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Fibre supply issues of the British Columbia log home manufacturing industry Thony, Paul J.C. 2004-11-24

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FIBRE SUPPLY ISSUES OF THE BRITISH COLUMBIA LOG HOME MANUFACTURING INDUSTRY by PAUL J.C THONY B.S.F, The University of British Columbia, 1993 A THESIS SUBMITTED IN PARTIAL FULLFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF FORESTRY in THE FACULTY OF GRADUATE STUDIES Department of Forestry We accept this thesis as conforming to the required standard The University of British Columbia August 2004 © Paul J.C. Thony, 2004 THE UNIVERSITY OF BRITISH COLUMBIA FACULTY OF GRADUATE STUDIES Library Authorization In presenting this thesis in partial fulfillment of the requirements for an advanced degree at the University of British Columbia, I agree that the Library shall make it freely available for reference and study. I further agree that permission for extensive copying of this thesis for scholarly purposes may be granted by the head of my department or by his or her representatives. It is understood that copying or publication of this thesis for financial gain shall not be allowed without my written permission. Paul John Christian Thony 25/08/2004 Name of Author (please print) Date (dd/mm/yyyy) Title of Thesis: Fibre supply issues of the British Columbia log home manufacturing industry Degree: Master of Forestry Year: 2004 Department of Forest Resource Management The University of British Columbia Vancouver, BC Canada grad. ubc.ca/forms/?form I D=THS page 1 of 1 last updated: 19-Aug-04 ABSTRACT British Columbia's log home manufacturing industry's fibre supply problems have been documented since 1992. To better understand the issues, an industry wide mail survey of 171 companies was conducted to assess production, sales, markets employment, fibre sources, fibre consumption, fibre costs and alternate fibre usage. The responses provided information on the current status of the industry, its fibre supply characteristics and use of alternative fibre supplies, such as insect killed, fire killed and second growth timber. A sample size of 42 resulted in a 24.6% response rate achieved in the mail survey. Over 90% of respondents reported using hand crafted production methods. The most common product category manufactured was the custom log home "not to lock up" with an average unit price of $71,100, which generated $905.36 in sales per cubic metre of fibre utilized. On average, each respondent consumed 1723 cubic metres of fibre, employed 12.5 full time equivalent personnel andproduced 14.6 units per year to generate gross annual sales of $1.1 million. The major markets for BC's log home industry were the United States (46%), British Columbia (31%) and Asia (13%). Of the 55,119 cubic metres of fibre recorded as purchased by respondents, 69% was from the Vancouver and Kamloops forest regions. This fibre was primarily obtained from logging company dryland sortyards, with Douglas fir {Pseudotsuga menziesii [Mirb.] Franco) the preferred species. The weighted average delivered price of all fibre purchased was $153.67 per cubic metre. In addition to old growth timber, insect killed and second growth timber were used as alternative fibre sources with 58.5% of respondents reporting usage of these materials. Just over 26,300 cubic metres of this alternative fibre was purchased by respondents with a weighted average delivered price of $127.60 per cubic metre. The respondents' opinions indicate inconsistent fibre supply and high fibre costs had the greatest impact on the industry's performance. To resolve fibre supply issues, the log home manufacturing industry strongly favoured policy changes to existing fibre allocation programs and the creation of quota systems, over developing business relationships with organizations able to supply fibre. Key Words: log buildings, fibre, forest industry, insect killed timber, mail survey, secondary manufacturing, timber frame building TABLE OF CONTENTS Page ABSTRACT ii ' TABLE OF CONTENTS iii LIST OF TABLES v LIST OF FIGURES '. vi LIST OF EQUATIONS viACKNOWLEDGEMENTS vii1 INTRODUCTION : 1 1.1 LITERATURE REVIEW 2 1.1.1 BC log home manufacturing industry 3 1.1.2 BC secondary wood products industry 6 1.1.3 Other related documents 7 1.1.4 Literature review summary 8 2 BACKGROUND ON THE BC LOG HOME MANUFACTURING INDUSTRY 9 2.1 A BRIEF HISTORY OF LOG HOME CONSTRUCTION 9 2.2 AN OVERVIEW OF THE BC FOREST PRODUCTS INDUSTRY 10 2.3 A REVIEW OF THE BC SECONDARY WOOD PRODUCTS MANUFACTURING INDUSTRY 12.4 A REVIEW OF THE BC LOG HOME MANUFACTURING INDUSTRY 13 3 METHODOLOGY 5 3.1 POPULATION DEFINITION 13.1.1 Refinement of the sample frame 16 3.2 MAIL SURVEY DESIGN3.2.1 Cover letters3.2.2 Survey questionnaire 7 3.2.3 Request form 13.3 MAIL SURVEY IMPLEMENTATION 18 3.4 DATA ANALYSIS3.4.1 Answer code sheet3.4.2 Mail survey responses 9 3.4.3 Data entry 13.4.4 Attitude measurement scales 14 RESEARCH RESULTS 21 4.1 SURVEY RESPONSE STATISTICS AND AGGREGATE RESULTS 24.1.1 Mail survey response4.1.2 Survey response rate calculation 22 4.1.3 Non-response bias 23 4.2 PRODUCTION AND FINANCIAL DATA 4 4.3 FIBRE SUPPLY CHARACTERISTICS 9 4.4 CURRENT METHODS OF ASSESSING LOG PURCHASES 35 4.5 ALTERNATE SOURCES OF FIBRE SUPPLY 34.6 RESOLVING FIBRE SUPPLY ISSUES 43 4.7 GENERAL QUESTIONS 45 DISCUSSION 49 5.1 THE STATE OF THE BC LOG HOME MANUFACTURING INDUSTRY 45.1.1 Industry size5.1.2 Industry characteristics 50 5.1.3 Product lines and attributes 1 5.1.4 Company sales per year 2 5.1.5 Markets and employment 3 5.1.6 Factors affecting industry performance 55.2 FIBRE SUPPLY CHARACTERISTICS 4 5.2.1 Sources of fibre 55 5.2.2 Cost of fibre 7 5.2.3 Preferred size and quality characteristics of fibre 58 5.2.4 Business factors affecting fibre supply 59 5.3 ALTERNATIVE FIBRE SUPPLY SOURCES 60 5.3.1 Insect killed timber volume and value5.3.2 Insect killed timber discount rate 1 6 CONCLUSION 63 LITERATURE CITED 5 APPENDIX 1. TAXONOMY OF SECONDARY MANUFACTURED WOOD PR0DUCTS68 APPENDIX 2. INTERNET WEBSITES USED FOR MAILING LIST 69 APPENDIX 3. MAIL SURVEY COVER LETTERS 70 APPENDIX 4. MAIL SURVEY QUESTIONNAIRE 4 APPENDIX 5. REQUEST FORM 79 APPENDIX 6. REFINED SAMPLE FRAME LIST 80 APPENDIX 7. NON RESPONSE BIAS RESULTS USING TWO TAILED T-TEST 82 APPENDIX 8. PRODUCT CATEGORY LIST AND DEFINITIONS 83 APPENDIX 9. LIST OF RESPONSES TO QUESTION 29 OF THE MAIL SURVEY 84 APPENDIX 10. COMMENTS RECEIVED IN QUESTION 31 OF THE MAIL SURVEY ... 88 iv LIST OF TABLES Page Table 1. The nine business types of the secondary manufacturing industry 13 Table 2. Mail survey response 21 Table 3. Mail survey response rates 3 Table 4. Variable averages and t test results 24 Table 5. Distribution by processing method 5 Table 6. Frequency of product category selection by respondents 25 Table 7. Consolidated production and financial results by product category 26 Table 8. Cross forest region purchasing distribution -31 Table 9. Fibre consumption frequency, price and total value by species 34 Table 10. Log species and size preferences 3Table 11. Anova for means of log characteristics 7 Table 12. ANOVA for means of log seller's characteristics 38 Table 13. Frequency of response, volume purchased, average delivered price and year first used of alternative fibre sources for 2002 41 Table 14. Frequency and ranking of reasons for non use of alternative fibre sources 43 Table 15. Rank and mean scores of company's fibre supply issues 44 Table 16. Ranking and mean score with confidence intervals of ways to resolve fibre supply issues 45 Table 17. Top three advantages and disadvantages of operating in British Columbia 47 LIST OF FIGURES Page Figure 1. BC's share of Canadian value added wood exports 11 Figure 2. Value added wood products to solid wood products exports ratio for BC and Canada .12 Figure 3. Distribution of log home manufacturing companies by operating age 24 Figure 4. Average sales value per cubic metre by product category 27 Figure 5. Distribution of gross company sales 2Figure 6. Distribution of sales by market area 8 Figure 7. Number of employees by employee type per company 29 Figure 8. Distribution of respondents by forest region 30 Figure 9. Distribution of fibre consumption by forest region 3Figure 10. Number of log suppliers per company by forest region 32 Figure 11. Distribution of fibre purchases by source 33 Figure 12. Distribution of methods to deal with substandard fibre once delivered 35 Figure 13. Rank and mean score of log characteristics 36 Figure 14. Rank and mean score of log seller's characteristics 38 Figure 15. Mean scores of alternative fibre suitability as a building material 40 Figure 16. Average discount required for alternative fibre source 41 Figure 17. Average delivered price of alternative fibre source versus selected species 42 Figure 18. Reasons for turning down work projects ..46 Figure 19. Distribution of companies providing value added wood products by type 47 vi LIST OF EQUATIONS Page Equation 1. Survey response rate calculation 22 Equation 2. Overall response rate calculation 3 Equation 3. Discount rate calculation '. 42 vii ACKNOWLEDGEMENTS In order to complete this thesis, I have received support from several people and organizations. I would like to thank Drs. Gary Bull for his several years of support and guidance and Robert Kozak for his insight and direction of the mail survey. I would also like to thank Warren Mabee for his practical knowledge on how to get through graduate school. Invaluable assistance was received in developing the mail survey from Robert Savignac, Executive Director of the International Log Builders Association; Dalibor Houdek, Industry Specialist at Forintek, Western Division; Brad Stennes of the Canadian Forest Service; arid Victor Cummings of Forrex. Finally, a thank you to all my office mates that kept the humour going at all times. I wish to thank Forest Innovation Investment and the IMAJO Cedar Management fund for their financial support. A very special thanks needs to go to my wife, Naslishah, for her endless kindness and patience after all the detours I took on the way to completing my thesis. As well as to my son, Elijah, for putting even more joy in my life, more than I could have ever imagined. Rjct viii 1 INTRODUCTION This study investigates fibre supply issues relating to the British Columbia (BC) log home manufacturing industry which includes companies manufacturing the following products: • handcrafted log homes, • machine profiled log homes, and • timber frame and timber frame/log home hybrid structures. Fibre used in their manufacturing processes is green or dry whole logs: • with a minimum top diameter of 20 centimetres, • all bark removed, and • composed fully of sound wood (International Log Building Association, 2000). These logs are commonly known as house logs by the forest industry but for the purpose of this research will be referred to as fibre. Fibre used by this industry are either peeled and notched, machine profiled or milled into large cants and used in both structural and non structural building elements. On average, 90% of the building material used to manufacture a log home is logs (Stennes and Wilson, 1999). The BC log home manufacturing industry is a small but expanding sector within BC's forest industry. In 2001, the industry contributed 0.5% to the province's forest products export total. The industry has increased output over the last several years while the primary forest industry has reduced output due to decreasing commodity prices (Woodbridge, 2002). In 2001, the international market for log homes packages was over $2 billion with sales tripling since 1986 (Log Home Living, 2002). BC's log home manufacturing industry gross sales for 1996 was $114 million with a majority of sales occurring in BC, the United States (US) and Japan (Westcoast CED, 1999). 1 The industry currently has difficulty in securing a consistent supply of high quality fibre to ensure production levels meet market demand. Exploratory research (Stennes and Wilson, 1999; Houdek, 2001; Wilson et al, 2001) and personal interviews (Dowdeswell, 20021; Savignac, 20022) confirmed supply side constraints noting that securing an adequate volume of timber meeting size and quality parameters was the most prevalent factor limiting industry expansion. Research into the broader secondary wood products manufacturing industry has also revealed industry-wide fibre supply challenges (FRDA, 1992; Wilson, 1996a; Wilson, Stennes and Wang, 1999b; Woodbridge, 2000; Wilson et al, 2001). Given the general consensus that fibre constraints exists, the research focuses on the BC log home building industry fibre supply issues that could be partially resolved through identifying preferred log characteristics and sizes, alternative sources of fibre to old growth timber, and favourable business practices that could improve fibre supply chains. The research objectives of this thesis are: 1. to assess the current state of the BC log home building industry; 2. to identify fibre supply characteristics of the industry; and 3. to investigate the use of alternative fibre supply sources. The thesis is organized as follows: • Section 1, Introduction and Literature Review, • Section 2, Background, • Section 3, Methodology, • Section 4, Research results, • Section 5, Discussion, and • Section 6, Conclusion. 1.1 LITERATURE REVIEW The literature review organizes articles into three sections: ' Mr. Russ Dowdeswell, Director of Fibre Acquisitions, The Log Building Industry Association of British Columbia 2 Mr. Robert Savignac, Executive Director, The International Log Building Association 2 • articles describing the BC log home manufacturing industry exclusively, • articles describing the BC secondary manufacturing industry, and • other related articles that provide background information. Each article is briefly described and its weak points in addressing the industry's fibre supply issues discussed. 1.1.1 BC log home manufacturing industry Houdek's (2001) report, Overview of the Log Building Industry in British Columbia, focussed primarily on the level of technological sophistication of log home manufacturing companies and its effect on productivity levels versus company size and production system. Of the industry's challenges, the study found that securing an adequate and consistent fibre supply was the industry's single largest problem. The study did not identify why a fibre supply problem existed but did report the industry was addressing the issue through several programs, one being the creation of a "virtual log yard" to accumulate fibre (Houdek, 2001). Stennes and Wilson's (1999) report, An Overview to Log Home Manufacturing in British Columbia, was based on data from mail surveys conducted in 1991 and 1997 of BC's secondary manufacturing industry. The first half of the overview compared 1991 and 1997 results on population estimates, total sales and employment levels, sales by market distribution, and species use distribution for the BC log home manufacturing industry. The second half reported 1997 statistics comparing the log home industry to the rest of secondary wood products manufacturing industry in the following areas: raw material type used, job maintained per 1000 cubic metres consumed, gross sales per cubic metre utilized, average cost distribution, capacity utilization and expansion plans and constraints to expansion. The report's two major conclusions were: 1) 100% of log home companies reported fibre supply as a constraint to expansion, with 72% of respondents identifying volume and 52% identifying price as the source of the problem, and 2) 3 the fibre supply constraints of the log home manufacturing industry were different to fibre supply constraints experienced by the rest of the secondary manufacturing industry. The study's results must be carefully interpreted because of design flaws in the survey, in particular answer categories that did not allow accurate reporting by log home manufacturing company respondents. An example of these flaws was the inclusion of the SPF (spruce-pine-fir) lumber category in the tree species use distribution diagram. SPF is not a tree species, but a lumber product used as an input material by the secondary wood products manufacturing industry. Since the distribution diagram included both Pine (Pinus spp.) and Spruce (Picea spp.) in addition to the SPF category, the answers could have influenced double counting resulting in an inaccurate species utilization calculation. The second example was the reported distribution of potential log supply sources. The BC Market sales category aggregated several possible log supplier sources, such as logging company dryland sortyards, log brokers, log wholesalers and private land owners. Each of these subcategories individually provides substantial amounts of fibre to the industry. The inclusion of Other Tenure in the list of timber tenures included as possible fibre sources was also misleading, as log home manufacturers can only be granted Category II Small Business Forest Enterprise Program3 timber sales. Wilson et al's., (2001) report, The structure and economic contribution of secondary manufacturing in British Columbia: 1990-1999, included a summary of the BC log home manufacturing industry. This summary was based on a 1999 mail survey that was conducted on the entire secondary wood products manufacturing industry. The information presented included: population estimates, industry level employment and sales estimates, sales by market, species use distribution, log supply sources, jobs maintained per 1000 cubic metres of fibre, 3 The Small Business Forest Enterprise Program was renamed on April 1, 2003 to BC Timber Sales. 