ADAPTING TO CHANGE: A NEW ERA FOR BY-PRODUCTS

Wednesday, May 31st, 2017

One constant in life and in business is change. As technology is upgraded and industries adapt, there will always be a time of transition. I grew up in this industry, and for 57, I’ve experienced much change.

When I began my career, lumber was traded by mail which took days to weeks, then by fax machine which shortened the time to days, and now by email which is practically instantaneous. Also, markets were predominately domestic and our staff would visit them with a drive to North Carolina. Now, our sales team boards a plane to reach customers all over the world. As our consumer markets have changed, our by-product and pulpwood markets have also evolved in correlation to changes in the pulp and paper industry. Pulp mills are closing, tightening up on specs, and issuing quotas. The consistent market for our by-products and pulpwood is now inconsistent.

My dad was adamant “if you can’t get rid of your chips, dusk and bark, they will bury you.” Not only can these product bury us, the inability to sell them can suppress lumber production and log availability. How do we as an industry and individual businesses, adapt to these changing by-product and pulpwood markets without eroding overall profitability? This issue can keep you up at night. In those sleepless, prayerful nights, I have found the need to stay focused on what my management team and I can control: manufacturing methods and keeping an open mind about potential by-products markets.

Adapting to changes in the by-product space has meant re-evaluating the milling process. The first step we have taken is to evaluate our kerf and overall yield. How much sawdust do we make per board foot of lumber produced? We continually evaluate all machinery centers to ensure minimal saw kerf or yield loss without sacrificing quality. We are also talking to equipment dealers to source new breakdown systems to match. We will never get away from making sawdust; we just want to make less of it per thousand. The same is true for chips. We may not fully eliminate our issues, but we are managing them on the front end. There’s also a payback to that — less chips and saw dust means more lumber out of the same logs.

In addition to adapting to change with the manufacturing process, we are identifying opportunities to dispose of our by-products regionally and into diverse markets when available. In our area of the country, it is not profitable to convert by-products to wood pellets for biofuel. We do sell part of our chips to a distillery to be burned in their steam plant. However, quotas are being curtailed amid talks of natural gas conversion.

Our pulp markets are facing similar challenges with weekly pulpwood, chips, and dust quotas. The questions we ask ourselves daily are: Is there opportunity for on-site consumption? Are there alternative users for these products? Are we making something that meets the specs of alternative consumers? Where can we move these products to their highest and best value?

Finally, we are examining the overall global consumption of North American hardwood fiber and our ability to compete as a low-cost provider. If we are, in fact, moving into an era when getting rid of the residuals becomes the determining factor of success, then whoever can move their chips and sawdust consistently and still make money will come out on top.

Again, one constant in life and in business is change. The change has never slowed down. What works today may not work for my team tomorrow. We must constantly strive to adapt to change creatively, knowing that with change comes great opportunity. Just keep in mind, as my dad always said, “Be careful son, there is a fine line between a vision and an illusion.”

Nordeck Thompson, Thompson Appalachian Hardwoods

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