A California-based manufacturing operation hired Optware Solutions to help them optimize their business and improve profitability. The cut-stock business involves purchasing lumber veneers and sawing them into small blocks of specific sizes and grades for particular end uses. There are literally thousands of potential conversion options in the procurement and processing of veneers. In this case the client desired to include a representation of company-owned sawmills to allow company-wide optimization of resources. The basic questions to answer were: “What logs should I buy?”, “What lumber should I saw”, “What lumber should I buy from outside sources?”, ”How should the lumber be remanufactured?”, “What products are most profitable?”.
The application of optimization technology included the following model contents:
The optimization model has become an integral part of this client’s business culture. Use of the system has the strong support of top management. The model is used in tandem with the company’s annual business planning/budgeting to keep the plan “alive and working” during the year as significant changes in the business environment take place. Much of the information developed for the budget, including hourly sawmill costs, operating hours, product volumes by major category, log volumes and prices, and product outsourcing volumes and prices are used as initial inputs to the model and for comparisons to model runs as the year unfolds.
The client has experienced a number of benefits from the use of optimization including: improved fiber utilization, improved machine utilization, improved product mix, reduced inventories, reduced manufacturing costs, improved coordination between business units and personnel, and significantly improved profits.
Steve Killgore, President, McKenzie Forest Products
“We picked up well over 35% savings in our manufacturing costs in a one year period”
Michael McCollum, President Procurement, Georgia-Pacific Corporation
“We saved 1.5-2% of total fiber costs in transportation savings alone using Optware”
Mark Shuholm, Manager, Containerboard Division, Willamette Industries
“Optimization allowed us to substantially improve our paper machine utilization across the Division”
Richard Dutchak, Engineering Manager, Loewen
“We documented wood cost savings of just under $1,000,000 in the first year of using the software”