4 capacity utilization and expansion and major constraints to expansion. In describing the log home manufacturing industry, the study found that the log home manufacturing industry: • exports nearly 90% of total sales outside of Canada, • generates 3.2 more direct jobs per 1000 m3 consumed compared to the secondary manufacturing industry average of 0.6, and • the main expansion constraints are wood supply and labour while markets and finance limit the rest of the secondary manufacturing industry (Wilson et al., 2001). Unfortunately, the same survey design flaws that were made by Stennes and Wilson (1999) were repeated in this study. These flaws, including SPF lumber in the tree species use distribution and the limited number of log supply source categories, produced results that were again inaccurate. For example, SPF lumber was ranked as the second most used tree species, just one percent behind the most common species (Wilson et al., 2001). The inclusion of SPF may have significantly reduced the frequency of Pine and Spruce reported by respondents, and therefore affected the overall species distribution and their relative importance to the industry. A more realistic raw material input comparison would be logs versus lumber, panels and other wood products, and separately tree species use based on data collected for log inputs. The lack of more applicable log supply source categories also caused distortions, with a majority of respondents indicating over three-quarter of the industry's fibre supply was secured through BC Market Purchases. Several supplier sub-types are present in this category, such as logging company dryland sortyards, log broker, log wholesalers and private land owners, and their relative importance to the industry is therefore unknown. In all previous reports on the BC log home manufacturing industry, wood supply was ranked as the primary constraint to industry expansion. Wilson et al. (2001) reported labour had superseded wood supply as the primary industry expansion constraint, which may indicate that the industry's fibre supply problems had improved since 1997. 5 The Westcoast CED (1999) report, The Market for Log Homes - An Assessment, provided product definitions and global production and markets of log homes. It focussed primarily on providing a business plan design with several market penetration strategies for initiating a machine profiled log home manufacturing company for an aboriginal business development association in the Prince George of BC. It also included the findings of an unpublished 1996 BC log home construction industry survey4. In this study, fibre supply was noted as a constraint to industry expansion with survey respondents indicating that high log prices (81%), the inability to obtain an increased volume of building logs (68%) and inadequate log quality (53%) were the key factors affecting company growth when compared to other constraints due to labour, capital, and marketing or management skills (Westcoast CED, 1999). 1.1.2 BC secondary wood products industry The log home manufacturing industry is an important part of the secondary wood products manufacturing industry. However, information on the log home industry is often lost because secondary manufacturing industry surveys focus on companies that require commodity type lumber inputs and possess automated manufacturing lines to create products such as, laminated beams, roof and floor truss systems, prefabricated modular buildings, treated wood products and laminated veneer lumber. This is unrepresentative of the BC log home manufacturing industry, which requires for the most part unprocessed logs and large cants, and where a majority of companies utilizes hand crafted production techniques. In the Wilson, Stennes and Wang (1999a) study, Secondary Manufacturing in British Columbia: A Regional Breakdown, the authors analyzed 1991 and 1997 population levels, markets, sales and employment data for the secondary manufacturing industry by BC forest 4 Author unknown. Survey funded through Forest Renewal BC grant and conducted by the Log Building Industry Association of British Columbia region based upon mail survey data. The study determined that wood supply ranked first as a constraint to the secondary manufacturing industry expansion in all six forest regions when compared against labour and markets. The PriceWaterhouseCoopers (1993) study, Performance of the Value-added Wood Products Industry in British Columbia, provided sales, employment, capacity utilization and expansion plans and major constraints to expansion results. Again, the study emphasised that the lack of secure wood supply with right sizes, quality and price was a serious constraint. It reported that the industry needed to improve by: • enhancing industry margins in order to better compete for raw material, and • developing mature business relationships between primary and secondary producers The Forintek and McWilliams (1993) study, Structure and Significance of the Value Added Wood Products Industry in British Columbia, provided the first definition of the value added wood products industry as "secondary wood product manufacturers that add value to commodity wood products or wood based material by further processing it into specialty finished or semi-finished products". The definition was modified slightly in later reports and renamed the "secondary wood products manufacturing industry". 1.1.3 Other related documents There are numerous documents such as government publications, consultant reports and industry association and magazine Internet websites also available. Wilson (1984) gave a detailed history on log home construction developments in Europe and its influence on North America log home construction. Muir and Osborne (1983) reported historical use of log homes and some details on log building construction. The Ministry of Forests (1997 & 2003) provided data on the value of timber harvested from provincial forest tenures. Consultants' reports (Mater, 1999; Woodbridge and Associates, 2001; Woodbridge, 2000, 2002 & 2003) covered market research and weakness in BC's timber tenure system and its 7 affect on available fibre supply. They also provided strategies to improve the secondary wood products manufacturing industry output or viability. The International Log Building Association (ILBA) and Log Building Industry Association of British Columbia (LBIA) provided Internet articles that promoted the industry, voluntary building standards and company information. The industry magazine, Log Home Living, had many articles available: log home production reports, benefits of owning a log home, maintenance tips and articles for do-it yourself enthusiasts and how to be your own general contractor. 1.1.4 Literature review summary The BC log home manufacturing industry studies provided data on population size, fibre supply sources, sales, employment, capacity utilization, expansion plans and constraints to expansion. Most studies indicated fibre supply as the primary industry constraint to expansion followed by labour, but several reports were flawed and provided misleading or incomplete data. One common weakness was a lack of detailed analysis into the underlying causes of fibre shortages. Secondary wood products manufacturing industry studies do not provide reliable data on the BC log home manufacturing industry due to dissimilarities in company sizes, input materials, production methods and markets. Other related documents provided historical and industry importance material but largely avoided the fibre supply issue. Therefore, this study attempts to fill these gaps in the literature, by providing more detailed data on industry characteristics, fibre availability, quality and cost, and alternative fibre sources. 8 2 BACKGROUND ON THE BC LOG HOME MANUFACTURING INDUSTRY Section 2 is comprised of four parts: • a brief history of log home construction, • an overview of the BC forest products industry, • a review of the BC secondary wood products manufacturing industry, and • a review of the BC log home manufacturing industry. 2.1 A BRIEF HISTORY OF LOG HOME CONSTRUCTION The use of logs as the main building material for habitable human dwellings is widespread among prehistoric cultures with known use occurring in North America, Europe, Japan, Scandinavia and Russia (Janzen, 1980; Muir and Osborne, 1983; Wilson, 1984). From as early as 8000 BC, structures have been built utilizing logs laid horizontally and notched at the corners for increased strength, stability and security (Wilson, 1984). By the 17th century, the horizontal, interlocking log wall construction technique was predominant in rural areas of Scandinavia, the Baltic countries, Russia, Germany and Switzerland (Wilson, 1984). Migrants from Europe to North America continued the same log building construction methods in their new homeland for the next 250 years. In the late 19th century, log home construction fell out of favour when it became easier and cheaper to assemble lumber frame style buildings (Peters, 2000). By the 1990s, log homes were popular again as a primary residence (Court, 1997), and this helped expand the BC log home manufacturing industry. The most common style of log home building construction method used today, the Scandinavian Full Scribe (Westcoast CED, 1999), closely follows the traditional techniques brought over by the first Swedish settlers who arrived in 1638 (Wilson, 1984). This style is characterized by: 9 • logs left fully round, • a groove cut the entire log's bottom length, • notches cut in the top or both sided about 30 centimetres from the each end log, and • logs overlapped at each building corner. Properly built log buildings can last several centuries with some reported at greater than one thousand years old (Muir and Osborne, 1983). 2.2 AN OVERVIEW OF THE BC FOREST PRODUCTS INDUSTRY Since the late 1800s, BC's economy has been dominated by the forest products industry. It expanded rapidly given the natural endowment of forest resources made an ideal material supply coupled with increasing global demand for forest products. The industry is still one of the global leaders in forest products exports contributing some 8% to the global trade value (Ministry of Forests, 2003). In 2002, the forest industry: • harvested 73.4 million m3, • generated $14.4 billion in sales, • provided $ 1.296 billion in crown forest revenue, • contributed $4 billion to municipal, provincial and federal governmental revenue, • employed directly and indirectly over 270,000 people, and • accounted for 49.8% of the total provincial exports and 8.07% of provincial GDP. (Sources: Council of Forest Industries, 2003; Ministry of Management Services, 2003b; Ministry of Forest, 2004 & 2004a). Today, BC's forest industry is losing ground in its traditional markets to other competitors due to several factors: high wood extraction and labour costs, unfriendly regulatory and investment climate, outdated timber tenure system, uncertain access to fibre and a corporate mindset focused on production oriented, low value output (Woodbridge, 2003). 2.3 A REVIEW OF THE BC SECONDARY WOOD PRODUCTS MANUFACTURING INDUSTRY Improving the capacity of BC's secondary wood products manufacturing industry is important to the province. BC can no longer depend on the "commodity" forestry industry to 10 increase production and employment levels due to a lack of additional timber reserves and expansion of regulatory, environmental and social constraints (Wilson et al., 2001). The only area for substantial growth lies in expanding the secondary wood products industry. However, its expansion has languished in comparison to other provinces that promoted higher levels of secondary processing of primary manufacturing output over the last decade (Ministry of Management Service, 2003a). In 1990, BC's secondary industry ranked first in Canada in value added wood exports by shipping 35% of the total Canadian value (Ministry of Management Services, 2003a). Canada's secondary industry experienced a compound annual growth rate of 25% over the last ten years, but by then BC dropped to third place at 14% (Figure 1). BC Share of Canadian value added wood I l I i l I I i i i i i i "J 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Figure 1. BC's share of Canadian value added wood exports Source: Ministry of Management Service, 2003a. From 1990 to 2002, BC tripled value added wood product exports but had the second lowest provincial value added to total wood product exports ratio of 10.5 % with the Canadian average at 30.3% (Ministry of Management Service, 2003a) (Figure 2). 11 Value added as a % of so id wood exports r 35 h 30 E-2S Canada t 20 E- 15 10 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 20" 2001 2002 Figure 2. Value added wood products to solid wood products exports ratio for BC and Canada Source: Ministry of Management Service, 2003a. In 1999, the BC secondary wood products industry generated $4.68 billion in sales, over a quarter of the forest industry sales, but generated four times the amount of jobs per equivalent amount of timber (Wilson et al., 2001). The province's solid wood products export totals peaked in 1999 and has since declined mostly due to reduced lumber and pulp prices, non-tariff barriers to export and high logging and stumpage costs (Pearse, 2001). BC is positioned favourably just north of the largest consumer of value added wood products, the US, and in particular the Western States. BC's secondary manufacturers currently hold one percent of the US value added wood market and if increased to five percent, the forest industry's total sales would double without any increase in timber harvest levels (Woodbridge, 2000). 12 2.4 A REVIEW OF THE BC LOG HOME MANUFACTURING INDUSTRY Companies within the BC forest products industry operates in two broad groups: primary and secondary manufacturing companies. Primary manufacturing companies utilize logs to produce commodity type wood products such as, lumber, pulp, paper and panels (Woodbridge, 2002). The secondary manufacturing industry utilizes both wood and log products to produce higher value semi-finished and finished wood products (Wilson, Stennes and Wang, 1999b). The log home manufacturing industry falls within secondary manufacturing category utilizing log products (See Appendix 1). The more common classification system for the secondary manufacturing industry is by business type. There are nine business types with a total of twenty-nine subgroups with log home products categorized in the engineered wood products business type (Table 1). Table 1. The nine business types of the secondary manufacturing industry 1. Remanufactured products • lumber specialties • custom processing • cutstock • decking • Sawmill specialties • fencing • siding 2. Engineered wood products • laminated beams • trusses • prefab buildings • log homes • treated wood • laminated veneer lumber Source: Wilson et al (2001) 3. Millwork • doors/windows • moulding • flooring • architectural wood • turned wood • stairs 4. Cabinets • kitchen cabinets • cabinet doors • countertops • vanity cabinets 5. Furniture • household • ready to assemble • commercial/ industrial • patio 6. Pallets and containers • pallets • shipping material • boxes, bins and crates 7. Shakes and shingles 8. Panelboards • plywood • particleboard • oriented strandboard • medium density fibreboard 9. Other wood products • poles and posts • veneer • instruments • wood novelties • woodcrafts 13 The major drawback of this classification system is the failure to separate the log home manufacturing companies from other companies producing products such as, laminated beams, trusses and prefabricated homes. The log home manufacturing companies are typically smaller, labour intensive, export market oriented and require whole logs and large cants as their primary raw material. The latter instead are larger, highly automated, domestic market oriented and require lumber and panels as the primary raw material. In 1996, Canada ranked third in log home sales, manufacturing $189 million, with BC's sales contributing $113 million (Westcoast CED, 1999). In 1997, the LBIA reported similar sales of $114 million, directly employing 1800 people and contributing greatly to economic diversification and community development within BC (Log Building Industry Association of British Columbia, 2002). The industry is very labour intensive, generating one of the highest levels of employment per thousand cubic of logs in the secondary wood products manufacturing industry (Wilson et al., 2001). The major export markets of log homes are the US, Japan and Europe while a significant BC market exists. In 2001, the US purchased $1.7 billion of log homes with BC having a market share of $34 million, but expansion possibilities existed if fibre supply issues were addressed (Westcoast CED, 1999). In 1996, approximately 130 log home manufacturing companies operated within BC and consumed 200,000 m3 of fibre that consisted mostly of unprocessed logs and large cants (Log . Building Industry Association of British Columbia, 2002). Three-quarters of the fibre was sourced through BC log market sales and the remainder through the Small Business Forest Enterprise Program (Wilson et al., 2001). However, log suppliers often lacked a consistent supply of house logs that met size and quality requirements, even though log home manufacturing companies were willing to pay 20% and greater premiums to ensure their log supply needs were met. (Dowdeswell pers. comm., 26 Sept. 2002). 