Forest Operations Case Study

For one British Columbia based woodlands operation, change had come fast and furious. Caught between government regulation and bureaucracy on one hand and unprecedented market volatility on the other, the operation was working harder than ever. Even so, it was losing its battle to control costs while providing its customers with the right quality and mix of logs.

This growing sense of a lack of control led this client to Peforex and an different approach to management that could expand, adapt, and fit the constantly changing nature of its operations and markets.

“We needed more flexibility to operate so that we could get the right wood to our mills at the right time,” said the operation’s manager. “But historically, increased flexibility came with increased costs: more people in the field to get permits, more logging and road building equipment that our contractors could deploy in a hurry. In the new reality, this just wasn’t an option. We needed more flexibility and lower costs.”

When the Peforex team arrived they found a frustrated group of managers, foresters, and technicians. Their world had changed and the pressures of “unrealistic” demands from senior management had them scrambling to justify performance, pointing to the external factors causing their dilemma.

“It was a difficult time for the staff,” says the Perforex Project Manager. “It was clear that the tools and systems they had always relied on were no longer up to the task. So the first order of business was to rebuild those systems and get people focused on what they could control.”

The ExGAP Project™ focused in three main areas:

• Improve the process for getting wood under permit.
• Implement a new way of managing the profitability of stands to be harvested.
• Lower the cost of logging, road building, and silviculture operations.

“It really was an incredible process,” said the manager. “On the planning side, once we had the tools in place to manage each step of cutting permit development, our people saw some surprising things. While the bureaucracy was certainly slower and more difficult than in past years, a large part of our problem was really our own execution. The discipline the new system brought around performance metrics, action planning, and accountability changed how our people viewed the problem. Instead of pointing fingers at the larger issues, we had concrete actions to solve the specific roadblocks in our way.”

As a result of this process, they were able to double the amount of wood under permit, providing some of the operational flexibility they needed. As part of the new system the staff were no longer looking at just the volume and quality of the wood to be harvested. They were now using a system to manage the profitability of each stand. By looking at the stand makeup and plotting value, costs and historical market trends they are now able to manage for the long term profitability of the resource.

“One way or the other, the days of ‘creaming’ the forest are ending,” says Perforex partner Kevin Orbinski. “You can either manage for long term profitability, as this operation does, or wait until there is nothing left but guts and feathers and take your lumps then.”

On the cost side of the business there remained more paradigms to be broken. Historically, cost control meant hammering ever harder to negotiate a lower price from logging and road building contractors. As the adage goes “When your only tool is a hammer, you approach every problem as if it were a nail.” In this case, a new toolkit was the answer.

“When we really got under the hood and looked at performance in the field it became pretty obvious that the problem was more structural,” says the Perforex Project Manager. “As we often see, the costs of poor planning and underutilized equipment were easily ten times what they were ever going to get out of squeezing the current system harder.”

Now a rigorous system is in place to mange the quality of the planning and layout that enables more efficient operation. Further, an ongoing process of matching a contractor’s equipment to the volume and type of wood to be logged is providing structural cost savings that had always proved elusive.

Overall, the following improvements became real:

And yet perhaps the crowning achievement is that which can only be judged by the passage of time: Sustainability of progress. In the period since the ExGAP Project™ was completed nearly two years ago, the operation has continued to achieve new levels of success, profitability, and efficiency.

“The measurable results have been excellent,” says the manager. “But I believe the intangibles have been more important. Change in this industry is not over and after going through this process I have an organization with a different culture. We always had good foresters, but now they are good managers as well, with the tools and skills to meet the next set of challenges.”