Many businesses are currently uncertain of how the economic recession will affect demand for their services and products. For global papermaker Norske Skog, this is a familiar situation. Over the past decade, the company has experienced declining demand for its products as electronic media have replaced newsprint publications. As it struggles to survive, the company has been forced to make some difficult decisions, including closing paper production lines and entire mills. Operations research (OR) models have become a vital part of Norske Skog's decision-making process, helping the company to significantly reduce costs and enabling senior managers to make difficult choices with confidence that their solutions are the best possible. The tactical use of OR models has provided solutions that enable Norske Skog to save US$8 million and US$10 million annually in Australasia and Europe, respectively. In 2008, the Norske Skog Board used a model to make a strategic decision to close two paper mills and a paper machine, saving the company US$100 million annually, compared with the status quo. These savings are equivalent to 3 percent of the company's revenue.

Norske Skog Australasia has been utilising a powerful tactical supply chain optimisation model, known as PIVOT, for a number of years. Since 1999 users of PIVOT relied on spreadsheets for constructing input data files and creating reports. Recently a menu driven interface was developed for PIVOT using a Microsoft Access database. Input data is extracted directly from the database and solutions are written back to the database each time the model is solved for reporting purposes. Users are able to easily configure PIVOT to suit their particular need. In this paper we describe the aspects of the design of the system and demonstrate the flexibility that its development has provided to the supply chain planning team.

Fletcher Challenge Canada Limited (FCCL) is a large pulp and paper producer in British Columbia. FCCL has traditionally been a newsprint producer and has kept pace with increasingly stringent quality requirements by continually rebuilding existing paper machines and ancillary plant. The company is also considering other options, including converting machines to different grades of paper. Because of the complexity associated with the large number of possible options available, the company decided to develop an optimisation model to assist with this strategic decision making. Market forecasts, capital requirements, production and other pertinent data were collated for a ten year planning horizon, and incorporated into a multi-period optimisation model.. Initially this model proved to be extremely difficult to solve. Based on knowledge of the business a number of extra constraints were added that improved its performance and allowed optimal solutions to be obtained. The model has proved to be successful in challenging entrenched views within FCCL regarding strategic direction, and stimulating wide ranging thought and discussion.

We describe the formulation and development of a supply-chain optimisation model for Fletcher Challenge Paper Australasia (FCPA). This model, known as Paper Industry Value Optimisation Tool (PIVOT), is a large mixed integer program that finds an optimal allocation of supplier to mill, product to paper machine, and paper machine to customer, while at the same time modelling many of the supply chain details and nuances which are peculiar to FCPA. PIVOT has assisted FCPA in solving a number of strategic and tactical decision problems, and provided significant economic benefits for the company.

Fletcher Challenge Paper owns and operates an integrated newsprint and kraft pulp mill in New Zealand's eastern Bay of Plenty, commonly known as the Tasman mill. The mill has an average electrical load of 170 MW. Three steam drawing turbo-alternators are operated on site, which are able to generate as much as 40 MW. The remaining electricity required is purchased. Steam Plant operations staff are responsible for managing the supply of steam to the pulp and paper mills, and also internal electricity generation. Operational conditions, such as steam requirements, vary continually. When coupled with varying electricity price forecasts, this fluctuation produces a complicated set of trade-offs. A decision support tool has been running in the Steam Plant control room since early March 1999. This tool is commonly known as SPOT, or Steam Plant Optimisation Tool. SPOT is a linear program which uses real time operations data, and the latest half-hourly electricity price forecasts to produce an optimal plant operating strategy. This paper describes the nature of the Tasman Steam Plant operations, the formulation of the SPOT model and a description of its implementation.