14 3 METHODOLOGY Section 3 describes the four phases of the research: • define the population, • design the mail survey, • implementation of the mail survey, and • analyze data. 3.1 POPULATION DEFINITION To identify log home manufacturing companies in the province of British Columbia I used the Forintek and McWilliams (1993) definition of a company as "those who prepare and preassemble log structures at their place of business". Later, this definition was modified since 1. some companies do not need to preassemble their buildings and 2.companies must incorporate industry building standards produced by the International Log Building Association (2000). Therefore, all companies in this research had two primary characteristics: • premanufacture habitable structures at their place of business, and • building material are solid logs or cants greater than 20.0 cm. in diameter or width. This definition includes all log home structures made of solid, hand notched logs, manufactured or profiled logs and cants, and sawn timbers utilized in timber frame homes. The research population was all log home and timber frame manufacturing companies in British Columbia, and a sample frame of 232 companies was identified. For a majority of these companies, contact information was gathered from the Telus Superpages website under the Log Cabins/Homes/Buildings category and information from the internet (See Appendix 2). 15 3.1.1 Refinement of the sample frame Many errors were found in the sample frame, in particular, incomplete addresses and companies not producing log structures. To correct address errors, I conducted more intense research, attempted to email a contact person or telephoned the company. If the company could not be reached after these three steps, it was removed from the sample frame. The types of companies not producing log structures removed from the sample frame list provided these services: panabode style buildings, log chinking, log home renovation, log home sales, exports and transport and metal products associated with log building construction. After these steps, the sample frame was adjusted to 191 companies. 3.2 MAIL SURVEY DESIGN The mail survey consisted of cover letters, a questionnaire and a request form (See Appendix 3 to 5). The cover letters identified the researcher and the research purpose in relation to the industry's fibre supply challenges. The questionnaire collected data on company business results, practices and opinions. The request form asked companies to participate in an onsite visit of their manufacturing facilities and/or receive a copy of the survey results. 3.2.1 Cover letters The mail survey design required a total of four cover letters (Appendix 3.1 to 3.4) at different stages of the implementation timeline. The first cover letter was a pre-notification letter mailed to all companies in the refined sample frame for the purpose of identifying the researcher and notifying the companies of the forthcoming questionnaire. The second cover letter was mailed to all companies in the refined sample frame as part of the first mail out of the survey package. The cover letter included the following information: 1. identifying the researcher and the organization conducting the mail survey 2. the purpose of the research in relation to their industry 3. the benefits of participating in the mail survey 16 4. researcher contact information 5. thanking the company for participating. The survey package consisted of a cover letter, questionnaire, stamped return envelope and request form. The third cover letter was mailed to all companies in the sample frame reminding them to respond to the survey and thanking them for their participation if they had already responded. The fourth cover letter was included in the second mail out package and mailed to all non-respondents of the first mail out of the survey package. The fourth cover letter was the same as second cover letter, but further emphasized the benefits of responding to the survey. 3.2.2 Survey questionnaire The survey questionnaire was designed to collect log home manufacturing company production and financial results, fibre supply characteristics, methods of assessing log purchases, alternate sources of fibre supply, methods for resolving fibre supply issues and general questions. The questionnaire was pretested on executive council members of both BC log home building associations and two log home manufacturers in Alberta. The questionnaire was printed in a four page booklet-style format composed of six sections totalling thirty-one questions (Appendix 4) . Each respondent was asked to report only their Year 2002 results. The survey concluded with a thank you statement and researcher contact information. Questionnaires were numbered for the purpose of identifying respondents to remove them from subsequent mailing lists. 3.2.3 Request form Each survey package included a request form allowing respondents to indicate a willingness to participate in an onsite visit of its manufacturing site by the researcher5 (Appendix 5) . Also included was an area to indicate that the respondent wished to receive a free copy of the 5 Site visits were not completed due to a lack of funding 17 research results. For either request, the company was asked to provide its operation's contact information. The request form was requested to be faxed to the researcher. 3.3 MAIL SURVEY IMPLEMENTATION Conducting the mail survey followed Dillman's (2000) total design method with the following implementation dates: 1. mailing of pre-notification letter - February 15, 2003 2. first mailing of survey package - February 22, 2003 3. thank you/reminder letter - March 1, 2003 4. second mailing of survey package to non respondents - March 29, 2003. Dillman's fifth step, a third mail out via courier of the survey package with a new cover letter, was not included in the research methodology due to lack of funds and time. 3.4 DATA ANALYSIS The four steps of data analysis were: 1. Develop an answer code sheet prior to distribution of the mail survey for the purpose of defining numeric values to answers provided by the respondents. 2. Review all responses to categorize valid from invalid survey responses and to clarify individual responses for data entry. 3. Enter data into a MS Excel 2000 spreadsheet. 4. Use both descriptive and inferential statistics to analyze data collected and test for non-response bias using Microsoft Excel 2000 and SAS, respectively. For the inferential statistics, an alpha level = 0.05 was used in the calculation of 95% confidence intervals. The remainder of this section provides further detail on these four steps. 3.4.1 Answer code sheet An answer coding sheet was developed to transform survey responses into numeric data to allow for statistical analysis. Answer coding was completed to 1. input respondents' numeric and non-numeric data, 2. categorize answers that were illegible or incorrectly provided, 3. report 18 whether filter questions were followed correctly, and 4. indicate non-response to a question. Numeric data was entered directly while non-numeric data were assigned category numbers. 3.4.2 Mail survey responses All mail survey responses were classified into two categories: invalid and valid. Invalid responses included surveys that were returned unanswered or with comments unrelated to the project. Valid responses were returned questionnaires that were fully or partially answered. All questions within each valid response were reviewed to ensure answers were clearly marked. A Ambiguous or unclearly marked answers were either tallied as a non-response or corrected by the researcher corrected in one of two ways: 1. the researcher clearly marked the indicated response or clarified numerical answers (e.g. taking the average of two numbers when a single number answer was requested), or 2. the respondent was telephoned and clarified their answer. 3.4.3 Data entry Numeric data was separated into two categories based upon response to the first or second survey as determined by identification numbers. A master data set of all responses was then created with six separate subsections corresponding to the survey sections. The subsection data was used in the statistical analyse. The respondents' comments in the last survey question were also compiled. 3.4.4 Attitude measurement scales The statistical analyses were dependent upon the measurement scales used. All four measurement scales common to survey design was used. Several survey questions collected data using nominal scales: dichotomy questions to categorize respondents, types of products manufactured, company location and gross sales by category. This data was analyzed and reported using relative frequencies and histograms. 19 Ratio scales were used to collect financial and production results, the amount of fibre purchased by forest region and supplier type, fibre cost by species, employee information, etc. These results were calculated as relative frequencies and reported in tables and diagrams. Ordinal scales were used to rank the top three practices of dealing with fibre that fails their quality criteria and reasons why orders to start log home projects were declined. A scale of one to three was used with one being the most common practice and three being the third most common practice. This data was reported as relative frequencies. Interval scales were used in three question utilizing Likert scales for collecting data on business philosophies, as they pertain to fibre supply issues. These scales utilized a five-point interval scale, with one equalling to "strongly agree" and five "strongly disagree". Data means and standard deviations were calculated and means ranked and reported in tables. Ninety-five percent confidence intervals were computed for each mean and results reported in diagrams. Each statement mean and confidence interval was tested against the midpoint point of three to determine if the statement mean was significantly different from the neutral attitude. Another interval scale that was used was a five-point numeric scale to collect data on preferred log and supplier characteristics, with one equalling "not at all important" and five "extremely important". Data means and standard deviations were calculated and means ranked and reported in tables. Ninety-five percent confidence intervals were computed for each mean and results reported in diagrams. The Scheffe post hoc test was used for grouping of significantly different groups of statements. The respondent's comments to Question 31 were reviewed and then major themes were identified. These themes were identified by numbers and then tallied to determine the most common themes. 20 4 RESEARCH RESULTS Section 4 summarizes the mail survey response statistics and results of survey's six sections listed below: Production and financial data Fibre supply characteristics Current methods of assessing log purchases Alternate sources of fibre supply Resolving fibre supply issues General questions. All results present are based on respondents' data only with no industry level estimation of size, sales, or fibre consumed provided. 4.1 SURVEY RESPONSE STATISTICS AND AGGREGATE RESULTS 4.1.1 Mail survey response An initial population size of 191 entities was included in the first mail out of the survey. Survey response by mail out phase is reported in Table 2. Table 2. Mail survey response Number of Number of elements Number of Number of valid survey removed from surveys returned surveys sent responses sample frame unanswered First mailing 191 32 20 1 Second mailing 138 10 0 5 Total 42 20 6 With the initial mail out of 191 survey packages, 32 completed or partially completed surveys were returned. Due to the detailed nature of the survey, very few questionnaires were completed in their entirety. Therefore even a partially completed survey was still considered a 21 valid response. Between the first and third mail out of the questionnaire, fifteen envelopes were returned as undeliverable. In addition, three companies used the return envelopes to inform the researcher that they thought they did not meet the research definition of a log building producer, explaining they produced "Lindal style" homes which are not similar to log buildings. One response was received from a company that stated it was "out of business in 2000" and one from a company notifying us that we had sent letters to their head office as well as their manufacturing site. As a result, the sample frame was reduced by 20 to a refined sample frame size of 171 companies (See Appendix 6). The refined sample frame size was confirmed by Brian Lloyd, Executive Council member of the LBIA (pers. comm. 8 Jan. 2004) as an accurate estimate of the industry size. The second mail out contacted all non-respondents of the first mail out resulting in 138 mailed surveys. Five respondents returned the survey unanswered with responses ranging from "not interested in participating" to a handwritten messages stating "it was none of your damned business to ask these types of detailed questions". The sample size for the study was 42. 4.1.2 Survey response rate calculation The survey response rate (RR) (Equation 1) was calculated counting all valid survey responses received from the refined sample frame from each mail out: Equation 1. Survey response rate calculation RR = Valid responses for mail out phase Refined sample frame - Valid responses from earlier mail out The overall response rate (ORR) (Equation 2) determines what proportion of the refined sample frame answered the survey: 22 Equation 2. Overall response rate calculation ORR = Total number of valid survey responses Refined sample frame The RR for each mail out and ORR is provided in Table 3. Table 3. Mail survey response rates Number of Number of valid Response rate surveys sent survey responses (%) First mailing 171 32 18.7 Second mailing 138 10 7.3 Overall 42 24.6 The range of acceptable response rates for industry mail surveys varies widely. A response rate of greater than 10% is suitable for statistical analysis but a 20% to 30% response rate is more acceptable (Miller, 1977; Salant and Dillman, 1994; Babbie, 2001). The ORR for this study was 24.6% (Table 3). 4.1.3 Non-response bias Inherent to research involving mail surveys is the issue of systematic error. Several types of systematic error occur but non-response bias is of interest in this survey. Non-response bias is important because it determines whether there is a significant difference between the portions of the population that did not respond to the survey and those that did (Salant and Dillman, 1994). A method to test for non-response bias when utilizing a multistage mail survey format involves a two-tailed t-test to compare respondent data of the initial mail out to the second mail out. The variables selected to test for non-response bias between the two groups were business age, number of full time employees and volume of fibre purchased. These variables were selected as they are central to the research objective of assessing the state of the industry. In Appendix 7, t 23 test results are presented for the three groups. In all cases, there are no significant differences at an alpha level of 0.05 (Table 4). Table 4. Variable averages and t test results Variable tested First mail out Second mail out T value T critical P value Business age (years) 15.44 19.20 -1.033 2.160 0.32 Number of full time employees 9.96 8.29 0.394 2.179 0.70 Volume of fibre purchased (m3) 1526.33 2572.50 -0.641 2.571 0.55 The acceptable response level and non-response bias calculation supporting the null hypothesis indicate inferences from the research results can be made on the BC log home manufacturing industry population (Miller, 1977; Babbie, 2000). 4.2 PRODUCTION AND FINANCIAL DATA The initial survey question asked respondents to report the age of their business in years and determined that a majority of respondents (75.60%) had been operating for over ten years (Figure 3). 6 o ^0 8 Years operating i-H R Y H Figure 3. Distribution of log home manufacturing companies by operating age. 24 The average company age was 16.3 years and the median age was 15.0 years. When respondents were asked to identify their main manufacturing process used to produce their product lines, hand crafted production methods were much more frequently compared to machine milled production methods (Table 5). Table 5. Distribution by processing method Processing Percent of total method response (%) Hand crafted 90.2 Machine milled 9.8 Total 100.0 Several common product lines are marketed by the industry. Respondents were provided six researcher and one respondent specified product categories to indicate the breadth of the product lines (See Appendix 8 for product category list and definitions). Table 6 summarizes the frequency of product category selection by thirty-eight respondents. Table 6. Frequency of product category selection by respondents %of Product category respondents Custom log home not to lock up 89.47% Custom log home to lock up 28.95% Multiple unit dwelling 13.16% Pre-designed log home (<2000 sq.ft. total) 39.47% Pre-designed log home (>2000 sq.ft. total) 36.84% Commercial buildings 57.89% Other, please specify (see A to C below) 42.10% A Log & Timber frame 2.63% B Timber frame 21.05C Post and Beam 18.42% The custom log home not to lock up was the most frequent selected product category followed by commercial buildings. In Table 6, the Other category was reported frequently and is further broken down into subcategories A to C to show composition of product category total. 