{"id":1553,"date":"2022-05-25T14:46:51","date_gmt":"2022-05-25T19:46:51","guid":{"rendered":"https:\/\/pmpsolutions.ca\/?post_type=landing_page&p=1553"},"modified":"2023-04-13T13:02:38","modified_gmt":"2023-04-13T18:02:38","slug":"raising-profits-in-the-modern-industrial-world","status":"publish","type":"landing_page","link":"https:\/\/pmpsolutions.ca\/en\/landing_page\/raising-profits-in-the-modern-industrial-world\/","title":{"rendered":"Raising Profits in the Modern Industrial World"},"content":{"rendered":"

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Raising Profits in the Modern Industrial World <\/h1>
Because time-proven methods of increasing wood transformation plant revenues just don't cut it anymore. Simply controlling and reducing costs while maximizing throughput are no longer enough to increase (or even maintain) profits in the wood transformation industry. This (so-called) mass production mentality\u2014still widely the norm in the wood transformation industry\u2014actually hinders your growth in today\u2019s market.<\/div><\/div>
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It's no Longer Only About Low Costs<\/h2>
Even though the market (not you) dictates product prices, controlling costs is an effective way to increase your profit margin, based on the logic that the more high-price products you sell and the lower the costs, the higher the profit. On the surface, this logic is sound: output high-price products as quickly as possible at high machine and labor efficiency (thus, the lowest possible costs, regardless of your plant setup), and you get the most bang for your buck, right? Not quite.

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This reasoning assumes that high-price products are in great demand. In reality, some highly prized (and priced) wood products may not be in such demand, therefore the volumes sold won\u2019t align with costs, leading to relatively lower profits. A further drawback of the above logic is that it also assumes that high-price products are cheap to make (i.e., offer the best ROI), which is not usually the case.<\/div>

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Depending on your S&OP, supply, log diets, inventory levels, line configurations, and a slew of other operational variables, you may come to the conclusion that it\u2019s more profitable to output products in slightly lower demand and \/ or grades, but still highly prized, simply because this optimizes costs (i.e., maximizes ROI), and speeds up production and sales\u2014in other words, sacrificing grades to throughput.<\/div>

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However, production management in the mass production mentality usually breaks down operational tasks to their simplest elements. Regardless of the impact on other operations, each element is optimized locally (for cost and \/ or efficiency). If the plant reaches its target volumes, everything\u2019s good. This, however, uncouples processes that should be thoroughly integrated, which effectively lowers your profits despite local cost optimization.<\/div><\/div><\/div>GET IN TOUCH WITH US<\/span><\/a><\/div><\/section>\n\n
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INCREASING CAPACITY ALSO HAS ITS LIMITS<\/h3>

Another way of raising profits is to improve capacity by installing new equipment or building a new, turnkey factory. This is also in line with the mass production approach: more capacity means more throughput means more profits. Very large operations <\/span>like <\/span>Weyerhaeuser<\/a>, West Fraser Timber<\/a>, or Canfor<\/a> <\/span>are in a better financial position to purchase turnkey plants, but new equipment is not out of reach of small plants.<\/span><\/p>\n

One flaw of this approach is that to successfully increase production capacity depends, among other things, on your ability to secure the necessary lumber to support your increased capacity. Other factors include availability, shipping costs, lead times, etc., which may end up significantly eating into your profits.<\/span><\/p>\n

Furthermore, despite state-of-the-art equipment or a shiny new turnkey sawmill, most operations still usually taper at an operational efficiency (OE) of around 60 %. That’s because new equipment only addresses mechanical issues, not operational issues. Many people throughout history have been attributed to say: “Insanity is doing the same thing over and over again, but expecting different results.” Applied to your context, it means that if you keep using the same old operational methods, regardless of new equipment, you’ll face the same old challenges and reach the same old results (i.e., 60 % operational efficiency).<\/span><\/p><\/div><\/div><\/div>

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Leveraging Data to Get a More valuable Product Mix<\/h3>

This leads us to address the third and, arguably, most difficult way of increasing profits: taking advantage of your operational technologies (your PLCs and the data they generate—other buzzwords include the industrial internet of things (IIoT) and business intelligence (BI)) to improve your business and operational processes. We believe that this is the best way to achieve long-lasting results.<\/span><\/p>\n

Effectively manufacturing a more valuable product mix involves carefully balancing effective sales planning (usually over a 3–4-week horizon), effective operations planning (i.e., synchronizing sawing, drying, and planing), a clear understanding and effective inventory level management, and getting good-quality products. This means having the complete control of your value chain<\/a>—not a small task and one that can only be done with a hefty dose of data.<\/span><\/p>\n

Some software solutions on the market address several of these challenges for the wood transformation industry (OPER8<\/a>, DGS Manager<\/a>, PMP TeamMate™, for example) to varying degrees of success. It still requires a good amount of human intelligence to transform the information delivered by these solutions into actionable insights that will drive profits up. Under the right leadership, PMP TeamMate is known to drive operational efficiency up 20 % or more.<\/span><\/p>\n

So, this avenue (used with the other two above or not), is the most challenging because it requires a real desire for change driven by strong leadership and commitment. It is, however, the improvement method that will yield the most long-lasting results.<\/span><\/p><\/div><\/div>

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Using the Theory of Constraints to Achieve Change<\/h3>

Introduced by Eliyahu M. Goldratt in his 1984 book titled The Goal<\/em><\/a>, the theory postulates that only a very few constraints prevent manageable systems (such as a wood transformation plant) from reaching more goals. The theory’s framework helps you identify the constraint(s) and restructure the rest of your organization around them to improve results.<\/span><\/p>\n

