Are my wood costs too high? This is an age old question, often posed rhetorically. I am sure that all of us— from legends like Frederick Weyerhaeuser, the Calders and the Camps (Union Camp) to every procurement manager with boots on the ground—have asked this question.
On the surface, this question seems simple. The answers turn complicated, though, when considering the nuances of the wood supply chain—product and sourcing mix, consumption volume and haul distance to name a few. Throw a little inclement weather into the mix and this mishmash of factors get wrapped around an axle spinning so fast that not even Einstein could theorize his way to an answer. Two of the biggest monkey wrenches gumming up this work are poor data and inappropriate comparisons. They not only lead to the incorrect answers, they lead—more importantly—to answers in which you can have little confidence.
The adage that all wood markets and supply chains are different is true, but more similarities exist among supply chains than we often believe. And, here is the key: these similarities are more informative than the differences. To really understand whether your wood costs are high, you need to start with an apples-to-apples comparison. The first step, then, is finding your peer group, a set of facilities that have characteristics similar to yours. Once you’ve identified the right peer group, isolating cost and supply chain differences becomes meaningful.
How do you identify a peer group? For pulp and paper mills, consumption volume is a defining characteristic. Sawmills will find log measurements more informative.