25 In assessing the current status of an industry, it is important to include production levels, sales, materials consumed, markets and employment levels. Table 7 summarizes 26 respondents data on number of units sold, average unit price and size, and average log use for five of the seven product categories as well as the product category total value. Table 7. Consolidated production and financial results by product category Average Average Average Category Number of unit price unit size log use value Product category units sold ($) (sq. ft.) (m3/unit) ($,000) Custom log home not to lock up 138 71,107.34 1566 79 9,812.8 Custom log home to lock up 9 282,222.22 3322 155 2,540.0 Pre-designed log home (<2000 sq. ft.) 58 29,067.31 1884 81 1,685.9 Pre-designed log home (>2000 sq. ft.) 94 73,780.14 2793 128 6,935.3 Other (timber frame/post & beam) 51 81,931.82 2197 60 4,178.5 Unclassified 29 98,863.64 1794 95 2,867.0 Total/Weighted average 379 73,930.39 2063 92 28,019.6 A sixth product category, Unclassified is included in Table 7 to report sales and fibre use data recorded by respondents who did not specify a product category. Respondent sold 379 units with a weighted average sales price per unit of over $73,900 and total sales of over $28 million. Respondents, on average, manufactured 14.58 units resulting in $1,077,000 in sales per company. The custom log home not to lock up product category contributed 35.02% to the total sales value (Table 7). Pre-designed log homes greater than 2000 square feet ranked second in unit production and proportion of total product category value (24.75%) (Table 7). The remaining four product categories account for less than 38.76% of unit production, but greater than 40.22% total product category value. Figure 4 uses data from Table 7 to calculate the average sales value per cubic metre by product category. 26 Custom log home not to lock up Custom log home to lock up Pre-designed log home (<2000 sq.ft. total) Pre-designed log home (>2000 sq.ft. total) Other (timber frame/post & beam) Unclassified $905.36 $1,820.79 $356.92 $577. $1,373 $1,040.80 ] .38 $- $400.00 $800.00 $1,200.00 $1,600.00 $2,000.00 Sales value per cubic metre of fibre utilized Figure 4. Average sales value per cubic metre by product category. The weighted average sales value per cubic metre for all product categories was $835.11. Respondents were asked to report gross company sales for 2002 in one of eight possible categories. The answers displayed a bimodal distribution with the median sales per year falling within the $500,000 to $749,999 category (Figure 5). 25% i 5 20% 3 I 15% g 10% 3 CT ^ 5% ^ 0% $0- 249,999 $250,000- $500,000- $750,000- $1,000,000 - $2,000,000 - $5,000,000-$499,999 $749,999 $999,999 $1,999,999 $4,999,999 $9,999,999 Gross company sales Figure 5. Distribution of gross company sales. 27 Respondents were then asked to report the percent of gross company sales and sales trends over the last three years in seven global market areas. Figure 6 indicates the distribution of sales in seven market areas. United S tate s 46.1% Figure 6. Distribution of sales by market area. Greater than 82% of log home sales value was completed within North America. The US was the main export destination, with 46.1% of sales (Figure 6) and the strongest increasing sales trend from 1999 to 2002. The rest of Canada and Asian markets also experienced increasing sales trends over this time period, while Europe, Other and British Columbia experienced decreasing sales trends. Respondents were asked to report the number of full time, part time and contract workers employed at their places of business in 2002. Figure 7 summarizes the mean number of employees by employee type with 95% confidence intervals, and median values were calculated. Asia Europe other 4-7% / 0.4% British Columbia Rest of Canada 5.1% 28 12 10 0 9.62 • Average number of employees per company • Median number of employees per company 4.5 Full time Part time Employee type Contractor Figure 7. Number of employees by employee type per company On average, each respondent maintained 15 employees broken down into 9.6 full time, 2.5 part time and 2.9 contract positions. Respondents were asked to report the 2002 average gross annual salary of their full time employees minus benefits. The mean and median values were calculated based upon 26 respondents resulting in a gross annual salary of $37,076.92 and a median value of $35,000. 4.3 FIBRE SUPPLY CHARACTERISTICS On a map of BC with the Ministry of Forest's old six forest region system delineated6, respondents were asked to place a check mark in the forest region where their manufacturing centre was located. Manufacturers from the Vancouver and Kamloops forest regions returned a majority of the survey responses (71.05%) with little or no response from operators in the Prince George and Prince Rupert forest regions (Figure 8). 6 On April 1, 2003, the Ministry of Forests changed the forest region boundaries within the Province of British Columbia by amalgamating six regions into three. Research data is presented using the six forest region system. Prince Rupert, 0.0%^" rince George, 5.3% Vancouver, 36.8% Nelson, 13.2% Caribou, 10.5% Kamloops, 34.2% Figure 8. Distribution of respondents by forest region. Response from these regions was strong as a majority of the industry is located within these two areas. On the same map, respondents were also asked to report the approximate percentage of their total log consumption sourced from each forest region. Figure 9 reports the distribution of fibre consumption by forest region. Nelson, 15.1% Figure 9. Distribution of fibre consumption by forest region. The southern half of the province, which includes the Vancouver, Kamloops and Nelson forest regions, provided 84.71% of total fibre purchased. Prince Rupert, i Prince George, 2.3% 4.9% Vancouver, 37.7% Kamloops, 31.9% 30 Log home manufacturers need to source material from many areas in the province based on the product demand of their clients. This leads to fibre purchases from forest regions outside of their home forest region. The cross forest region fibre purchasing distribution (Table 8) was calculated based on the proportional distribution of log purchases by 34 respondents in five of the six forest regions. The left hand column represents the home forest region where the log home manufacturers' facilities operate and the top row indicates the forest region from which fibre was purchased. The far right hand column is the number of respondents answering the question from each forest region. Table 8. Cross forest region purchasing distribution Purchasing X region Prince Prince Home region Rupert George Caribou Kamloops Nelson Vancouver Responses Prince Rupert N/A N/A N/A N/A N/A N/A 0 Prince George 30.00% 70.00% 0.00% 0.00% 0.00% 0.00% 2 Caribou 5.00% 5.00% 45.00% 45.00% 0.00% 0.00% 2 Kamloops 0.91% 0.91% 5.91% 84.09% 5.00% 3.18% 11 Nelson 0.00% 0.00% 5.00% 0.00% 95.00% 0.00% 5 Vancouver 0.00% 0.71% 0.36% 7.14% 0.00% 91.79% 14 Totals 35.91% 76.62% 56.27% 136.23% 100.00% 94.97% 34 Highlighted within the table is the average percent of purchases made by manufacturers from within their home forest region. In each column, but not highlighted is the average percent of purchases by respondents outside the forest region. Each column was totalled and reports the forest region's fibre balance. A score of 100% means the forest region's internal fibre requirements for respondents equalled the total amount of fibre purchased within the forest region by all respondents; a score above 100% indicates a flow of fibre out of the forest region. The Kamloops forest region experienced the highest flow of fibre out of the forest region while four of the remaining forest regions had a fairly balanced fibre flow or flow into the region. 31 There were no respondents from the Prince Rupert forest region, but fibre purchases were made from sources outside of this forest region. Respondents were asked to report the number of log suppliers utilized in 2002. The average number of suppliers per company was 7.0, with a median value of 3.0. The mean number of suppliers per company, with 95% confidence intervals and median values, were calculated for respondents from each forest region (Figure 10). 14.0 12.0 1 10.0 1 '— 8.0 0 \ 6.0 < 4.0 2.0 0.0 6.5 3.0 3 Caribou 12.1 Mean I Median Pr. George Figure 10. Number of log suppliers per company by forest region Kamloops Nelson Vancouver Forest region In all forest regions, multiple log suppliers were required to meet manufacturer's production requirements. Respondents from the Kamloops forest region required the highest average number of log suppliers per company (12.1), and the Nelson and Prince George forest regions respondents the fewest log suppliers. Fibre is secured by the log home manufacturing industry from five common sources: the Small Business Forest Enterprise Program, Broker/Wholesalers, Logging company dryland 32 sortyards, and Specialty/Auction dryland sortyards and private land owners (respondent specified). The average distribution of fibre purchases by source based upon 34 responses is reported in Figure 11 below. Logging company DLS, 48.34% Brokers/Wholesalers, 14.14% Specialty/Auction DLS, 7.77% Private land owners, 9.09% Small business forest enterprise program, 20.66% Figure 11. Distribution of fibre purchases by source A majority of fibre is sourced through logging company's dryland sorts and the Ministry of Forests' Small Business Forest Enterprise Program. Log brokers and wholesalers, private sellers and specialty auction dryland sorts individually do not supply much fibre to the log home manufacturing industry but together provide 31.00%. The cost of fibre to construct log buildings varies mostly due to the species utilized. The total volume of fibre consumed, average volume per response and average delivered to the manufacturing site price per cubic metre for the five most common species7 is reported based on 75 responses submitted by 33 respondents (Table 9). 7 For simplicity, all tree species identified as Pine were grouped into one category: Pine (Pinus spp). This practice was also followed for tree species identified as Spruce (Picea spp.) and Cedar (Thuja spp. and Chamaecyparis spp): Spruce and Cedar/Cypress. Tree species identified as Douglas fir and Larch (Larix spp.) were grouped into another category, Douglas fir/Larch. Tree species identified as Hemlock (Tsuga spp.) and all true firs (Abies spp.) were grouped in a final category: Hemlock/Balsam. Table 9. Fibre consumption frequency, price and total value by species Percent Total Percent Average Average of total volume of total volume/ delivered Species responses consumed volume response log price value Species (%) (m3) (%) (m3) ($/m3) ($,000) Pine 17.33 9,045 16.49 702 114.42 1,043 Spruce 18.67 12,640 22.85 903 125.23 1,583 Douglas fir/Larch 36.00 17,489 31.85 653 139.49 2,458 Cedar/Cypress 28.00 15,945 28.82 759 214.34 3,418 Total/Weighted average 100.00 55,119 100.00 1723 153.67 8,502 A total of 55,119 m3 of fibre was consumed worth approximately $8.5 million. The average volume of fibre consumed per respondent was 1723 m3 and a median value of 1000 m3. The weighted average delivered fibre price was $153.67 per cubic metre. No responses were recorded for the Hemlock/Balsam category. To clarify further the types of fibre that the log home manufacturing industry purchases, respondents were asked to report the top three species they preferred to purchase and the required minimum and maximum size ranges. The frequency of 86 responses is ranked by most preferred species, with average minimum and maximum size ranges also presented in Table 10. Table 10. Log species and size preferences Percent Top Top Bottom Bottom Length Length of min. max. min. max. min. max. Species responses (cm.) (cm.) (cm.) (cm.) (m) (m) Douglas fir/Larch 33.72 29.6 32.5 43.9 52.3 13.0 16.0 Cedar/Cypress 30.23 29.0 34.0 47.0 51.8 12.2 16.5 Pine 18.61 27.9 30.5 42.9 56.4 11.6 15.5 Spruce 17.44 27.7 30.0 41.7 45.7 12.2 15.2 34 4.4 CURRENT METHODS OF ASSESSING LOG PURCHASES Respondents estimated the average number of hours per week spent sourcing fibre was 8.0 hours with a median value of 5.0. Part of this time was spent inspecting logs with the most common log inspection methods visual inspections of all logs (62.16%), visual inspection of some logs (24.32%) and Other practices (5.41%) which included using specification sheets by third party purchasers and log grading systems. Even though a majority of fibre purchased was inspected thoroughly, on average 9.1% did not meet their quality standards once delivered to their manufacturing sites. The most common method used to deal with this substandard fibre was to buck out defect and utilize log elsewhere in the building (Figure 12). Buck out defect and utilize elsewhere in building Turn it into firewood Use where not critical Resell it to another business Other Return it to seller Does not apply 16.75% 15.76% 11.82% • 1.48% 8.87% 8.87% 36.45% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% Percent of respondents Figure 12. Distribution of methods to deal with substandard fibre once delivered. / Log home manufactures are willing to operate with logs that contain some defect as long as the offending material can be removed or used in a non-critical part of log homes. But if the logs have too much defect, they are twice as likely to end up as firewood than to be returned to the log supplier, likely meaning once a log has reached the manufacturing site it does not leave. 35 ]4.76 14.58 4.54 4.32 Along with meeting minimum size limits, physical characteristics of fibre purchased is important to log home builders. Respondents were asked to rate seventeen physical characteristic of logs on a scale of 1 to 5, with 1 being a not at all important characteristic and 5 being an extremely important log characteristic influencing their buying decisions. The mean for each characteristic was calculated and then ranked from extremely important to not at all important (Figure 13). Relative importance 1 = Not at all important 5 = Extremely important 1 2 3 4 5 Log characteristic Proper log species Lack of spiral grain Free from any type of rot Log straightness Free from any mechanical damage Log dimensions on target Free from any splits Presence of loose knots Greater than 6 rings per in. Free from any staining of the wood Free from stump pull No knots greater than 5 cm. Logs almost perfectly cylindrical Logs aged greater than 6 months Even distribution of small knots Light coloured wood Logs freshly cut 14.24 03 89 3.74 13.63 3.57 ]3.30 13.28 • 3.26 3.14 89 12.86 _J2.78! 12.62 Figure 13. Rank and mean score of physical log characteristics important to log home builders. 36 A one way analysis of variance was completed (alpha level of 0.05) to determine if the log characteristics means were significantly different from each other (Table 11) Table 11. Anova for means of log characteristics ANOVA Source of Variation SS df MS F P-value F crit Between Groups 272.75 16 17.047 14.039 2E-32 1.6601 Within Groups 739.47 609 1.2142 Total 1012.2 625 The ANOVA results reject the null hypothesis with a significant difference between variable means. A Scheffe test was completed to determine which of the log characteristics with the lowest mean values were significantly different from the remainder of the log characteristics until the highest value was reached. The lowest eight log characteristics, from logs freshly cut to free from any staining of the wood were significantly different from the remaining nine log characteristics with higher mean scores, greater than 6 rings per inch to proper log species. When asked to record other log characteristics important to look for during the purchasing process, respondents most often noted insect damage, wind shake and character marks. When log home manufacturers purchase fibre from a potential seller, eight key issues are important in the decision process and relate to both fibre and service qualities. These issues when rated on a scale of 1 to 5 with 1 being not an important characteristic and 5 being a very important characteristic influencing their buying decisions resulted in the following ranking based on average scores, highest to lowest (Figure 14). 