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  • Hannah Hammond

Maintenance: A Pathway to Forest Products Profit

by John K. Kelley and team.


All timber products manufacturing in the modern world involves equipment, machinery, vehicles, and the people who operate and manage all the above. They do so with an eye to the most basic business equation there is: revenue minus expenses equals profit. In commodity-driven industries like lumber, plywood, and OSB, increasing revenue per unit of production is often difficult. The profit pathway, therefore, often focuses on cutting costs.


Where can that happen? Not payroll, in most places; labor is difficult to hire and train, making retention essential. Cutting wages is an obvious path to non-retention and higher training costs–a false economy if ever there were one. Cheaper raw materials? Maybe, but if they’re cheaper for one mill, they’re probably also cheaper for the competition.


That’s okay. We can defer some maintenance.


No–in fact, the exact opposite! BECK staff’s combined 130 years of forest product consulting, with numerous deep dives into the mathematics of turning trees into profit, argue for the opposite approach. Efficient, consistent, effective maintenance has a demonstrated history of lowering production costs over time.


Got any specifics?


More than we have room to share, but let’s start with the results from BECK’s 2022 survey of sawmills across the Western US and Western Canada. Here’s what we learned:

  • Machine reliability is an important indicator of sawmill performance. Not a shocker; it’s expensive to pay people to stand around not producing, just as it’s expensive to fix the machinery when it coughs smoke and stops. Unplanned downtime is costly.

  • Our survey showed a correlation consistent enough to be a connection: four of the five mills with the lowest conversion costs reported sawmill downtime lower than the survey average (20%).

  • Similarly, four of the five mills with the highest productivity per labor hour reported sawmill downtime lower than the survey average.

  • One might imagine that the newest mills with the latest technology would be over-represented in that 80%, but it wasn’t so. The consistent factor was that the high-producing mills’ equipment had received effective, timely maintenance over the long haul. Unless regular maintenance is performed, new equipment will become old equipment within a couple of years.


But it’s hard to get out in front of that when we are battling to stay productive while putting out repair fires here and there.


We understand. That’s why we advocate starting a plan as soon as possible, even if it means a temporary overload as you catch up on maintenance while addressing the urgent repairs that might be the consequences of past deferral. Preventive maintenance is a key to getting ahead of the game and reducing ongoing downtime.


I answer to budget people, also known as “Team Budgetcutter.” They won’t like the sound of that. That will sound to them like your profit equation is going the wrong direction.


Then try not to schedule anything else for September 10-11, 2024, because at our maintenance workshop we’re ready to show you the path to making your world and theirs a more profitable place. And since the logical question is how much this will cost, we’ll volunteer that right here. For as low as $1395/person, you can attend on Zoom and won’t even have to sell the travel expenses to Team Budgetcutter. If you can make the trip, attending in person will cost only an added $100/each from a tuition standpoint. The payout there is the ability to network in person and share useful info with your professional peers. That might make the cost of a trip to Portland, OR and back pay for itself in good ideas—never an easy currency to come by.


Specifics. I hear the sizzling, but let’s get into the steak.


First, BECK is excited to partner with IDCON, a company with 45 years of wood products maintenance training experience. Our search for this partnership led us to the company we felt offered the best value for affordable costs. IDCON’s people know their subject in theory and practice.


The IDCON approach begins with defining objectives, creating a positive environment, and building momentum by enlisting and establishing support for reliability through routine maintenance. Next comes the business case, developing the strongest possible argument to convince Team Budgetcutter that this will also advance their goals.


After that, the course moves to methods for developing the vision and the pathway along which to lead a mill to effective implementation. How does one decide what to address? What should be in a mission statement, and why is one needed? How would one develop and execute the plan? And the baked potato to go with your steak: How can one determine that one is succeeding?


Interesting. So help me to understand: How can I get the money people of a cash-strapped enterprise to buy off on $1400-2200 in order to learn this?


Not hard. If it costs $200,000 in salary and benefits to employ a senior manager, 1% of that cost­–expended one time–in order to gain maximum benefit from that manager’s skills is an easy decision. If that $2200 might pay back many times over, one would make that deal every time. What it costs you is less important than what it pays you.


Let’s develop a specific example. Suppose your mill produces 200,000 MBF/year, operating for 4000 hours with 85% uptime, 600 hours of unplanned downtime, and thus 3400 hours of productive time. Let’s also assume 58.8 MBF/hour production rate during productive hours.


Let’s now assume a 2% uptime improvement (which sounds conservative to us) results from improved maintenance activities attributable to lessons learned in professional training. When the uptime increases to 87%, unplanned downtime drops to 520 hours and productive time rises to 3480 hours. At the same production rate, total annual production rises to 204,706 MBF/year.


Remember that you are getting the extra 4,706 MBF/year using the same equipment and crew while on site the same number of hours.  This means the new volume is produced with minimal incremental manufacturing costs.  Even in lean times with log/lumber margins of $150 per MBF, the incremental profit is more than $700,000 per year —an amount that dwarfs the cost of several attending staff members. We at BECK doubt that anyone could find fault with that profit equation.


All right. To sell this, I need all the details. Where can I find them?


We’re glad you asked. You can access the full training brochure here:


Managing Maintenance Sept 10-11 2024_Full Brochure
.pdf
Download PDF • 8.55MB

To learn more about IDCON, visit https://www.idcon.com/about-idcon/. And when you have buy-in and are ready to join us, register here. Specific questions? Email Hannah Hammond of the BECK team, or call us up: (503)684-3406, ext. 2. We’re looking forward to meeting you—or in some cases, seeing you again.



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