Forestry companies collaborate

MEDIA RELEASE
May 23, 2007

Forestry companies collaborate to improve profit
margins using new research ‘toolbox’

Major forestry companies Juken New Zealand Ltd and Ernslaw One are collaborating on a pioneering East Coast research project that has the potential to improve profitability by millions of dollars in cost savings.

The research is a departure from the previous system of government-based or individual company research.

Instead the project, which focuses on improving harvesting and productivity, is a private, collaborative venture between four companies run under a system designed by the Wellington-based Forme Consulting Group.

The companies, also including Hikurangi Forest Farms and forestry service provider PF Olsen, have interests in 90 percent of the East Coast’s 158,000 hectares of forests and will share the results for mutual benefit and for the region.

Forme co-director Jon Dey said the 12-month project was a step toward rectifying a long-standing problem for the industry as a whole in which a lack of readily available harvesting and productivity research had reduced companies’ profit margins.

Government-sponsored research had declined during the past 10 years leaving the industry in a situation where it made investment decisions based more on gut feeling than hard data, he said.

“If you can’t measure it, you can’t manage it, let alone improve it,” Mr Dey said.

Potentially huge benefits could come from commercially applied research in an industry with an estimated $1 billion of capital assets employed in wood harvesting. In the supply chain from forest to mill, harvesting and transport costs made up to 60 per cent of the delivered cost of logs.

Mr Dey said, based on a national harvesting programme of 20 million cubic metres a year, savings could equal $2 million for every 10 cent per tonne saved on harvesting costs through productivity gains. That meant investment in research could have a significant impact on the sector’s profitability.

Juken New Zealand’s general manager of forests Sheldon Drummond said harvesting productivity had gone backward for many years. The company had been doing what it could but needed research that led to practical outcomes to make real progress.

“Already we are getting significant improvements in productivity in the six months since Forme, who are leaders in their field, have been working with us on this project,” Mr Drummond said.

“The outcomes from the project in Gisborne will be of use to us throughout our New Zealand operations.”

Juken is using advanced electronic measuring equipment called MultiDAT, supplied by
Forme, to assist the practical research process. It is a motion sensor that is attached to machinery and feeds information to a computer software programme.

One research outcome - a seemingly small example but one that was having considerable impact - was the rescheduling of truck visits to logging sites resulting in a smoother flow of work on site.

Previously there would be times when trucks would turn up all at once and the site loading machine would be tied up for long periods loading them with logs. In the meantime, felled logs waiting to be stacked choked up the site causing other machinery to sit idle.

“Once the research quantifies the actual timings and interference on a daily basis, we can make calculated changes that work in with other sectors of the wider operation,” Mr Drummond said.

Mr Dey said a vacuum in work study and harvesting research had followed the demise of the Forest Service in 1987 and the Logging Industry Research Organisation (LIRO) in 2000.

“Even then, LIRO’s work was difficult to apply to commercial decisions because little reconciliation was done of the productivity formula - inputs consumed with outputs achieved.

“Practically the entire effort in the industry has been on cost reduction without any quantification of benefit in the wood supply chain.”

Mr Dey and co-director John Schrider developed a management and research “toolbox” they call Resin – the lifeblood of trees - as a result of impatience at the slowness of the industry to step into the breach.

Forme’s Resin research management service is designed to guide involved parties through a collaborative research project and to help develop the commercial potential of the results. It is a business model for facilitating the scoping, development, implementation, funding and outcomes of forest engineering research.

Taking a project to the stage of commercialisation is a significant departure from earlier forest research initiatives, Mr Dey said.

Both Mr Day and Mr Schrider have more than 30 years’ experience in forestry and can draw on a wide variety of forest consulting projects including productivity studies, forest valuation, feasibility studies, small lot management and Forest Stewardship Council certification services.

Mr Dey said the Resin system was designed to encourage collaboration not only between forestry companies but also to include contractors and equipment manufacturers to enable the research to achieve its full potential.

“Collaboration is an effective strategy because the involved parties can share costs and the research results become a reusable asset which they can also market to others in the industry.”

Mr Drummond said collaboration was an essential part of the East Coast project. As contracted logging crews moved from one job to another, the efficiencies learned on one company’s site would benefit the others.

“It’s all very well for Juken New Zealand Ltd on the East Coast to improve its productivity. But we are one of several companies here. It behoves us all to increase productivity for the region,” Mr Drummond said.

He said the research project was timely given the positive future for New Zealand on the world wood market.

“Wood supply round the world is becoming a relatively scarce commodity after a period of availability. New Zealand is well placed as one of the few countries in the world that can sustainably produce plantation wood.”

Mr Dey said a major benefit from improving productivity was improved health and safety for logging crews. While forestry accidents were on a downward trend compared to other industries, it would always be a high-risk occupation.

The Government recently took steps to improve research in the field. It announced late last year that forest research institute Scion would join with the forest industry to form a new company called Future Forests Research Limited that would help increase the level of automation and productivity of harvesting systems.

ENDS

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