Phil Green was asked to sum up a one-day conference put on by the Forest Ecosystem Science Cooperative, in Sault Ste. Marie Ontario on November 1, 2011. The conference was attended by forest industry professionals and executives from across the province. The theme of the conference was “squeezing value from trees.”
- Better Information
- Supply chain, value chain
1. Better information
To create more value from the forest we need better information. We need information about the forest, the trees, the logs, and especially, information about the customer. With better information about the wood supply, including detailed information such as the size distribution of standing timber, we can make better decisions about what kind of mills to build and what mix of products to manufacture. We can make better predictions about harvesting costs and forest renewal. We can even make predictions about the “value” of blocks, by measuring the net revenue that could be realized from each block. Better information from the forest also enables us to plan production to avoid bottlenecks, thus increasing production efficiency.
Of course, it costs money to get information, but some estimates show that it is rapidly repaid.
Information about the forest is also part of what defines value for customers, who wish to know what forests products companies are doing to ensure the sustainability of the forest.
2. What is value?
In economic terms, value is the opposite of uncertainty, variability and waste. The more knowledge customers and the forestry industry have about the forest and the products that come from it, the more value those products have for them.
Recently in forest management the word “value” has meant something that requires special protection, such as pine marten habitat. It is heartening to hear the forest industry, which has suffered a tremendous set back in recent years, also use the term in its economic sense.
Usually people in the forest industry speak about the volume of timber, not the value of timber. One speaker said it is time to stop speaking about volume and start speaking about volume.
If we measure only the cost of producing volume, how do we know whether we are producing value? How can we measure the cost with reference to the vale we add? We cannot continue to just measure the dollars per cubic meters of delivered wood. We have to start focusing, and measuring, the value we add to all forest products, including chips and biomass but not limited to wood.
We need to stop thinking about “timber” in the forest and start thinking about “forest products” in the forest. We need to stop focusing on the cost of the supply chain, and start focusing on the productivity of the value chain.
4. Supply Chain/Value Chain
We need to expand our thinking about who the players are within the value chain. The value chain includes all those steps that add value to our products. This includes people not normally thought of as part of the value chain, such as architects and the people who develop and approve building codes.
5. The customer
Some speakers asked whether the “bush” was at the front end, others asked whether the mill was at the front end. It is time to think of the customer at the front end.
Traditionally the forest industry has been a “push” industry, pushing products onto the market. But many companies around the world have become “pull” companies—making each product to exact customer specification when the customer “pulls” it. If the forest industry wants to add more value to trees, it has to become more of a pull industry. This will be a major change, as mills have been built to make a few identical products in large quantities, not a large number of unique products in small quantities.
To become a pull industry, it will have to find a way to use customer information in the manufacturing process. Then it can apply the principles of mass customization. This is starting to happen, with homes for example being partially assembled to order in factories, the way cars are. Mass customization of wood products will also require mills to provide better information to customers on wood characteristics and specifications.
At the end of the day, it should be remembered that it is in selling value-added products that the industry will find profits.