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5 Reasons You Should Be Optimizing Wood Procurement

October 4th, 2016

5 Reasons You Should Be Optimizing Wood Procurement

1. Leverage the data that you have

You likely already have the required data to be making smart, timely, insightful decisions about when and where to source wood, from whom, how much, and where it exists in your supply chain.

But, your datasets are likely big, complex, and ever changing… it doesn’t take much before you are buried in the numbers and your Excel spreadsheet breaks due to the sheer volume and velocity of data. The problem for businesses is rarely actually having the data, but being able to practically use this data.

This is where optimization shines. Optimization can leverage the data you have, compute the numbers and business requirements for you, and generate forecasted schedules for purchasing, harvesting, selling, trading, inventory storage, and mill processing that are timely, highly accurate … and optimized!

2. Capitalize on market opportunities

Even with a great sales forecast in place, plans often change. Prices are volatile, weather can impact the wood basket available for purchase, competitors can impact supply, and mills both internal and external can unexpectedly change lines or shut down.

Agility in responding to favorable market conditions is key to maximizing profitability, as well as the ability to strategically maneuver market downturns and make smart business decisions when margins are tight.

Optimization allows you to capitalize on market opportunities and stress test against unfavorable conditions. Scenario analysis allows you to analyze and understand the business implications of “worst case” market scenarios.

3. … But don’t paint yourself into a corner

Even when businesses are agile and able to capitalize on short term opportunities, they rarely are able to make short term decisions with full view of long term consequences. We all make decisions today that have potential to cost us business in the long term. For example, short term purchasing and stocking of one product when it is cheap might lead to future inventory shortages of another product needed in the future. Optimization allows you to capitalize on short term opportunities while simultaneously ensuring future business requirements are met.

4. See the big picture

When problems are big and complex, as they are in wood procurement, it’s common to try and break the business problem down to get a handle on it. Organizations often deal with procurement, external supplier contracts, residual sales, wood transportation, inventory management, and mill line scheduling in separate management silos. While this approach could lead to operational efficiencies, it’s also valuable to take a step back and look at the big picture… Break down your silos between inventory storage and wood purchasing, for example, or between procurement and wood transportation.

Optimization inherently accounts for all decision variables of the business when scheduling wood procurement and flow through the supply chain. And while when you look at the business and entire supply chain network as a whole there are always opportunities to make better decisions, perhaps the greater value is realized through understanding the trickle-down effect that any business decision will have on other drivers in the supply chain. 

5. Never lose sight of your inventories

Our clients often site inventory minimum and maximum thresholds as one of the key driving factors in their integrated business model. Balancing wood coming in with wood being processed, while maintaining acceptable risk margins and not overspending on inventory costs is no easy feat. This is a problem best suited for optimization. Give cost parameters to a model, set minimum and maximum inventory requirements, and let the optimizer solve for how much wood (by product or grade), you need to buy, when, where to put it, for how long, and when to process it, in order to minimize delivered wood cost.

Want Optimization? Think Remsoft.

Think your procurement planning process could benefit from optimization? Remsoft has 25 years of experience serving the forestry market in optimal forest management planning, supply chain optimization, and strategic to operational planning.  Now we can offer solutions specifically designed for wood procurement planning.

Contact us to learn more or set up a demonstration of the technology.

 


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