Wood procurement using harvest measurment : for improved management of forest operations

Abstract: Sweden is a world-leading actor in the global forest sector and remains in the top league of trading, research, and business operations. Despite being ahead of its competitors, several forest actors struggle with low profitability levels. The profitability index for private wood suppliers decreased by 0.45 units between 2000 – 2020, and sawmills' profitability levels are still low despite investments being record high in 2018 (financial performance due to COVID-19 are not considered). Wood procurement is a decisive process for several forest actor's profitabilities. For forest owners since selling wood is the primary income from their forest, and for sawmills because a large proportion of their costs are due to the procurement. Wood procurement is a complex process, including several participants and steps to complete. Process improvements could increase profitabilities for several actors and motivate further sustainability initiatives. Studies have shown that the process along the wood supply chain can be improved with harvest measurement instead of industry measurement as payment basis. Potential in terms of reduction of lead times and improved supplier relationship are some of the findings. However, no studies have analysed whether waste can be removed and if costs can decrease by applying harvest measurement. This study identified activities, information flows, lead times, and cost drivers within the wood procurement processes of both harvest and industry measurement. It demonstrated how waste, supplier relationship, and total costs are affected by the harvest measurement and identified non-value adding activities. Furthermore, the study explored opportunities for further improvements in the process. A single case study was performed using qualitative methods. Interviews were conducted to perform a value stream map of the process, followed by an activity-based cost analysis to determine cost differences. Lastly, further process improvements were explored by combining the empirical findings with the latest research and development within wood procurement. The result showed that harvest measurement as payment basis enable more flexible management of the logistics and bucking instructions. Overprocessing waste during contracting and making of the final invoicing is reduced. The supplier takes less risk and the cash flow is improved. On the other hand, the buyer takes a higher risk and gets a weakened cash flow. Measurement at the industry becomes non-value-adding. Lastly, lead time from harvest to supplier’recives his payment is reduced by half from eight to four weeks when harvest replaces industry measurement as payment basis. the main reasons for the differences are the change of ownership in the value chain, and the push flow becoming a pull flow in the end of the process when harvest measurement is applied as payment basis. The activity-cost analysis indicates that the supplier’s sales costs increase by 1.7 kr/m3ub, and the acquisition cost for the buyer is reduced by 7.5 kr/m3ub. Moreover, applying a digital contracting and planning process could reduce the acquisition cost further since a lot of the cost originates from time spent on these activities.