37 Relative importance 1 = Not at all important 5 = Very important 1 2 3 4 5 Log supply quality Readily available supply Competitive pricing Log supply consistency Speed of delivery Ease of accommodating pick up or delivery Close to manufacturing site Exchange policy Figure 14. Rank and mean score of log seller's characteristics. Log supply quality was the most important issue related to purchasing decisions followed closely by readily available supply and competitive pricing. The fibre supplier's exchange policy and location in relation to the manufacturing site were the lowest rated characteristics. However, all characteristics, except the exchange policy, rated above the midpoint of three (3), likely meaning all issues may affect a purchasing decision. A one way analysis of variance was completed (alpha level of 0.05) to determine if the log seller's characteristics mean values were significantly different from each other (Table 12). Table 12. ANOVA for means of log seller's characteristics ANOVA Source of Variation SS df MS F P-value F crit Between Groups 94.122 7 13.446 13.839 2E-15 2.0412 Within Groups 281.77 290 0.9716 Total 375.9 297 38 The null hypothesis was rejected based upon the ANOVA calculations. A Scheffe test was completed to determine which of the log seller's characteristics with the lowest mean value were significantly different from the remainder. The lowest five issues in Figure 14, exchange policy to log supply consistency, were significantly different from the top three issues, competitive pricing, readily available supply and log supply quality. However, the characteristics ranked third through seventh in importance were not significantly different indicating a log supplier's exchange policy may not affect purchasing decisions, but readily available supply and log supply quality likely will. 4.5 ALTERNATE SOURCES OF FIBRE SUPPLY Respondents were asked to rate their company's business philosophies when presented with three alternative fibre sources in comparison to high quality, old growth fibre as a building material. Old growth fibre was defined in this study as trees with narrow growth rings and second growth as trees with wide growth rings, ignoring the possibility trees being virgin timber. This definition was used instead of Ministry of Forest Inventory Branch's classification of mature timber, trees 121 years old and greater, because most manufacturers are more concerned with the number of rings per inch of tree diameter than tree age. The alternative fibre sources provided in the study were second growth, fire killed and insect killed timber. Respondents reported their level of agreement to three researcher supplied statements that pertained to these alternative fibre sources as potential building material on a scale of 1 to 5, with 1 being strongly agree to the statement and 5 being strongly disagree. Figure 15 summarizes the mean results for each statement with confidence intervals. 39 Second growth timber is a potential source of raw material for building Fire killed timber is a potential source of raw material for building Insect killed timber is a potential source of raw material for building Old growth is better than second growth for log home building 1 2 3 4; Relative preference 1 = Strongly agree 5 = Strongly disagree Figure 15. Mean scores of alternative fibre suitability as a building material. Overall, log home manufacturers somewhat agreed all three alternatives were potential sources of fibre supply with the order of preference being second growth, insect killed and fire killed. However, when the statement means with 95% confidence intervals are tested against the neutral point of three, only second growth timber (2.49 + 0.44) and insect killed timber (2.57 + 0.42) are significantly different from the neutral point, while fire killed timber (2.87 + 0.40) is not. A fourth statement was included in the survey question to compare manufacturers' preference for old growth timber over second growth timber (Figure 15). The statement mean with a 95% confidence interval and median value computed resulted in an almost neutral point response (2.74 + 0.45) not significantly different from three. Twenty-four out of a possible forty-one respondents (58.5%) provided data on their use of alternative fibre sources indicating its widespread use as a building material. Table 13 reports by alternative fibre source category: frequency of responses, volume purchased, average delivered price per cubic metre, year the product was first used and the fibre purchasing trend for 2002. 40 Table 13. Volume purchased and average delivered price of alternative fibre sources for 2002 Volume Average purchased delivered price Alternative fibre type (m3) ($/m3) Insect killed 15,480 100.38 Fire killed 350 N/A a Second growth 10,543 169.23 Total/Weighted average 26,373 127.60 a average delivered price of fire killed timber withheld to prevent the release of respondent specific data The total value of the alternative fibre sources purchased by respondents was $3.3 million with a weighted average delivered price per cubic metre of $127.60. Second growth timber has been used for almost two decades while the use of fire and insect killed is relatively recent. The volume of alternative fibre purchased represents 47.7% of the total volume of fibre (55,119 m3) purchased by respondents. In order to determine the market price of the alternative fibre sources, respondents were asked to report the discount required before they would consider purchasing alternative fibre sources as a substitute to old growth timber as a building material. Figure 16 summarizes the three alternative fibre sources average discounts. c 3 O O 40.0% 30.0% •a •C 20.0% a. <u oo 03 > 10.0% 0.0% ' '' l • • *• • -Insect killed timber Fire killed timber Second growth timber Figure 16. Average discount required for alternative fibre source. 41 The discount necessary for insect killed timber was the largest at 32.3%, followed by fire killed timber at 29.9% and the lowest for second growth timber at 17.5%. In order to confirm that a discount was made, the average delivered price of insect killed timber was compared to the average delivered price of Pine and second growth timber versus Cedar/Cypress prices (Figure 17) . $250.00 $200.00 S 2 $150.00 <u c > .a ^ "S 3 | $100.00 < 'I $50.00 $214.34 $169.23 $100.38 $114.42 1 . $-Insect killed vs. Pine Second growth vs. Cedar/Cypress Figure 17. Average delivered price of alternative fibre source versus selected species The discount rate (D) for the comparison was calculated as follows: Equation 3. Discount rate calculation D = Species average delivered price - alternative fibre average delivered price X 100 Species average delivered price The calculated discount rate was 12.3% for Insect killed and 21.1% for Second growth. The reported discount rates for these two categories were 32.3% and 17.5%, respectively. This comparison was recommended by Robert Savignac of the ILBA (pers. comm.. 17 Nov. 2003). 42 Ten of the possible seventeen respondents followed the filter pattern in the mail survey and reported why they did not utilize alternative fibre sources. Respondents were asked to place a check mark beside as many of the nine categories identifying why alternative fibre sources were not used. A total of 39 check marks were recorded and ranked by the frequency of responses from highest to lowest (Table 15). Table 14. Frequency and ranking of reasons for non use of alternative fibre sources Category % of total responses Perceived quality problems 25.64 Lack of demand 20.51 Aesthetics 15.38 Perceived durability 12.82 Material not available 12.8Workability 10.26 Safety considerations 2.57 Total 100.00 There were no responses to "Difficult to handle" and respondents' specified answers. Six of the remaining categories were related to customer and builder preference for not utilizing the material and totalled 87.18%. The "Material not available" category was included to determine the level of interest for the material by non-users that could not secure a supply and tied for the third most common response with 12.82%. 4.6 RESOLVING FIBRE SUPPLY ISSUES Respondents were asked to indicate their level of agreement to twelve researcher supplied statements pertaining to their company's fibre supply issues on a scale of 1 to 5, with 1 being strongly agree to the statement and 5 being strongly disagree with the statement. Table 15 summarizes statement means with 95% confidence intervals and ranks statements from most strongly agree to most strongly disagree. 43 Table 15. Rank and mean scores of company's fibre supply issues Statement Mean CI My suppliers are trying to provide a product suited to my business 2.15 ±0.26* Paying a premium for fibre that meets all my company's log quality specifications is worthwhile 2.38 + 0.38* The dimensions of logs we require is easily available 2.49 + 0.43* 1 am happy with the service 1 receive when purchasing logs directly from my suppliers 2.50 + 0.27* 1 would purchase logs from a government run log sortyard 2.51 + 0.35* A steady supply of high quality fibre is difficult to find 2.65 + 0.42 The quality of logs we require are easily available 2.72 + 0.43 Having one supplier provide me with all my raw material needs would benefit my company 2.98 ±0.36 The logs we require are available at a fair price 3.35 ±0.31* Large forestry companies have a good understanding of the BC log home manufacturing industry 3.56 ± 0.34* Large forest companies would readily supply logs to my company 3.62 ±0.36* The provincial government has a good understanding of the BC log home manufacturing industry 3.85 ±0.34* * denotes statement is significantly different from the midpoint of three (alpha level = 0.05) Each mean and 95% confidence interval was tested against a neutral point of three to determine which were significantly different than three, the point on the scale that represents an undecided attitude, and indicated with an asterisk (*). Respondents were asked to indicate their level of agreement to thirteen researcher supplied statements on ways to resolve their company's fibre supply issues on a scale of 1 to 5, with 1 being strongly agree and 5 being strongly disagree. Table 16 summarizes statements means with 95% confidence intervals with statements ranked from most strongly agree to most strongly disagree. 44 Table 16. Rank and mean scores of ways to resolve fibre supply issues I support Mean CI export restrictions on fibre meeting log home manufacturers size and quality requirements 1.82 ±0.35* redistributing the weighting system in current small business sales to favour log home manufacturers more 1.98 ±0.39* forest region specific quotas to sell house logs to log home manufacturers 2.00 ±0.33* a new category of small business timber sale exclusive to the log home manufacturing industry 2.12 ±0.41* woodlot like tenures exclusive to value added manufacturing companies to provide a dedicated fibre supply 2.21 ±0.41* forest company specific quotas to sell house logs to log home manufacturers 2.27 ±0.36* forming business relationships with integrated forest companies in order to secure a dedicated fibre supply 2.43 ±0.37* removing restrictions on logs imported into the province for the purpose of value added manufacturing 2.45 ±0.32* governmental funding of specialty log sortyards in several locations throughout the province 2.58 ±0.42 changing the current provincial log grading system to include a category specifically for house logs 2.69 ±0.45 forming buying cooperatives to improve buying power 2.75 ±0.38 forming business relationships with First Nations in order to secure a dedicated fibre supply 2.76 ±0.37 using fibre facilitators through log home building associations to secure fibre for my company 2.78 ±0.39 * denotes statement is significantly different from the midpoint of three" (alpha level = 0.05) Each statement mean and 95% confidence interval was tested against a neutral point of three to determine which were significantly different than three, the point on the scale that represents an undecided attitude, and indicated with an asterisk (*). 4.7 GENERAL QUESTIONS Respondents were provided a skip pattern if they had not turned down log home orders from potential customers in 2002. If they had turned down orders, they were asked to rank the top three reasons why from a list of nine categories, one which was respondent specified. An arbitrary scoring system of 3, 2, and 1 was assigned for ranks first through third respectively. Figure 18 summarizes each reason for turning down work orders total evaluation points and ranked in order of frequency. 45 Not enough trained personnel Lack of consistent fibre supply Did not want the extra work Respondent specified Quality of fibre supply Technical considerations Lack of proper tree species for order International trade law Figure 18. Reasons The results show the most limiting factors to the industry were not enough trained personnel followed by lack of consistent fibre supply. The respondent specified answers remarked that fibre did not meet customer expectations and "questionable client knowledge". These results do somewhat reflect the responses received from an open ended question asking respondents to list the advantages and disadvantages of operating in the BC log home manufacturing industry. Table 17 summarizes the results of the 64 advantages and 46 disadvantages comments recorded with the top three responses for each category based upon percent of total responses with a complete list provided in Appendix 8. 46 10 15 20 • Evaluation points for turning down work projects Table 17. Top three advantages and disadvantages of operating in British Columbia Percent of Percent of total response total response Advantages (%) Disadvantages (%) 1. Quality of fibre 28.13 1. Availability of fibre 23.91 2. Availability of fibre 25.00 1. Cost of fibre 17.39 2. Reputation/marketing of 10.94 3. High shipping cost and 13.04 industry worldwide constraints The industry increased log home package value by including other value added wood products. The frequency of eight researcher specified and a consolidation of seven respondent specified value added wood products categories supplied by log home manufacturers is reported in Figure 19. % of respondents providing product type ' 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Wood framed windows and doors Cedar roofing and siding Interior design additions Solid wood flooring Board and batten siding Patios and decks Wood cabinetry Railings Staircases Other Other siding Picnic tables Log furniture Engineered wood panel flooring Structural Insulated Panel ~ 42.11% 36.84% 31.58% 28.95% ] 26.32% 126.32% 5.26% Vi 5.26% D 2.63% "J 2.63% 15.79% 13.16% 13.16% 13.16% 10.53% Figure 19. Distribution of companies providing value added wood products by type. 47 The most common value added products was wood framed windows and door and this was expected since most log home packages in all product categories include these items. The second and third most frequent value added products were cedar roofing and siding and interior design additions. The final question in the survey provided respondents the opportunity to make additional comments about the log home building industry in BC. Over half of the respondents' comments were about fibre supply challenges and highlighted the following challenges: • lack of access to high quality fibre from large forest companies and the Small Business Forest Enterprise Program • strong competition within the industry for fibre • high fibre costs. • adversarial business relationships created by some log home builders with log suppliers. • foreign control of the larger log home manufacturers within the province and their better access to fibre through timber sales. In addition to the above situation, other issues reported that affected the industry but are not directly related to fibre supply include the following: • trying to keep government out the way of small business • governments preference to work with larger companies over smaller companies • lack of promotion and support of value added wood product producers • government incentive programs for First Nations organizations and log home builders who cooperate with them • lack of government interest in developing the industry via training programs On a positive note, several respondents reported that international markets for log homes were very strong, "almost boundless", and they were very optimistic about the industry's capacity to grow. However, they also noted that orders were turned down on a consistent basis and more employees could be hired but the lack of quality fibre holds companies back. A complete list of comments is provided in Appendix 9. 48 5 DISCUSSION Discussion of the research objectives is heavily dependent upon research results and input from industry professionals due to limited amounts of academic literature. The thesis research objectives are: 1. to assess the current state of the BC log home building industry; 2. to identify fibre supply characteristics of the industry; and 3. to investigate the use of alternative fibre supply sources. Non-normal distribution of research data in favour of larger companies required the presentation of mean and median results in several areas to convey industry characteristics. As well, some survey questions were designed with intentional bias to collect the industry's opinions on fairness of fibre pricing. Fairness of fibre pricing is subjective and out of the scope of this thesis. A majority of responses to these questions were biased in favour of the industry but still recorded in research results. 5.1 THE STATE OF THE BC LOG HOME MANUFACTURING INDUSTRY The study's findings on industry size, industry characteristics, product lines and attributes, sales results, markets and employment and factors affecting industry performance are described below. 5.1.1 Industry size The refined sample frame of 171 companies is considered to be an accurate estimate of the industry size. This was the largest survey total ever reported in BC and is 31% greater than the 2000 estimate by Houdek (2001) and 76% greater than the 1999 estimate by Wilson et al, 49 (2001). The study's population total was larger for three reasons: first, the definition of the research population included companies producing timber frame buildings (approximately five percent of the population); second unlike previous studies, the sample frame included all companies actively advertising their services no matter how small the company; and third, a large number of new companies have entered the industry in the last four years. Approximately 15% of respondents recorded their companies started operating after 1997. 