uncertain demands. Second, we conducted a supplier selection experiment within a limited budget and carbon emission regulations. Finally, we conducted a sensitivity analysis of carbon emission limits. The results show that our RHM can handle ESCM under uncertain situations effectively.

Keywords

• energy supply chain management
• replenishment problem
• emergency procurement
• carbon emissions
• rolling horizon