2. Project Scope
Goal: Determine the optimum location for sorting logs, leading to the most
efficient and cost effective log merchandizing process
Objectives: Gather information from both operational and financial
perspectives
1. Estimate potential log procurement, harvesting and delivery savings
($/MBF)
2. Estimate increase in log yard scaling, handling and equipment costs
3. Evaluate equipment, manpower and space requirements
4. Determine any operational or logistical constraints
Analysis: Determine the most cost effective solution without operational
and/or logistical constraints
1. Use traditional decision making criteria to analyze the financial data
2. Perform a thorough review of operational issues & constraints
Limitations: Considerations outside the scope of this analysis
1. Environmental and productivity impacts of reduced landing size were not
taken into consideration
3. Interviews
The Forester at each mill in the initial scope (6) provided insight on potential
savings and operational constraints.
Six Logging Contractors were interviewed at active job sites to assess
potential saving in logging rates and review the sorting and loading process.
Sawmill Managers at each mill provided input on handling costs and log yard
constraints.
Log Yard Supervisors were consulted regarding handling and space
constraints.
SPI Trucking Manager & Log Truck Supervisor helped determine potential
reduction in load time and dispatch efficiency, particularly impacted on
“cleanup” loads.
Our company Check Scaler was consulted regarding mixed species sampling
and additional scaling requirements.
Sawmill Accountants assisted with log handling and equipment costs.
Corporate Accountants provided additional information on equipment costs
and annual expenses.
IT Support provided base volume and cost data as well as technical expertise
on sample weight processing options.
4. Initial Observations
Interviews with mill managers and foresters quickly established a physical and
logistical constraint preventing scaling of every mixed species load; therefore, a
mixed species weight sample would be required.
Fee timber sales would continue to pay log and haul rates based on weight to
avoid complications with mixed species sampling.
For a variety of reasons, mixed species sampling rules out timber sales on
private and government land, further constraining the analysis to company
owned timberlands (“Fee” Timber).
Considerable debate was generated when considering mixed species sampling,
indicating the need to consider multiple sampling levels.
Currently, all mixed species loads are scaled, partially offsetting the increased
sampling frequency required for mixed species loads.
The initial scope identified 6 California sawmills; however, it became apparent
a policy change would affect all mills so the analysis was expanded to include
all 9 CA sawmills.
Separating scaling costs from other log handling expenses was not feasible for
“company scalers”; therefore, Bureau scaling costs were used exclusively.
Delays unloading trucks at the mill could offset reduced load times in the
woods.
5. Data Collected for CA Mills
2012 Log Plan – Separating by Timber Source (Fee, Government & Private)
o Estimated delivered volume by Mill
o Estimated delivered cost by Mill
o Weighted average log and haul costs, converted to $/MBF
2011 Log Scale History - Separating Fee from Non-Fee Timber Sources and
Bureau from Company Scale
o 100% Scaled (non-sample sales)
o Sample Scaled Loads
o Weight only Loads (“Deck”)
o Average NMBF/Load
o Average Green Tons/ Load
2011 Bureau Scaling Invoices
o Total bureau scaling costs by mill
o Average bureau Scaling costs by Mill
o Weighted average scaling cost for CA
8. Financial Analysis – 1
Annual Cost/Savings: Scaled Annual Savings by Log/Haul Efficiency Factor
(Not counting initial investment) "Deck" Loads Low Med High
10% $ (168,009) $ 1,592,074 $ 3,352,156
50% $ (789,008) $ 971,074 $ 2,731,157
100% $ (1,565,257) $ 194,826 $ 1,954,908
Payback Period: Scaled Payback of Initial Investment (Years)
Number of years to payback "Deck" Loads Low Med High
initial investment = $ 2,250,000 10% N/A 1.4 0.7
50% N/A 2.3 0.8
100% N/A 11.5 1.2
9.