The theory of constraints uses the common idiom a chain is no stronger than its weakest link<\/em> to express that an organization or process is vulnerable because its weakest part can always adversely affect outcomes.<\/span><\/p>\n

Implemented correctly, the theory of constraint can help you target efforts at those areas that need it the most instead of reducing operational tasks to their simplest elements and optimizing locally.<\/span><\/p><\/div>\"A<\/div><\/section>\n\n

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Bottlenecks are Constraints, but not all Constraints are Bottlenecks<\/h3>

The terms bottleneck and constraint are often used interchangeably to some confusion. Bottlenecks are temporary overloads on resources<\/strong> (human or machine). Causes can be anything from unplanned downtimes, absenteeism, missing tools, unexpected shortages, etc. While bottlenecks can cause serious delays, they can all be fixed.<\/span><\/p>\n

Constraints, on the other hand, persistently limit throughput<\/strong>. For example, equipment that can’t go any faster because it’s already operating at maximum speed, or a process that can’t take less than a certain amount of time to complete. From a value chain standpoint, not all constraints are worth reorganizing for because they have nothing to do with your operations and can’t readily be controlled. An outrageous regulation or a persistent raw material shortage limiting your ability to fulfill orders are good examples. Having no control over those, we won’t spend any time on them.<\/span><\/p><\/div><\/div><\/div>

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What Does This Mean for You, in Practice?<\/h3>

Wood transformation plants face several unique challenges that are different from one transformation process to the other.<\/p>\n

SAWMILLING CHALLENGES<\/h4>\n

Your sawmill works as a discrete process<\/strong>. At very high efficiency levels, it can come very close to a continuous process.<\/p>\n

A mill produces a finite number of packages during a production run: an average-sized mill outputs about 60, a stud mill about 35 to 40, and a specialty sawmill up to about 100 or more. However, the variations in timber diameters affect the output volume of your sawmill, as do the uptime and efficiency of your equipment, so these numbers vary.<\/p>\n

The number of specific packages can also vary greatly—from several a day to one every few weeks, depending on the products. Moreover, what you want from the sawmill is a series of packages uniformly having set characteristics: usually the species (spruce\/fir\/jack pine (SFP)), square dimensions (2×3, 2×4, etc.), length (6–16 ft), and, occasionally, weight.<\/p>\n

To process the packages at the kilns, the wood from the sawmill must be sorted according to these characteristics. Sorting usually uses species + square dimensions + length or square dimensions + length to enable faster planing.<\/p>\n

This introduces interesting inventory management and planning challenges because drying is a batch process, forcing the lumber from the sawmill to sit in the yard. The longer lumber sits in the yard, the longer your money sits there, too—but it still needs to be dried.<\/span><\/p><\/div><\/div><\/div>

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Drying Challenges<\/h3>

As previously mentioned, unlike milling, drying is a time-consuming batch process. The area surrounding a kiln is typically divided into three zones: loading, drying, and unloading (but there are also kilns whose loading and unloading zones are the same). Charges in the loading zone are composed of wet lumber packages with similar characteristics (usually the time it takes them to dry and their moisture content).<\/span><\/p>\n

Charging and drying practices vary wildly from one plant to the next, but one thing is constant: charges are so many packages wide, high, and deep, usually stacked from the bottom layer up for stability.<\/span><\/p>\n

The ratios of species in a charge can impact the drying time and the quality of the products coming out of the kilns. The time the timber and the lumber from the sawmill spend in the yards can also affect drying times and the quality of end products.<\/span><\/p>\n

All these elements pose unique and complex planning challenges.<\/span><\/p><\/div>\"Typical<\/div><\/section>\n\n

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Planing Challenges<\/h3>

Lastly, planing is the discrete process<\/strong> that outputs distinct products. The quality of the drying process influences the productivity of planer mill and the quality of finished products. Simultaneously, productivity impacts output volumes.<\/span><\/p>\n

There are as many production recipes as there are packages from the sawmill. The final products from the planer mill depend on the supply and its characteristics, but packages are all processed regardless. Each package at the planer mill infeed can yield 10 to 20 different products to maximize value.<\/span><\/p><\/div><\/div>

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What are Your Constraints?<\/h3>

YOUR LOG DIET<\/h4>\n

Sales are usually planned for a period of three to four weeks. Operations chooses product recipes to meet the plan, based on available timber (composing the log diet). Sawmill lines are finally configured to run at speeds that technically maximize throughput for the selected recipes.<\/span><\/p>\n

Operating a line at constant speed fails to account for the variability of the log diet, which usually reflects poorly on equipment efficiency (empty lugs). However, the equipment isn’t to blame—the log diet is.<\/span><\/p><\/div><\/div><\/div>

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The Different Natures of The Sawing and Drying Processes<\/h3>

As you’ve noticed, there’s a basic unbalance between sawing and drying—sawing is a discrete process, drying is a batch process. This is usually handled by stocking wood in the lumber yard, which means money sleeping in the yard (sometimes months on end) and a potentially significant drop in the quality of finished products.<\/span><\/p>\n

Some lumber (dimensions, species, etc.) dries better together. The time it takes to assemble “perfect” charges is a significant constraint. If packages spend two or three weeks in the yard before they’re charged kiln drying, they air dry at a rate of approximately 1 % a day. So doing, these charges may no longer have the optimal moisture content to dry well with other products, impacting quality.<\/span><\/p>\n

On top of that, here are other factors that contribute to your wood spending more time in the yard:<\/span><\/p>\n