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A mill for every stem

April 5th, 2005

Canadian Forest Industries | Fibre Management section
As published in the March 2005 Issue (pp. 32-34)

A new software product is the key to boosting productivity for the folks at J.D. Irving Ltd.

The New Brunswick based company is counting on Remsoft’s Allocation Optimizer software to improve efficiency and bottom line savings throughout its forestry operations in Atlantic Canada and the North-East US. The privately held integrated forest products company is making changes to the way it sources and allocates wood fibre to its many manufacturing facilities. The company anticipates that these supply chain management changes could result in significant savings – in both decision-making time and operational costs. Specifically, the company is using a Remsoft solution to help decide where to allocate logs to manufacturing facilities, what products to produce, and what markets to sell them in. Planners are also changing when these decisions are made, pushing the decision further up the line to the strategic planning phases from the operations level.

"What we are talking about is optimizing the allocation of wood fibre with the aim of maximizing net cash flow from across all of our operations," explains Ian Taviss, JDI management forester, who is spearheading the program to change wood allocation decision-making within the organization.

"Ultimately, we are selling products to customers out in the market, so our goal has to be to source the best mix of raw materials for our manufacturing facilities given both market demands and the available wood supply."

The allocation challenge

For companies like J.D. Irving, the wood allocation challenge is far more complex than it might initially appear, and gets increasingly complex as the company grows. Companies like Irving have literally thousands of choices to make between the forest and finished product, and the wrong decisions are tantamount to millions of dollars in lost revenue over time. For example, consider what Taviss’ team faces: They source fibre from a large and varied wood basket – 2.4 million ha of land in four jurisdictions in the Maritimes and Maine, as well as from external, private wood suppliers. Outputs from these forests supply over 80 facilities – including some 20 JDI facilities – all having different processing options, speeds and efficiencies. Forest products range from saw logs for any number of different purposes (flooring, various grades of lumber, etc…), or wood chips for a variety of pulp grades.

There is also the common industry practice of fibre exchanges between mills to consider. Add to this the ecological and environmental considerations of when, where and how responsible harvesting can and should take place, and a mix of private and Crown land. The finished products (of which there can be multiple options from the same log) dictate how a tree is cut and where and how it is transported, and are themselves dependent on the facilities’ order books, capacities and inventories, commodity prices and market demand. With these decision variables – plus the costs and revenues associated with each – it is evident how the fibre allocation decision can quickly become a decision matrix, with less-than-optimum decisions costing thousands of dollars or more.

"This new technology has greatly enhanced the speed and accuracy of our planning processes and decisions," Taviss explains. "It has also enabled us to ensure maximum value from the renewable forest resource. The technology removes a lot of the guesswork and provides a less reactive, more scientific approach to make these decisions at a higher level, from a broader, more integrated perspective."

Technology makes it possible

The software produced by Remsoft, a longtime supplier to J.D. Irving, has made this change in fibre supply chain management possible. Allocation Optimizer was developed with integrated forest product companies in mind, enabling them to address – rather than avoid or ignore – these problematical fibre allocation decisions.

Because the software is a linear programming (LP) solution, it produces allocation options that best meet the objectives specified by planners, and allows all combinations of decisions to be analyzed. The optimal results can be incorporated into strategic-level plans so that the allocation decisions are considered along with such contingent decisions as harvest schedules or land investment decisions – the point at which it is, in fact, most logical and useful to make these allocation decisions. Still, it requires buy-in from all involved in the planning and log allocation chain.

At JDI, Taviss is doing the rounds within the organization making the case for optimization in the fibre allocation decision- making process. The positive initial results from trials of the new approach, and the user-friendly nature of the software, are helping him to make his case. "We have always had buy-in from the very senior levels of our organization who have faith in optimization as a decisionmaking tool throughout the organization. But now we are working with people in the facilities and at the operations-level to convey the importance of this step and the benefits to both them and the company," he explains. As JDI adopts the system throughout its operations, it will become a tool to measure performance. "We are very excited about the prospect of enhanced performance that this new approach to fibre allocation affords us," Taviss says.

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