5.1.2 Industry characteristics The study's expanded population search gathered a proportionally larger number of smaller companies. These companies tend to produce hand crafted log homes and resulted in the greatest recorded disparity of production methods: 90% hand crafted versus 10% machine milled. This is the highest ever recorded but is still consistent with previous surveys (Stennes and Wilson, 1999; Houdek, 2001; Wilson et al, 2001). The preference of hand crafted production methods is due to continued international demand for high quality hand crafted log homes and the extensive machine milled log home industry present in the US and Scandinavia (Westcoast CED, 1999). Over 80% of respondents have operated more than 10 years which indicates several important industry characteristics: low industry attrition rates, strong product demand to supports existing companies and new entrants, and mature company ownership to cultivate business relationships to ensure dedicated sources of fibre supply. The large number of new entrants suggests the log home manufacturing industry has a large enough market to support them but increased industry size will place even further pressure on fibre supply sources than is currently experienced as these companies mature and increase production rates. The majority of respondents recorded their manufacturing location in the Vancouver and Kamloops forest regions (Figure 8) and responses to mail surveys from companies in these areas 50 has been strong in three previous studies. All studies, including this one, report small population sizes and very low response rates for the Prince Rupert, Prince George, Nelson and Caribou forest regions. However, it is worth noting that companies within the Nelson and Caribou forest regions did respond well to this survey, each with greater than 10% of the response total. These two regions have experienced the largest increase in number of companies based on a comparison to 1997 data (Stennes and Wilson, 1999) and correlates to a strong internal demand for log homes reported within these regions (Westcoast CED, 1999). 5.1.3 Product lines and attributes Several common product lines are marketed by the log home manufacturing industry and most respondents indicated they were capable of producing two or more of the seven product categories listed in the survey. Of these seven product categories, production and financial data was only collected on five. The similarities within these five product categories are best discussed as three groups: custom log homes, pre-designed log homes and timber frame building. The custom log home category is important to the industry because it generated the highest average sales value per cubic metre because manufacturers were more likely to be responsible for additional project phases and custom design features. The additional phases required may include one or more of the following: development of architectural drawings, building site preparation, product assembly at the building site or subcontracting of additional building trades. Custom log homes are a preferred product because customers can contribute significantly to the building's design. Custom design features are normally built with logs, such as log staircases and log railings, and are services provided by the log home manufacturer. This increased the amount of fibre utilized per unit but the overall effect was positive for the manufacturer as these additional services resulted in above average unit prices (Table 7) and sales value per cubic metre utilized (Figure 4). 51 The pre-designed log home category was the only category selected by all respondents whose main production process was identified as machine milled. It possessed the greatest unit production tally but contributed proportionally less to total sales value. Machine milled log homes typically have lower production costs and fibre consumption per unit but also lower sales value per cubic metre (Westcoast CED, 1999). The lower average unit price and sales value per cubic metre is attributed to the use of automated profiling machinery, lower quality and smaller sized fibre and less customized building packages. The timber frame building category (listed as Other in Table 7) has some advantages over other product categories. It generated the second highest sales value per cubic metre (Figure 5) because substantially less fibre per square foot of building space was utilized (Table 8). This is likely the result of pricing timber frame buildings on a dollar per square foot basis on par with custom log homes but having the advantage of substantially lower fibre and labour inputs per unit. While additional inputs are required for this product category to complete the building shell and partitions, the cost per square foot using conventional construction practices (dimensional lumber) or structural insulated panels is significantly less expensive than solid wood walls. 5.1.4 Company sales per year Company sales per year data of 38 respondents resulted in bimodal distribution with median results of $500,000 to $749,999. Woodbridge (2003) reported similar findings and noted smaller companies were remaining in the higher value custom log home niche markets, preferring to simplify business operations, while larger companies were expanding product lines and production levels to increase market share in several export areas. An alternate method to calculate annual sales was through data provided on unit production and value in the mail survey. Larger companies were more willing to provide such data and based on the sales of 26 respondents average annual company sales of $1.1 million was 52 calculated. This higher annual sales result corresponds with Stennes and Wilson (1999) who excluded smaller companies in their research methodology. 5.1.5 Markets and employment The study' results indicate a shift in the traditional markets that have been developed by the industry. While a vast proportion of sales were again to the US market (Figure 6), the BC market expanded more than threefold, while the Asian market reduced by almost half and the US market by a third when compared to Wilson et al (2001). The export of 83% to 90% of log homes reported by Houdek (2000) and Stennes and Wilson (1999), has dropped dramatically to 69% in 2002, indicating contracting export markets in several areas. The US and Asians markets, are still recovering from economic downturns but both have experienced increased log home sales trends from 1999 to 2002 (Table 9). Local manufacturers refocused on the BC and Rest of Canada markets to maintain production levels but expansion is limited as these markets are mature, less profitable and relatively small on a global scale (Westcoast CED, 1999). The BC log home manufacturing industry continued to create significant amounts of employment in 2002. The number of full time equivalent employees per company was less than reported in Wilson et al (2001) but that was expected due to different methodology used (see Section 1.1.1.). Employment stagnation or reduction may have been experienced from 1999 to 2002 as the median annual full time salary of $35,000 has remained unchanged and labour reported as a minor disadvantage of operating in the BC log home manufacturing industry. The employee reduction may account for increased industry size as the new industry entrants may possibly be the displaced employees starting their own companies. 5.1.6 Factors affecting industry performance The factors that had the greatest impact on the industry's business performance were related to fibre supply. The cumulative effect of inconsistent fibre supply, poor fibre quality and 53 fibre cost exceeded labour and non-production related issues. When focussing on the range of fibre supply issues, inconsistent fibre supply was determined to be the main fibre supply problem, and was self-identified (fibre availability) as the primary disadvantage of operating in the BC log home manufacturing industry with fibre cost and fibre quality ranking in the top four (Table 17). Statistically significant results indicate fibre availability and cost were problems because large forest companies were not readily supplying logs, fibre was unavailable at a fair price and price premiums were necessary to ensure a consistent supply of high quality fibre (Table 15). However, another statistically significant result in Table 15 refutes the above point by reporting respondents had easily available access to suitable fibre in the dimensions required. Large forest companies are seen as the main source of fibre supply challenges as they control a majority of the fibre flow in the province. In 2002, roughly 80% of the annual, allowable cut from public forest lands originated from Tree Farm Licences and Forest Licences controlled by six companies (Ministry of Forests, 2003). The only form of timber tenure available to the log home manufacturers is a Category II timber sale licence. Timber sale licences, which were the primary method of granting timber rights in BC prior to 1947, today represent only 14% of the 2002 annual allowable cut and are allocated on a competitive basis to over 1600 companies (Ministry of Forests, 1997; Ministry of Forests, 2003). 5.2 FIBRE SUPPLY CHARACTERISTICS By determining the BC log home manufacturing industry's key fibre supply characteristics, another important element is gained to better understand the industry. Discussed here is how sources of fibre, fibre costs, preferred fibre size and quality characteristics and business factors impact the industry's search for secure supplies of high quality fibre. Regarding fibre prices, the perspective of fair log prices is from the log home builders' point of view. Very little academic information exists in this area. 54 5.2.1 Sources of fibre Sources of fibre were analyzed in two ways: by forest region and supplier type. While it is obvious some fibre would transfer between coastal and interior forest regions based on production requirements, three conditions were expected: 1) the proportion of fibre purchased by forest region would match the proportion of response by forest region, 2) each region would provide greater than 90% of its internal fibre requirements, and 3) internal plus external manufacturers purchases would equal internal manufacturers requirements. None of the three conditions were met in its entirety and confirms an unbalanced fibre supply situation within the province. No previous data was available on the distribution of fibre purchases by forest region. Fibre consumption distribution by forest region (Figure 9) did follow the ranking as the response distribution (Figure 8), but the proportions between regions differed. Therefore, some forest regions experienced a greater draw on its fibre than others. Most forest regions supplied a majority of their internal fibre requirements (>70%), but few met the research expectation of 90%. The only forest region that met all three requirements, including a balanced fibre purchase/fibre requirement situation, was the Nelson region. The Vancouver forest region was close to meeting all three expectations but few interior respondents noted sourcing fibre from this region and resulted in an unbalanced fibre supply/requirement situation. This was not the case for the remaining three forest regions (Kamloops, Caribou and Prince George) that all possess the same tree species of similar size and quality. Based on the cross forest region fibre purchasing distribution table (Table 8), the Kamloops forest region experienced the greatest fibre demand. On the opposite side of the spectrum, the Caribou forest region experienced the greatest inflow of fibre with a majority sourced from the Kamloops forest region. It is difficult to determine what situations led to these results as all three forest regions have fibre that meet manufacturer's size and quality requirements. 55 Therefore, the regional fibre balance results are somewhat speculative and can be attributed to the use of percentages and not actual volume reported in returned surveys, three regions with low response rates, but also possibly several business factors. These factors affecting fibre supply in these three forest regions could be adversarial business relationships with internal log suppliers, forest companies not making fibre available, challenges in securing small business sale timber or the lack of specialty dryland sortyards or log auctions. Regional analysis of Questions 25 and 26 may clarify these claims. Supplier type preference reveals a continued heavily reliance on logging company dryland sortyards to supply fibre. This source is likely preferred because it can provide a readily available supply at most times of the year. This reliance, however, exposes the log home manufacturing industry's vulnerability to external forces that may affect not only fibre quantity, but also quality and price. The Small Business Forest Enterprise Program (currently known as BC Timber Sales) is still not a viable option to supply the industry. All fibre within timber sale contracts successfully bid upon by log home manufacturers does not meet production requirements and captures capital in the harvesting process until sold. Excess fibre is sold to other business or ends up in trading programs but trading incentives are focussed towards large forestry companies. Log auctions, brokers and private timber individually do not surmount to significant amounts of timber individually, but collectively are more important than timber sales. The importance of all five log supplier types indicates that multiple sources of fibre are necessary to ensure adequate production continuity. This situation is best displayed in the Kamloops forest region. The provincial demand for fibre in this region required local manufacturers to utilize the highest average number of log suppliers per company (Figure 10) and to source fibre from all six forest regions (Table 8). Data may have been skewed heavily for this region's analysis as two respondents reported 40 and 50 suppliers; however, they each purchased greater than 3600 m3. If these two outliers are removed, the average number of suppliers per respondents in this region was 4.8; Furthermore, the suspicion that manufacturers in the Caribou forest region have difficulty with fibre flow due to adverse business relationships is supported since this area recorded the second highest number of suppliers required per company (Figure 10). 5.2.2 Cost of fibre High fibre cost continues for the log home manufacturing industry. The 2002 weighted average delivered log price per cubic metre was significantly higher than rates paid for comparable fibre purchased by the primary manufacturing industry. As a relatively small open log market exists in BC, Ministry of Forest Log and Lumber Selling Price System data was used in the comparison of log prices. Log prices from this system should not be considered entirely reflective of open log market prices. Comparables of fibre purchased by primary industry would be peeler logs in the interior and a mix of large "J" and small "H" metric grade logs on the coast ranging from $80 to $165 per cubic metre for 2002 and 2003 for the four most common tree species utilized by the log home manufacturing industry (Ministry of Forests, 2004b; Ministry of Forests, 2004c). On a tree species basis, premiums of $30 to $40 per cubic metre were paid for Pine, Spruce and Douglas fir and $55 per cubic metre for Cedar. Price premiums on house logs are prevalent in the US as well, where the strong demand for house logs amongst buyers and limited supply results in prices almost double the price of logs sent to sawmills (Keegan III et al, 2000). The industry preference for Douglas fir and Cedar as a building material (Table 11) will continue to keep production costs high as these species possess the highest fibre costs. Product substitution is common with manufacturers utilizing large amounts of lower priced insect killed and second growth timber as an alternative building material. Still, all fibre used in the log home manufacturing process had an average price per cubic metre above $100. This means 57 manufacturers need high sales value per cubic metre (Figure 4) to recoup production costs but limits the type of buyers available who can afford log home products. 5.2.3 Preferred size and quality characteristics of fibre The average preferred minimum and maximum top diameters, bottom diameters and lengths for each tree species were similar across all species (Table 12). Universal size preference across the industry is beneficial because it simplifies supply chain flow parameters. Log suppliers can process multiple species to the same specification and know several manufacturers throughout the province would be willing to purchase the material. The premiums paid (Section 5.2.2) are therefore not limited to exclusive agreements and paid sometimes on full length logs with the remaining top portion above the minimum top diameter used in other parts of the building, cut for firewood or sold to another business. Fibre quality characteristics apply to features visible on all four tree species during the log inspection process. Proper log species was the most important quality characteristic noted (Figure 14) and is a valid characteristic considering mixed species use within a single unit is uncommon. If a log of the wrong species is shipped to the log home manufacturing site, it is almost twice more likely to end up as very expensive firewood than be returned to the supplier (Figure 13). Quality characteristics that affect a log's structural integrity, namely spiral grain and rot, are two more important characteristics to manufacturers. However, three- quarters of the physical characteristics listed in the survey were deemed important in the fibre purchasing decision process (Figure 13) and indicates very high quality standards are set before fibre is utilized in log home construction. This may justify the increased fibre price but most manufacturers indicated fibre of the proper quality was readily available to them but just not at a fair price (Table 15). This is confirmed (Table 17) where fibre quality ranked first as an advantage and fibre cost ranked second in disadvantages of operating in the BC log home 58 manufacturing industry. Therefore, some type of artificial price pressure must exist to inflate log values beyond the market price for high quality fibre destined to log home manufacturers. 