How do you make decisions pertaining to issues such as log procurement and product mix? Many companies are not very scientific in their approach. Some may answer that they “know their costs” and it is these numbers that drive decision-making. Others may focus on indicators such as recovery or productivity. Others may have a strong marketing focus with sales realization acting as a major driver. For some businesses, tradition is the strongest force. Experience can be a very valuable tool; however, the problem with this approach is that no two business scenarios (just like snowflakes) are exactly alike. In a commodity industry with slim margins the intuitive answer is not often the optimum answer. Resource allocation decisions are often more complex than people realize. The complexity increases exponentially when the number of interactions between variables increases.
I recently was involved in a consulting project in South America. It was an eye-opening experience. My experience would challenge anyone’s paradigm with regard to which products are “good” (profitable) versus which products are “bad” (unprofitable). The cost of wood, the cost of labor, and the efficiency of machinery were totally different than North American norms. Not only were the costs different in absolute terms, but the operating parameters varied in proportion to each other. A North American mill manager placed in a South American mill would be forced to completely rethink his/her preconceived notions in order to be successful.