Impact of over-run on profitability of hardwood sawmills

Research output: Contribution to journalArticle

Abstract

The objective of this paper is to ascertain if the common sawmill efficiency measure, over-run, bears a significant relationship to the ultimate measure of efficiency-profitability. A data set of log grades and lumber yields from twelve batches of red oak logs, representing about four weeks of production, was collected from a mill in central Pennsylvania. The over-run and actual profitability of each batch were calculated from mill results. For comparison, each batch was optimized through a linear programming technique to determine potential mill profitability under prevailing log and lumber prices; the corresponding over-run of each optimized batch was calculated. Stepwise linear regression techniques were utilized to prove a hypothesis that no relationship exists between over-run and profitability, either actual profit as realized by the sawmill studied or theoretically optimal profit as determined by a linear programming solution. Simple linear regression was then used to validate the result. The study demonstrates clearly that, in this case, over-run is not a predictor of profitability, and as influenced by a company's choice of log scale, is merely a relative measure of operational efficiency that may lead to mistaken assumptions about mill profitability.

Original languageEnglish (US)
Pages (from-to)291-298
Number of pages8
JournalWood and Fiber Science
Volume39
Issue number2
StatePublished - Apr 1 2007

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Sawmills
sawmills
Hardwoods
profitability
hardwood
Profitability
mill
linear programming
linear programing
lumber
profits and margins
Lumber
Linear regression
Linear programming
wood logs
methodology

All Science Journal Classification (ASJC) codes

  • Forestry
  • Materials Science(all)

Cite this

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abstract = "The objective of this paper is to ascertain if the common sawmill efficiency measure, over-run, bears a significant relationship to the ultimate measure of efficiency-profitability. A data set of log grades and lumber yields from twelve batches of red oak logs, representing about four weeks of production, was collected from a mill in central Pennsylvania. The over-run and actual profitability of each batch were calculated from mill results. For comparison, each batch was optimized through a linear programming technique to determine potential mill profitability under prevailing log and lumber prices; the corresponding over-run of each optimized batch was calculated. Stepwise linear regression techniques were utilized to prove a hypothesis that no relationship exists between over-run and profitability, either actual profit as realized by the sawmill studied or theoretically optimal profit as determined by a linear programming solution. Simple linear regression was then used to validate the result. The study demonstrates clearly that, in this case, over-run is not a predictor of profitability, and as influenced by a company's choice of log scale, is merely a relative measure of operational efficiency that may lead to mistaken assumptions about mill profitability.",
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Impact of over-run on profitability of hardwood sawmills. / Ray, Sr., Charles David; Wadhwa, Vijay; Michael, Judd Harrison.

In: Wood and Fiber Science, Vol. 39, No. 2, 01.04.2007, p. 291-298.

Research output: Contribution to journalArticle

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