5.2.4 Business factors affecting fibre supply Both the supply and demand sides of the fibre transaction process need to be analyzed to determine what business factors affect fibre supply. Based on results, most log suppliers were doing a good job to provide a product suited to the industry and received a premium for their fibre (Table 15). The availability of high quality fibre at a competitive price played a key role in successful business relationships while customer service factors, such as shipping distance and speed of delivery, were relatively unimportant (Figure 14). This indicates fibre was available but manufacturers had to be willing to pay high prices, transport logs from long distances and accept unfavourable business conditions to get high quality fibre to ensure a consistent production flow. The industry is willing to accept these conditions for three main reasons: 1) to maintain the strong revenue flows created by each cubic metre of fibre manufactured, 2) to ensure the industry's reputation as a world class builder is untarnished, and 3) to increase utilization levels of equipment and employees to reduce overall production costs. The above conditions again point towards the requirement of multiple suppliers to meet production needs. Considering that provincial government and large forest companies supply almost 70% of the industry's fibre, the industry felt that log suppliers do not fully understand its needs and therefore knowingly or unknowingly limit the amount of fibre available (Figure 19). To resolve these fibre supply issues, the industry widely favoured policy based over business based solutions. The policy based solutions involved mostly regulatory changes, forest region and company quota systems to enforce the sale of fibre and new timber tenures exclusive to the value added industry to increase the availability of fibre (Figure 20). While these changes would benefit the log home manufacturing industry, it is mostly at the expense of primary 59 manufacturers. Business based solutions populated .the lower half of potential methods to resolve fibre supply issues indicating challenges still exist with suppliers and attempts to resolve issues at a business level have been unsuccessful. 5.3 ALTERNATIVE FIBRE SUPPLY SOURCES The traditional type of fibre to the log home manufacturing industry continued to be old growth timber. The willingness of the industry to utilize non-traditional fibre sources stems from the need for a steady supply of fairly priced high quality fibre that meets exact size requirements. The alternative fibre types deemed as potential sources of building material were insect killed and second growth timber (Figure 16). Large volumes of insect killed and second growth timber were purchased, totalling over 26,000 m3 and represented 46% of the total fibre purchased by respondents. Its demand is extensive and supply problem already exist causing similar problems experienced by manufacturers that purchase exclusively old growth fibre. Strong demand for alternative fibre sources has increased its. weighted average delivered price per cubic metre to within $26 of the weighted average delivered price for all fibre. Insect killed timber was the preferred alternative fibre source and is discussed further below. 5.3.1 Insect killed timber volume and value The popularity of insect killed timber as a building material for the BC log home manufacturing industry is a recent phenomenon due to the extensive insect outbreak in the BC interior that flooded log markets with sap stained, large diameter Pine since 1999. There are two key reasons why insect killed timber is the preferred alternative fibre source: fibre cost and lack of fibre quality concerns. The high price for second growth and old growth timber require BC log home manufacturers to utilize the more economical insect killed timber as a building material. The 60 prices for both fibre types cost 50% more to purchase than insect killed timber. Insect killed timber also costs $14 less per cubic metre than Pine, the lowest priced traditional fibre source. The two main fibre quality features synonymous with insect killed timber, staining of sapwood and reduced moisture content, are not critical physical characteristics when determining whether fibre is suitable as a building material. When reviewing Figure 14, the list of physical log characteristics important to log home builders, the characteristics that best describe these features were logs free from any staining and logs aged greater than six months. These characteristics ranked tenth and fourteenth, respectively, out of seventeen physical log characteristics. Insect killed timber is a viable alternative fibre source for the BC log home manufacturing industry due to its low cost and few quality characteristics that impact its choice as a desirable building material. The Montana log home manufacturing industry rapid expansion over the last two decades was mostly fuelled by utilizing insect killed timber. The state's primary forest industry considered insect killed timber to be of little economic value, but it proved to be valuable to the log home manufacturing industry because of its low cost, light weight and excellent final stability (Keegan III et al, 2000). . 5.3.2 Insect killed timber discount rate The situation where the demand for dead and dry wood for log home construction exceeded supply has also been experienced in the northwest US (Westcoast CED, 1999). Several log home manufacturers noted that insect killed timber was not readily available to them even though they had seen huge inventories at local sawmills (Appendix 9). The strong demand by BC log home manufacturers for insect killed timber has reduced readily available supply and resulted in elevating prices. When comparing the average delivered price of Pine versus insect killed timber to determine that the reported discount required was made (Figure 16), a 20.0% 61 discrepancy was found. The lack of readily available supply, supply inconsistency and elevated fibre costs of insect killed timber mimic the supply problems present with manufacturers that purchase old growth material exclusively. This indicates that no matter what sources of fibre log home manufacturers attempt to utilize, these fibre supply issues will likely be present. 62 6 CONCLUSION The BC log home manufacturing industry is an important part of BC's forest industry adding value to timber through increased processing and high quality workmanship. However, the industry's inability to secure consistent supplies of high quality fibre at what they think is a fair price impacts companies at several levels. To determine these impacts, the thesis investigated: the state of the industry, key fibre supply characteristics and the use of alternative fibre sources. The key areas to report for the state of the industry for 2002 were number of companies, product attributes, markets and factors affecting industry performance. The industry was substantially larger with a large number of new entrants. These companies greatly reduced average production and financial values in comparison to other studies but suggest market demand for log homes is large enough to support them. Increased industry size will place further pressure on current fibre supply sources than is currently experienced as these new companies mature and increase production rates. The industry has three well defined product segments each possessing unique characteristics. Custom log homes were produced mostly by hand crafted manufacturers and accounted for the majority of industry's total sales. While this product possessed a lower average unit size, it did require more fibre input per unit and craftsmanship resulting in the highest sales value per cubic metre utilized. Pre-designed log homes were produced by mostly machine milled manufacturers, possessed the largest average unit size but required less fibre and craftsmanship and therefore yielded the lowest sales value per cubic metre utilized. The timber frame homes were manufactured by both hand crafted and machine milled 63 manufacturers. This product recorded the second lowest average unit price but due to very low fibre inputs generated the second highest sales value per cubic metre utilized. Log homes are still built primarily for external markets, mainly the US and Asia, but exports have decreased to 69% of sales. Log home manufacturers see their markets as "almost boundless" but key factors affecting industry performance, fibre availability and cost, make it difficult to exploit Log home manufacturers required several log suppliers throughout the province to meet production needs. Some felt some log suppliers were not readily supplying fibre and it was unfairly priced. Premiums up to $55 per cubic metre were paid when comparing average delivered prices for fibre paid by log home manufacturers versus log purchase prices paid by sawmills in 2002 and 2003. The Kamloops forest region experienced the greatest demand for fibre requiring local manufacturers to have greatest number of log suppliers in the province. All five log supplier types were active in selling fibre to the industry but logging company dryland sortyards were the primary source. Douglas fir was the preferred species as a building material and cedar the most expensive at over $214.34 per m3. Log quality is extremely important to the industry and very specific size requirements are partially the result for high fibre prices. Alternative fibre sources, insect killed and second growth timber, were heavily drawn upon by the log home manufacturing industry and accounted for almost half the fibre reported in the study. Alternative fibre sources were required because the industry's traditional source, old growth timber, was sometimes too costly or difficult to find. Insect killed timber was the most widely used alternative source and its future use as a building material anticipated to increase. However, the industry is already experiencing difficulty sourcing insect killed timber and resulted in increased fibre prices and inconsistent supply which mimic the industry's current fibre supply challenge with old growth timber. 64 LITERATURE CITED Babbie, E. 2001. The practice of social research. 9th ed. Wadsworth/Thomson Learning, Belmont, California. Behavioural Research Ethics Board. 2002. Application for behavioural ethical review. University of British Columbia/Vancouver, BC. Council of Forest Industries, 2003. Forestry Facts, http://www.cofi.org/reports/report-forestryfacts.htm. 10 Apr., 2003. Court, Rosie. 1997. Log homes: Linking our past to the present and future. Assessment J. 4(1): 6 pgs. Dillman, Don A. 2000. Mail and Internet Surveys - The Tailored Design Method. John Wiley & Sons, Inc. Toronto, Ontario. Forestry Handbook. 1983. Forestry Handbook. Forestry Undergraduate Society, Vancouver, British Columbia. Janzen, Vic. 1980. Your log house- the on-site manual for the do-it-yourselfer. Muir Publishing. Gardenvale, Quebec. Government of British Columbia. 2002. British Columbia Heartland Economic Strategy-Forests. British Columbia Revitalization Plan. Victoria, BC Houdek, Dalibor. 2001. Overview of the log building industry in British Columbia. Internal Report - June 2001. Forintek Canada Corp. Edmonton, Alberta. International Log Builders' Association, 2000. 2000 Log building standards for residential, handcrafted, interlocking, scribe-fit construction. International Log Builders' Association, Lumby, British Columbia. Keegan III, Charles E, et al. 2000. Montana's log home industry. Montana Business Quarterly. 38(4 ):2-9. Missoula, Montana. Kozak, Robert. 2001. Lectures in Wood 463. 28 Feb. University of British Columbia, Vancouver, British Columbia. Log Home Living. 2002. 2001 log home production and construction report. www.loghomeliving.com. 13 Nov., 2002. 65 Log Building Industry Association of British Columbia. 2002. About the LBI. http://www.logbuilders.net/masterbuilders.html. November 22, 2002. Miller, D.C. 1977. Handbook for research design and social measurement. 3rd ed. David McKay Company, Inc. New York, New York. Ministry of Forests. 1997. Timber tenure system in British Columbia. Victoria, British Columbia. Ministry of Forests. 1999. Tenure and pricing issues and directions. Victoria, British Columbia. Ministry of Forests. 2003. 2001/02 Annual Report. Victoria, British Columbia. Ministry of Forests. 2004a. 2002/03 Annual Service Plan Report. Victoria, British Columbia. Ministry of Forests. 2004b. BC Coastal log market report 2002. Victoria, British Columbia. Ministry of Forests. 2004c. BC Interior log market report: 10/1/2003 to 12/31/2003. Victoria, British Columbia. Ministry of Management Services. 2003a. Value added wood production lagging in British Columbia. Infoline report. 22 Aug., 2003: 03(04) Ministry of Management Services. 2003b. Quick facts about British Columbia. Victoria, British Columbia, http://www.bcstats.gov.bc.ca/data/qf.pdf Ministry of Management Services. 2004. Personal telephone interview. Victoria, British Columbia. 24 Feb., 2004. Muir, Doris and Paul Osborne. 1983. The energy economic and thermal performance of log houses. A log home guide energy report. Muir Publishing Co., Gardenvale, Quebec. Pearse, Peter H. 2001. Ready for change. Crisis and opportunity in the coast forest industry. A report to the Minister of Forests on British Columbia's coastal forest industry. Vancouver, British Columbia. Peters, Rick. 2000. Framing basics. Sterling Publications. New York, New York. PricewaterhouseCoopers, 1993. Performance of the value added wood products industry in British Columbia. Forestry Canada. Canada-British Columbia Partnership Agreement on Forest Resource Development: FRDA II. Working Group to the Opportunity Identification Program. FRDA report; 0835-0752 ; 193. Victoria, British Columbia. Salant, Priscilla and Don A. Dillman. 1994. How to conduct your own survey. John Wiley & Sons, Inc. Toronto, Ontario. 66 Stennes, Brad and Bill Wilson. 1999. An overview to log home manufacturing in British Columbia. Working Paper 99.04. Industry, Trade and Economics - Canadian Forest Service, Victoria, British Columbia Westcoast CED. 1999. The market for log homes, an assessment. A report prepared for the Prince George Aboriginal Business Development Association, Forest Renewal British Columbia, Omineca-Peace Region. Unpublished document. Wilson, Bill and R. Ennis. 1993. Directory of secondary manufacturing of wood products in British Columbia. Forestry Canada, Pacific Forestry Centre. FRDA Report #203. Victoria, British Columbia. Wilson, Bill. 1996a. An examination of the structure and significance of secondary manufacturing in solid wood products in British Columbia. Working Paper 96.04, Industry, Trade and Economics, Canadian Forest Service, Victoria, British Columbia. Wilson, Bill. 1996b. A reality check on the expansion potential for secondary manufacturing in Canadian forest products. Working Paper 96.06. Industry, Trade and Economics, Canadian Forest Service, Victoria, British Columbia. Wilson, Bill, Brad Stennes and Sen Wang. 1999a. Secondary Manufacturing in British Columbia: A regional breakdown. Working Paper 99.03, Industry, Trade and Economics, Canadian Forest Service, Victoria, British Columbia. Wilson, Bill, Brad Stennes and S. Wang. 1999b. An examination of secondary manufacturing in British Columbia: Structure, significance and trends. Working Paper 99.02, Industry, Trade and Economics, Canadian Forest Service, Victoria, British Columbia. Wilson, Bill, et al. 2001. The structure and economic contribution of secondary manufacturing in British Columbia 1990-1999. Information Report BC-X-390. Pacific Forestry Centre. Forest Renewal British Columbia. Wilson, Mary. 1984. Log cabin studies. Cultural Resource Report No. 9. USDA Forest Service, Intermountain Region. Ogden, Utah. Woodbridge, Peter. 2000. Evolution of the North American home building industry: an opportunity for value added manufacturing investment in British Columbia. Forest Renewal British Columbia. Victoria, British Columbia. Woodbridge, Peter. 2002. BC in search of a new product-market model, www.truckloggers.com pdf%20files/opinion_woodbridge_nov2802.pdf. 28 Nov. 2002. Woodbridge, Peter. 2003. BC log home producers are 1! Crosscut 6(2): 1 and 8. April 2003. Woodbridge and Associates. 2001. Program for attracting value-added wood products manufacturing investment to Quesnel, British Columbia - Business Plan Outline. Prepared for Quesnel Community and Economic Development Corporation. Unpublished document. 