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Pastime to Profession: The Necessary Principles of Commercial Sawmilling
Jordan Baize of B & K Wood Products, Inc. touches on the basics of commercial sawing essentials that must be understood in order to transfer a recreational lumberman to a lumberman by trade. Fortunately, these are not difficult, but they are vitally important.
By Jordan Baize, B & K Wood Products, Inc.
Date Posted: 6/1/2011
Sawmilling is my career and my hobby. If it were just a recreational activity for me, I would want to make it my profession. And that’s what this article is all about. I will quickly touch on the basics of commercial sawing, essentials that must be understood in order to transfer from a recreational lumberman to a lumberman by trade. Fortunately, these are not difficult, but they are vitally important. Let’s get started!
Logs: The One and Only Material
Lumber manufacturers start off behind the eight ball. It’s almost impossible to avoid. Because most commercial sawmills cannot harvest all the timber they require, they must first compete for and buy the logs that they will saw, then compete to sell the lumber after milling. This rare business state of competing for raw material and competing to sell the finished material as product “two-way competition”. Two-way competition is created when companies compete for non-renewable materials, and thus face limited supply and fierce bidding competition. Timber is a renewable resource, but the time needed for forests to rejuvenate after harvest and fluctuating weather conditions greatly impact timber’s availability.
Basics of Log Purchasing
In most cases, logs must be purchased from outside sources so that mills can run at peak capacity. Buying the right logs at the right price is a science unto itself, but let’s quickly go over the basics. Though quick and easy, buying logs by the ton is imprecise and can present problems. At our mill, and most successful manufacturing opera- ions I have come across, we scale and purchase each log individually, assigning both a volume and a price. This method ensures that each log you saw, in theory, will be profitable. You also have the option to run an “output test” on the log. When logs are purchased by the ton, these quality controls do not exist.
Output Tests are easy and important, especially if you are new to log procurement or have recently started sawing a new species or have new purchasing procedures. If a log is scaled at 63 feet with a price of $0.35/ft, then that log cost a total of $22.05 to purchase. If this log is sawed correctly, it should generate more than $22.05 in lumber, or your company will not be making any money! If you are losing money, (1) your log prices are too high or your lumber prices are too low, (2) your assigned log volume is too large, or (3) the log is being sawed incorrectly with too much waste.
One thing so wonderful about operating Wood-Mizer sawmills is the minimal kerf, thickness of a cut. Because Wood-Mizer’s blades are so thin compared to conventional circular saws, a log cut into lumber using the thin kerf blades will always yield more product than the scale projected it should contain. If the lumber is scaled conservatively, lumber-to-log ratios will still hover around the 125-135% range, by using Wood-Mizer mills. This allows a few things to happen. First, this should give your company a competitive edge in the log market over operations using a circle sawmill with a lower lumber-to-log ratio, and in turn, should give you the ability to bid higher on the same logs. Second, this great ratio gained from using Wood-Mizer’s thin kerf equipment will allow you to quote better pricing to potential customers.
The Hardwood Market Report (www.hmr.com) is the standard for pricing hardwood lumber throughout the country. Purchase orders will often show “Priced at HRM + $10/MBF”. This means the HMR price – which is always listed as “per thousand board foot” or “/MBF”- plus $10/MBF is the price to be paid for lumber sold to that company. The HMR is issued each Saturday and is a wonderful source of information for current pricing, market trends and expectations, and advertisements. With each Saturday’s issue, however, lumber prices often fluctuate. So “HMR - $20.MBF” on a purchase order might make for a very different price from one week to the next. It is important to keep up with changes each week.
Now the not-so-simple question, “How much below the lumber market must my log prices be to become profitable?” Setting log prices exactly at the HMR lumber prices would create too narrow a margin of lumber price-log price difference. Setting log prices much lower than the HMR prices will quickly make you very unpopular with log suppliers. And remember, they can take their timber elsewhere! Finding the perfect balance is challenging to do, and greatly depends on your company’s financial structure and obligations as to what the appropriate difference is between your average lumber and average log prices. Keep a conservative feel when adjusting log prices, because competition for logs is often just as tough as competition to sell your product.
At the End of the Day…
When it’s all said and done, owning and operating a commercial sawmill operation can be both stressful and rewarding. Having the opportunity to do what you love as a career is a great blessing, one that I do not take lightly. I encourage you to take the plunge and try it yourself.
Jordan Baize is the General Manager of B & K Wood Products, LLC. in Madisonville, KY. His family has been in the lumber industry for the last 55 years. More information can be found at www.jordanbaize.com and www.bkwoodproducts.com.
Editor’s note: paid advertorial by Wood-Mizer. woodmizer.com
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