The objective of this study is to design and evaluate the performance of the supply chain for biocrude production from activated sewage sludge in wastewater treatment facilities. Experimental results indicate that feeding wastewater activated sludge with high sugar load and establishing a high carbon-to-nitrogen ratio in the wastewater can enhance biocrude yield and quality from the sludge. The biocrude will be further refined and converted to biodiesel. The optimization part, of the optimization-simulation framework that we propose, uses a mixed integer program to identify locations for sugar plants as well as the assignment of wastewater treatment plants to sugar plants and refineries. The objective is to minimize total supply chain related costs. We use the solution from the optimization model (the structure of the supply chain) to build a discrete-event simulation model. The simulation captures the seasonal and random nature of biomass supply. We use a case study that designs the supply chain for biocrude in Mississippi given the availability of lignocellulosic biomass, the locations of harvesting sites, location of wastewater treatment plants, and location of refineries. © 2011 American Institute of Chemical Engineers Environ Prog, 32: 139–147, 2013.