MSR equipment offers strong performance, low cost and maintenance for a solid payback.
Profits are a handy thing to have around when you want to make money with your company’s operations. As we learned from the national news recently, there really is not any good substitute. So let’s look first at your company’s money-making equation. Even the most complex financial report boils down to:
Profit = Revenue – Cost
Consider revenue from operations derived from the sale of goods. Increasing the volume or the selling price, or both, can increase an operation’s revenue. For a company that makes a number of products, the revenue is the sum of all the extended invoice prices. If the average of the unit prices can be improved, then the extended prices and revenue are improved.
Most sawmills are limited in one way or another with respect to the maximum volume that they can produce. These limitations result from bottlenecks that limit mill capacity, market acceptance volume, or resource limitations. Resource limitations are trending to reduce potential production in many areas, and in some cases they have caused closure of sawmill operations.
So, you have to make the most of the resources you have available. At this time most sawmills have squeezed all the volume they can get from reduced kerf widths and target sizes. This leaves improvement in average unit prices as the only remaining opportunity for revenue improvement. If you manufacture lumber products, then improving grade yield is the best opportunity you have to improve revenue. If we can effectively move material from a lower grade to a higher grade, and then sell the product at the market price of the higher grade, we can improve revenue. The more material we can move to a higher grade, the more we can improve revenue.
Shifting volume from a lower grade to a higher grade can reduce the unit value of the lower grade, so we need to consider the total value of both the lower grade and the higher grade as we seek to maximize the revenue. The value left in the lower grade must be offset by a larger improvement in the value of the higher grade.
Machine stress rating (MSR) offers one method of improving lumber grade value for structural dimension lumber. MSR equipment type and condition affect MSR grade yields. Higher accuracy and repeatability in MSR production allow the user to achieve a higher grade yield.
Metriguard provides accurate MSR equipment, and therefore high grade yields. Metriguard’s repeatability testing and maintenance assistance programs help ensure that accuracy is maintained. One can always reduce grade yields by increasing the grade threshold settings, but the optimum profits and grade yields are available only from the most accurate and stable equipment.
Marketability of the lower grades is seldom harmed by extraction of higher-grade material. There are a couple of reasons for this. One is that the lower grade will contain material with sufficient mechanical properties to make the higher grade but was placed in the lower grade because of visual characteristics. Each of these pieces improves the mechanical properties of the lower grade. Assuming the visual graders are doing their job correctly, the lower grade will contain only pieces that are visually acceptable for that grade. Numerous tests have confirmed that the mechanical properties of the visual “downfall” grade, either Standard & Better or #2, is acceptable and meets the design requirements.
Cost includes all money spent in the operation. Improvements in revenue are seldom obtained without some attendant increases in cost. These cost increases are in the form of capital investment in equipment and subsequent added personnel or training. Capital purchases are usually handled separately from other costs. Most every company has an organized method of putting capital purchase proposals to a test to determine if projected revenues will be sufficient to justify purchases and implementation costs.
Before a proposal can be made for an investment, the opportunity must first be recognized and evaluated. Some investments are made in equipment solely to reduce cost of operations, thereby reducing the unit cost of production. Labor-saving equipment fits into this category. Other investments are made principally to improve revenue by producing new products. MSR equipment fits into this latter category.
When MSR equipment is purchased, it makes sense to buy the equipment that produces the best revenue improvement. This is always the equipment with the best combination of high grade yields, low price and low cost of operation and maintenance.
Even if the grade yields are only slightly higher for a particular piece of equipment, the improved revenue that results quickly offsets a higher equipment price. When the better-performing piece of equipment comes in at a lower cost of operation and maintenance, and does not bottleneck production, there is simply no question that this is the equipment to buy. Consider investing in Metriguard MSR equipment, which offers an impressive potential payback.
Many sawmills are still managed using volume incentives. Volume contests are held. Salary raises and promotions are based on volume. While this may have been appropriate years ago when resources were virtually unlimited, I submit that a profit incentive system is more appropriate now. All aspects of an operation are rolled up in its profit, including the effects of purchases, sales, labor, training, maintenance and even accidents. The profit incentive works in the right direction for success in every way.
How important is profit? For many large-company mill operations, the profits are all sent away to the headquarters office, or so it may seem. However, the more profitable divisions will be those that survive in a downturn, and in those operations, the raises, benefits and capital purchases are easiest to justify. Much more attention is devoted to profits in single-mill companies where the owners spend a good deal of their time on-site. This may explain the higher percentage rate of growth in many small companies. If the same level of devotion to profit could be transferred to the larger companies, their performance could be truly amazing.
(Editor’s Note: James D. Logan, PE, is president and founder of Metriguard Inc, a manufacturer of nondestructive testing and quality control equipment for wood since 1972. For more information about Metriguard, contact the company at (509) 332-7526, fax (509) 332-0485, e-mail email@example.com, or visit the Web site at www.metriguard.com.)