The goal of this study is to contribute to commercialization of the second-generation cellulosic biofuels (SGCBs) by reducing its operational cost. A hybrid simulation-based optimization approach is devised to design a cost-effective SGCB supply chain model. The approach includes feedstock yield estimation and location-allocation of feedstock storages between farms and refineries. An agent-based simulation (ABS) implemented in AnyLogic is utilized to estimate operational cost of a SGCB supply chain. The simulation-based optimization with adaptive replication (AR) is devised to find an appropriate SGCB network design in terms of operational cost. The approach is applied to a SGCB transportation network design problem in Southern Great Plains of U.S.