10. Financial Analysis – 2
Net Present Value (NPV): Scaled NPV for 10 Years @ 6.0%
(10 Yr period at 6%, taking into account "Deck" Loads Low Med High
initial investment = $ 2,250,000 10% $ (3,486,558) $ 9,467,800 $ 22,422,158
50% $ (8,057,166) $ 4,897,192 $ 17,851,551
100% $ (13,770,425) $ (816,067) $ 12,138,291
Internal Rate of Return (IRR): Scaled IRR Over 10 Years
(Calculated over 10 Years, taking into account "Deck" Loads Low Med High
initial investment = $ 2,250,000 10% N/A 35.5% 88.6%
50% N/A 14.0% 70.3%
100% N/A N/A 46.9%
11.
12. Results Potential Savings:
1. Logging
a. Improved loader efficiency thru smoother movement from one
landing to the next (loader is not needed in 2 places at one time).
2. Hauling
a. Simplifies dispatch, easier to determine how many trucks will be
needed any given day.
b. Reduced wait time, particularly “cleanup” loads.
3. Due to variability in estimates from the interview process, log and haul
rate savings were evaluated at three levels: 1%, 3% & 5%
Costs – Log Yard:
1. Increased scaling costs were calculated at a flat $/MBF rate from 2011
Bureau Scaling costs for California
2. Potential increase in scaled loads was viewed as a reduction in “Deck”
loads at 3 levels: 10%, 50% and 100%
3. Handling / Sorting Requirements
a. 1 additional person per mill, for a duration of 8 months
b. On average, the need for one additional piece of equipment capable
of sorting logs at each mill
13. Other Concerns
1. Mixed Species Weight Sampling vs Pure Load Sampling
a. Major point of contention and confusion
b. Currently all mixed species loads are being scaled
c. Mixed species sampling frequency was questioned
d. Inventory accuracy and statistical validity were challenged
2. Log Yard Issues
a. Available space in the log yard for sorting every fee timber load
b. Species sorting in unconventional manner -“circle sort” or other
method to avoid “rolling out” every load
3. Effectively negotiating reduced Log & Haul rates
a. Communications and credibility are the key
4. Landing Size
a. Little to no discernible impact, except steep terrain
b. Most logging operations would be roughly the same
14. Future Considerations
Future Capital Expenditures
1. Potential need for more sorting equipment at some mills
2. Log Yard expansion and/or paving
a) Mitigated by more aggressive mixed species sampling
b) Requires innovation in sorting techniques to minimize space
requirements
Other Potential Problems
1. Breakage-especially cedar mills
2. Availability of Scalers- continued training
Future Expansion of Sales and Savings
1. Sale Type- Stumpage vs delivered on private, state & federal
2. Push cost savings beyond current levels of low, med or even high
3. Terrain, distance, and other environmental issues also involved
4. Improve our bidding and negotiating process
5. Communications and credibility are the key to “selling” this opportunity
now and expanding it in the future
15. Conclusion
While some logging and hauling efficiency is likely gained on all loads, startup
and cleanup loads from each logging operations provide the greatest
opportunity for savings.
Mixed species sampling is the key to effectively reducing species sorts on the
landing.
Additional testing and education will be required to increase confidence in
mixed species sampling.
Following positive experience and adequate testing, private timber suppliers
could be approached about potential savings from reduced sorting in the
woods.
16. Recommendations
Start slow - consider allowing loggers to deliver a small percentage of volume
from fee timber sales as mixed species loads, focusing on the “start up” and
“clean up” loads from each landing.
1. Maximizes impact – focusing on the most expensive loads.
2. Minimizes impact at the mills, potentially eliminating the need for
additional equipment and manpower.
Setup mixed load sampling for all mixed species loads at each mill.
Determine optimum log yard sorting procedures without requiring a full
rollout of each mixed species load.
Setup a number of scaling tests to verify the accuracy of mixed species
sampling in a variety of log sizes and species.
Finally, compare logging and hauling rates on fee vs private sales to evaluate
the effectiveness of reduced sorting on the landing.
Editor's Notes
The Results of our study
Potential savings are in logging and hauling operations
Logging savings could be realized thru loader efficiency on startup and cleanup of operations
1. Yarders and delimbers not waiting at landings for loaders doing cleanup operations
Hauling savings could be realized thru more efficient dispatch and reduced wait times
Can dispatch proper amount of trucks to definite locations
Reduced wait times- cleanup load issue resolved
3. Rate savings were evaluated at different percentages due to the variability of estimates
a) Each sale had its own individual issues and therefore fluctuating cost
