Plywood

The Problem

A west coast plywood manufacturing company was struggling with a number of difficult issues.  Competitive pressures forced the company to seek a change in traditional strategy.  The bankers were getting impatient and losing confidence in the venture.  Management realized that they must take action and pursue a more lucrative product mix.

The McKenzie Forest Products plywood mill was originally built in the late 1950’s.  The mill was equipped with a green-end, dryers, patching stations, a lay-up line, presses, saw-line and sander as well as some specialty equipment.  The mill was capable of making overlay products as well as long and wide panels.

Anyone who has worked in the plywood business knows that there is a great deal of inherent complexity.  One can’t look at product mix without considering veneer options and grade balancing issues.  On the other hand, you can’t select veneers without considering the impact on the key veneer bottleneck, which is often the dryers.

To chart the course it was necessary to find a compass trained to detect profitability.  Although management felt that they knew the general trend to follow, they also knew that the “devil is in the details”.  The all-important question that they desired to answer was:  “How can we make more money?”  It was clear to the group that they needed more than a spreadsheet.

The Solution

After talking with Optware Solutions, the management team was convinced that profit optimization was the best technology to handle the complexities of their decision environment.

Optware Enterprise’s focus on the key profit sensitive areas of veneer procurement, veneer drying, panel lay-up, panel yields, as well as manufacturing rates and costs.

A plan was developed to collect all of the necessary data.  The data was loaded into the Optware System with an easy-to-use data interfaces.  The Optware System was then put through a series of rigorous tests to ensure that the model properly represented the mill including a detailed analysis of the financial statements.

The Results

Within a matter of weeks the system was giving valuable direction as to what mix of veneers should be purchased and which products are most profitable to manufacture.  The sales team made a determined effort to seek buyers for the new products.  Initial results showed a dramatic financial improvement.  Red ink turned to black as the LP model acted like a compass pinpointing out hidden profits.  Profit improvements exceeded four hundred thousand dollars per month.