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Optimizing Provincial Woodflow

New Brunswick, Canada Government can now Optimize a Complex Value Chain

What if you could have a provincial or state-wide wood supply and consumption model that could combine the interests of all stakeholders, efficiently measure the economics of woodflows and the wood supply and demand balance?

The New Brunswick Woodflow Model was designed to contribute to the economic, environmental, and social sustainability of the forest and forest industry in New Brunswick. The model is used by stakeholders to analyze and measure possibilities ranging from regional wood supply and demand, the economic efficiency of allocating sustainable wood supplies from all tenures, the impacts of opening new mills  or closing existing ones due to market forces, as well as identifying new investment opportunities.

The New Brunswick land base is 7 M ha, eighty percent of which is forested and home to over twenty commercial tree species.  Currently, the land base is jointly owned and managed by three major stakeholders - the New Brunswick government (fifty percent), industry (twenty percent) and private landowners (thirty percent). The forest industry has been and continues to be an important economic driver in the province.  The diverse manufacturing base, wide variety of wood products and numerous wood sources (including both NB and neighboring provinces and states) presents an extremely complex value chain.

Like most areas with a significant forest industry, NB has a high demand for fibre.  The supply and demand balance is complex given a limited wood supply and the diverse and changing needs of a restructuring industrial base.  Over the last six years New Brunswick, like most forest jurisdictions, suffered great losses with as much as 50% of sawmills and pulp and paper mills forced to close. With depressed markets and tight margins, the economic viability of the forest sector has come under close scrutiny and the interdependence has caused market shifts in wood fibre flow.

In the late 2000s, the New Brunswick government and New Brunswick’s forest sector were facing challenges in managing wood supply and securing new investments.  Several high profile Task Force studies related to forest management and improving NB’s forest economy pointed to the need for a collaboration between the major forest sector stakeholders, and a transparent, fibre balance model to represent the flow of wood fibre in all its forms from sources to users.  This would allow important questions such as “What is the economically accessible wood allocation within provincial and external markets?” and “What are the business opportunities with respect to available fibre supply?” to be analyzed.

Both the government and the forest sector understood the opportunities afforded by modeling and optimization and were seeking an analytical solution that would not only address their immediate questions surrounding woodflows, but would also serve as a link between resource and industry. Although they traditionally operate independently, there is a unanimous agreement amongst all forest stakeholders of the importance of working collaboratively to ensure a healthy and sustainable New Brunswick forest and forestry sectors.

The stakeholders turned to Remsoft, who, as modeling and optimization experts, were asked to develop a decision support model that would address the economics of provincial woodflows, to be used by all stakeholders to support collective or individual needs.  The process was supported by a committee with members from the New Brunswick Department of Natural Resources, New Brunswick Forest Products Association, New Brunswick Federation of Woodlot Owners and License holders.

Building a provincial woodflow model is no easy task given both the scale and complexity of the problem, and the complex and varying interests of the stakeholders.  After months of discussions, deliberations, data collection and decision-making, the NB Woodflow Model was born.  Used by stakeholders to analyze the provincial supply and demand balance and the economics of woodflows, the model successfully synthesizes the interests of all stakeholders into one model.

“…Remsoft was able to develop a model that captures the essence of the province’s wood supply and demand balance from an economic, environmental, and socially sustainable perspective
Mark Arsenault
President, NB Forest Products

The NB Woodflow Model is a high level, comprehensive provincial model of wood supply and consumption that includes all wood sources and sinks (both domestic and external) capturing delivered wood costs and mill gate prices.  The model includes 80 products, 900 supply zones and 100 mills representing upwards of 7 million wood allocation decision variables.  The model has the potential to analyze and measure possibilities ranging from regional wood supply and demand, the economic efficiency of Crown wood allocations, investment opportunities for surplus products, as well as the impacts of opening new mills or closing existing mills due to market forces. 

The model’s uniqueness lies in its ability to support a variety of interests and in its potential for future innovations to address new or expanded value chain dynamics.  In particular, the model serves to address and evaluate strategic business questions in a variety of areas such as:

• Assessing/valuing new business opportunities and fit within current provincial woodflows

• Understanding the impacts of business change with respect to benefits and costs

• Impacts of fibre allocation decisions (i.e. who gets what wood from where) from a financial perspective

• The value of the resource through calculated stumpage values 

• Address senior government and executive level questions allowing for more informed decision making   through better understanding of the business challenges

In summary, through their collaboration with the major forest sector stakeholders, Remsoft was able to develop a model that captures the essence of the province’s wood supply and demand balance from an economic and environmental prospective within one sustainable model. The solution provides provincial forest stakeholders with a holistic decision making system and the new and needed capability to effectively analyze the complexities of the provincial forest value chain.

REMSOFT PROVINCIAL Woodflow Case Study.pdf

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