Financial Risk Management for Investment Planning of New Commodities Considering Plant Location and Budgeting

Javier Lavaja, Adam Adler, Jeremy Jones, Trung Pham, Kristin Smart, David Splinter, Michael Steele, Miguel J. Bagajewicz
2006 Industrial & Engineering Chemistry Research  
The classical capacity planning problem considers the determination of the initial capacity for a particular network of processes and the timing and size of the future expansions. The data used for such a model are the forecasted demands and prices of raw material and products, as well as the utility costs. This paper expands the problem to also consider plant location, transportation of raw materials, and transportation of product to consumer markets. We also add budgeting constraints, which
more » ... onstraints, which follow the cash flow through the life of the project and allow the project to finance the expansions. Finally, we add considerations about the price of the product in different markets. To illustrate the technique, we consider the case of ethyl lactate, a green solvent. The model was made stochastic, and financial risk is managed.
doi:10.1021/ie0601394 fatcat:fiy2mjbe4nh3vghsaf23ok35zu