67 APPENDIX 1. TAXONOMY OF SECONDARY MANUFACTURED WOOD PRODUCTS Wood Products Log Products Intermediate Final Chopsticks Building/Home Components Boxes, Bins and Crates Firewood Cutstock Cabinets House Logs Doorstock Coffins Pilings Edge Glued Components Countertops Poles Finger-Jointed Stock Decking Posts Furniture Components Doors Log homes Joinery Stock Fencing Shakes Ladder Stock Finger-Jointed Lumber Shingles Laminated Components Flooring Treated Pilings Laminated Stock Flooring/Engineered Treated Poles Metric Stock Furniture/Commercial Treated Posts Moulding, Panel Blanks Furniture/Household Novelties Pallet, Crating Stock Furniture/Patio Medium Density Fibreboard Furniture/RTA Particleboard Garden Buildings, Products Pattern Stock Laminated Veneer Lumber Sawmill Specialty Products Millwork/Architectural, Custom Staircase Components Medium Density Fibreboard Turning Squares Mouldings Window Stock MSR Lumber Oriented Strandboard Pallets Paneling Plywood Prefab Buildings and Manufactured Homes Siding Staircases Stakes, Lathe, Strips and Batten Structural Laminated Beams Treated Lumber Trusses Turned Wood Products Windows Wood Novelties Source: Wilson and Ennis (1993) Note: In table above, the Primary subsection of the Wood Products category has been removed that occurs in the original list. 68 APPENDIX 2. INTERNET WEBSITES USED FOR MAILING LIST http://www.logbuilders.net/ http://www.logassociation.org/about/index.php http://www.loghomes.com/states/canada.htm http://www.mhd5000.com/mhd-log.htm http://www.log-world.com/log directory.php http://www.theloghomesite.com/temp/Log Home Builders/General Contractors/ http://www.loghomeliving.com/ME2/default.asp 69 APPENDIX 4. MAIL SURVEY QUESTIONNAIRE INVESTIGA TING FIBRE SUPPLY ISSUES OF THE BC LOG HOME MANUFACTURING INDUSTR Y Before you start, please remember to answer all questions with respect to log home manufacturing within BC and for your business location only. Please answer the financial questions in Canadian dollars. Production and financial information 1. For how long has your company been operating? _ 2. What is the main manufacturing method that best describes how your products are processed? Check (S) one box only. • machine milled • hand crafted years 3. Please indicate the type of products your company produces using whole logs as the main building material. Check (S) all that apply. If your company did not operate in 2002, please go to Question 26. O Customized log homes packages not to lock up (any size) O Pre-designed log home packages (<2000 sq. ft total living space) [J Customized log homes packages to lock up (any size) ~2 Pre-designed log home packages (>2000 sq. ft total living space) O Multiple unit dwellings (townhouse, duplex) O Commercial buildings (lodges, businesses) O Other, please specify Using the categories above, list your three top selling products based on unit sales in 2002. For each, please list the total number of units sold, average unit selling price, average unit size (total at manufacturing site), and average volume of logs used per unit. Product type Total # of units sold Average selling price per unit ($) Average size per unit (sq. ft.) Average volume of logs used per unit (m) 1. 2. J. 5. Please provide the total gross sales amount for your company for 2002. Check (one box only. (Please note that financial data will be used in aggregate form only — no individual company information will be released) • $0 - $249,999 • $250,000 - $499,999 • $500,000 - $749,999 • $750,000 - $999,999 • $ 1,000.000 - $ 1,999,999 • $2,000,000 - $4,999,999 • $5,000,000 - $9,999,999 • $ 10,000,000+ 6. Where were your major markets in 2002? Please indicate the approximate percentages of gross sales in each area and circle the sales trend over the last three years — ff increasing sales, U decreasing sales, and => unchanged sales. British Columbia % and ff 1] Rest of Canada % and ff U => United States _ % and ff JJ => % and ff li => Europe Asia 7. How many workers did you employ throughout 2002?. %and ff U => Other full time part time 8. What was the average gross annual salary of your full time employees in 2002 (excluding benefits)?,. Fibre supply characteristics 9. On the map to the right, please place a check mark {S) in the forest region in which your business is located. 10. On the map to the right, please approximate the percentage (%) of your total log consumption coming from each forest region in 2002. If your company sources logs from outside the province, please provide the percentage from within Canada and outside of Canada. Total should equal 100%. If you do not know which forest regions your logs came from, please skip to Question 11. %and ft U => subcontractors lyr. Prince Rupert l-'orest Region % Prince George Forest Region % 11. How many different log suppliers did you use in 2002? suppliers 12. Please approximate the percentage of your total log consumption from each of the sources below in 2002. Total should equal 100%. Small Business Forest Enterprise Program Brokers/Wholesalers Logging company sortyard Specialty/Auction sortyard Other, please specify Within Canada % Caribou Forest Region % Vancouver Forest Region' % % 100% Kamloops Forest Region Nelson o/0 Forest Region % Outside of Canada % 13. Please fill out the following table of the log species consumed in 2002 and the average delivered to the manufacturing site price of each species. If one of the species below was not used in your products, leave the spaces blank. Species ^ Total volume consumed (nr) Average delivered price of logs per mJ ($/m') Pine Spruce • Douelas Fir/Larch Cedar/Cypress Hemlock/True Firs 14. Considering the logs that would fit into a majority of your company's design plans, what are your three (3) preferred log species and sizes? Please provide species (from list above), top and bottom diameters and log length. Log species Top Diameter (in.) | Bottom Diameter (in.) Length (feet) 2. I i Current methods of assessing log purchases 15. Which of the following inspection methods do you use most when purchasing logs from your suppliers? Check (one box only. Q Visual inspection of a sample of logs to be purchased fj Detailed visual inspection of all logs to be purchased • Peel one or both ends of several logs to be purchased Q No inspection completed ' party inspection • 3rd O Other, please describe 16. 17. On average, what proportion of your purchased fibre supply does not meet your quality standards?. % If the raw material that you purchased does not conform to your quality standards, what happens? Please rank the three (3) most common solutions with 1 being the most common and 3 being third most common. Does not apply Return it to supplier Resell it to another business Turn it into firewood Buck out defect and utilize elsewhere in building Use where defect is not critical Other, please describe Please rate how important the following log characteristics are to you when determining whether a log is suitable for your main product. For each characteristic, please circle one number indicating the level of importance: l=Not at all important to 5- Extremely important. Log characteristic > Log straightness > Log almost perfectly,cylindrical > Log dimensions on target VjPropcr Jogsj2<Fci. > No knots greater than 5 cm (2 inched >, Even distribution of small 'Inots > Presence of loose knots > Lack of spiraljgi .un | > Logs freshly cut > Logs aged greatet than omonihs > Free from any splits > Greater than 6 growth ring per inch > Free from stump pull Free from allotypes ofioi > Free from jnechanical damage^ •e liom an\ -.laming ul'lhe uood > Light coloured wood Not at all important 1 L i •Bill 2 2 2 3 3 ••l Bill life! :> !•• ' "3 3 4 4 4* 4/ 4" 4 4" 4 1 4 4 4 I 1 •I 4 Extremely important 5 5 5 lilllifsS' illlllll 5 5 5 5 5 5 19. Are there any log characteristics we failed to mention above that are important in determining log quality? If yes, please specify. 20. On average, how many hours per week were dedicated to the acquisition of fibre for your company in 2002?. hrs/wk. 2 21. Please rate each of the following issues in terms of their importance in your decision to purchase logs from a potential seller. For each issue listed, please circle one number indicating the level of importance: 1 =Not at all important to 5=Extremely important. Not at all important Extremely important 5 5 > Readily available supply ?.;i.;og. supply consisteucv > Log supply quality > Close to manufacturing Mle > Competitive pricing v Speed of deli\or\ > Exchange policy > Ease o ^accommodating pick up or delivers Alternate sources of fibre supply For questions 22 and 23, please consider old growth timber as trees with narrow growth rings and second growth timber as trees with wide growth rings, ignoring the possibility of the trees being virgin timber. 22. Please state your level of agreement with the following statements as they pertain to your company's business philosophies. For each statement please circle one number indicating your level of agreement: l=Strongly agree to 5=Strongly disagree. Strongly Strongly agree disagree > Old growth timber is better than second growth timber for log home manufacturing 12 3 4 5 > Insect killed timber is a potential source of raw material for log home manufacturiiiL' I 2 3 4 5 > Fire killed timber is a potential source of raw material for log home manufacturing 1 2 3 4 5 > Second growth timber is a.potential spurce'of raw niaterial for log home manufacturing 1 2 ^ 4 5 23. Compared to the average delivered price you paid for old growth timber in 2002, how much of a discount would you need before considering purchasing the following material to incorporate into your building plans if it was a suitable size and quality? o Insect killed timber - % o Fire killed timber - % • Second growth timber - % • 24. If in 2002 you did use any of the fibre mentioned in the answer portion of Question 23, please fill out the following table; otherwise skip ahead to Question 25. If one of the product types was not used, please leave the spaces blank. Product Type Quantity purchased in 2002 (m3) Average delivered price per nr ($) Year product was first used Trend in purchasing (increasing or decreasing) Insect killed timber Fire killed timber Second growth timber If you completed any part of the above table, please continue on to Question 26. 25. If you did not use any of the materials listed in Question 23, please state the reasons why not. Check (S) all that apply. O Material not available fj Safety considerations fj Perceived quality problems fj Aesthetics 0 Lack of consumer demand Q Difficult to handle 1 I Other issues (please specify) • Workability I I Perceived durability Resolving fibre supply issues 26. Please indicate your level of agreement with the following statements as they pertain to your company's fibre supply issues. For each statement, please circle one number indicating your level of agreement: l=Strongly agree'to 5=Strongly disagree Strongly agree > Having one supplier provide me with all my raw material needs would benefit my company >4LamiRappy di^Ify^^P^iklwSP^.. > My suppliers are trying to provide a product suited to my business > PayirTf'a premium for fibre that meets all my company's log quality^spwifj^&ns/is.wbrthwhile .' > The provincial government has a good understanding of the BC log home manufacturing industry > I wquld'purchase logs from a government run log sottyard Large forestry companies have a good understanding of the BC log home manufacturing industry > Large forest companies would readily supply logs to in\ mmpain p The dimensions of logs we require is easily available > The quality of logs we require are easily available *• The logs we require are available at a fair price > y^'ste^^upplv of high quality fibre is'difflcuh to find Strongly disagree 2 -» J 4 5 Jiiiii 4 5 9 4 5 2 J 4 v 2 3 4 s IB ill! 4 5 t 3 1 5 2 Bl 1HI 5 2 -> 4" 5 T 3.. . 4 2 • 4 5. ' 3 1 5 27. Please indicate your level of agreement with the following statements as they pertain to resolving fibre supply issues for your company. For each statement, please circle one number indicating your level of agreement: 1'^Strongly agree to 5=Strongly disagree. agi liii ee I support.... > ..forest company specific quotas to sell house logs to log home manufacturers >J-.Torest regipn:sp£cific qupUs^p selKhpuse jogsto lpjg^.ome manufacturers > ..governmental funding of specialty log sortyards in several locations throughout the province > ..export restrictions on fibre meeting log home manufacturers size and quality requirements > ..removing restrictions on logs imported into the province for the purpose_of valuejKldedjrianufacturing > 'Jbnnin^'Buyingc^perall^slo improve'ouylng power > ..forming business relationships with First Nations in order to secure a dedicated fibre supply > ...forming busines\relationships with integrated forest companies in order'to securc;a'de,d.icated fibre supply •..„ > ..using fibre facilitators through log home building associations to secure fibre for my company > ..changing the current provincial log grading system to include a category specifically for house logs * > ..a new category of small business timber sale exclusive to the log home manufacturing industry ^Redistributing the^weighti^-systeni in curtent small business sales tctfavour logshome manufacturets more', > ..woodlot like tenures exclusive to value added manufacturing companies to provide a dedicated fibre supply General questions 28. If your company turned down orders in 2002, please rank the top three reasons (1 being most often cited and 3 the third most cited reasons). If you did not turn down work, please go to Question 29. __ Did not want the extra work Technical considerations (engineering/architectural) Improper tree sizes for order International trade law (quarantine, permits, other red tape) Lack of proper tree species for order Quality of fibre supply Lack of consistent fibre supply Other (please specify) . Not enough 'trained personnel y Strongly disagree 2 3 4 5 illf '3 - "4 " 5 HI 3 4 5 3 4 5 IIP 3 • 4 5 "i 3 4 "" 5 Pip 3 .4 5 2 3 4 5 2 3 4'.'"'5 2 3 4 5 Bill 3 % ? 2 3 4 5 29. Please list what you consider to be advantages and disadvantages of operating in the BC log home manufacturing industry Advantages: _ Disadvantages: 30. Are you currently providing other value added wood products in your product packages? Check (S) all that apply. O Cedar roofing or siding O Wood framed windows and doors Q Board and batten siding Q Patios and decks O Wood cabinetry O Interior design additions (ceiling/wall finishing; etc) r~1 Solid wood flooring Q Engineered wood panel flooring O Other items, please specify 31. Do you have any additional comments you would like to make about the log home building industry in BC? Please use the space below. Thank you for your time and co-operation in completing this survey. Your participation is greatly appreciated. Please return your completed questionnaire in the enclosed self addressed and stamped envelope to: BC Log Home Manufacturers Survey PO Box 95063 Kingsgate RPO Vancouver BC V5T 4T8 Phone (604) 822-0161 Fax (604) 822-9106 4 APPENDIX 6. REFINED SAMPLE FRAME LIST 659541BC A Fine Logbuilding Co. A. Chevigny Log Construction Acadia Log Homes Ltd. Arbor Vitae Log Craft Arrowsmith Log Building Artisan Custom Log Construction Ayrewood Log Homes Bavarian Leisure Cottages Beaver Contracting Beaveridge Contracting Belview Homes Benbow Construction B-i-g Developments Limited Big Foot Mfg Inc. Big Log & Timber House Company Ltd. Big Rock Homes Limited Bigfoot Hand Hewn Log Homes Inc. Bowron Valley Log Homes Brian Moore Log Homes Limited Bruin Log Works Calija Log & Timber Homes Limited Canada Logworks Limited Canada's Log People Inc. Canadian Fine Products Inc. Canadian North Log Homes Inc. Canadian Pride Log Homes Canadian Timber Products Canadian Walden Log Homes Canalog Wood Industries Limited Cancedar Log Homes Ltd. Cascade Handcrafted Log Homes Ltd. Cascade Handcrafted Log Homes Ltd. Casia Enterprises Ltd. Cedar Mill Log Homes Chilliwack Mountain Log Homes Ltd. Club Enterprises (Canada) Inc. Colin Solly Construction Continental Log Homes D & V Logworks Daizen Log-Tech Limited Damstrom Log and Timber Homes Dene Log Crafters Derynck Log Construction Don B Gervais Log Homes Dorish David Contracting Double Eagle Timbercraft Limited Ducharme Log Homes Durfeld Log Construction Durfeld Log Construction Ltd. Eagle's Nest Log Industries Eagleye Precision Log Homes Eco-Log-Homes Falcon Log Homes Fink Custom Log Homes Ltd. Finlayson Log Homes Fire Valley Log Homes Forbes Landing Log Homes Gateway Timber Frame Construction Golden Nugget Log Homes Gord Hill Log Homes Grizzly Peak Log Homes Hamill Creek Timberframe Homes Harris Log Homes Heatherbrae Construction Herridge Custom Profiling Limited High Country Log Homes High Mountain Log Homes Hodson Logbuilding Hudson's Hope Log Homes Limited Ideal Log Homes J J Log Homes Japan-Canadian Log Ark Ltd. Jim Pownall & Co. Kanstam Log Homes Limited Karsten Construction Keeko Log Homes Key-Oh Wood Products Ltd. Khita Log Builders Limited Kicking Horse Log Homes Kodiak Log Homes Kootenay Lake Log Structures Limited Laidlaw Custom Log Homes Lake Country Log Homes Leatherwood Log Homes Limited Legacy Log & Timber Homes APPENDIX 6. REFINED SAMPLE FRAME LIST CONTIONUED Little Log Company Lloyd Ventures Lobo Log Crafters Log & Timber Homes Lussier Log Homes Limited Majestic Log Homes Ltd. Mara Mountain Log Homes Maurer Log & Timber Frame Homes Mcmahan Log Homes Mile High Log Homes International Morgon Log Homes Ltd. Mountain Valley Log Homes & Wood Products Mountainview Log Structures Natures Best Log Homes Limited Neville Log Homes of Canada Nicola Logworks Nolte Log Homes Nordik Log Homes Norse Log Homes Ltd. North American Log Crafters Limited North River Log Homes North Road Log Homes Northern Light Classic Log Homes Northern Log Homes Northern Spirit Log Homes Northern Timberworks Odermatt Log Home Manufacturing Okanagan Vertical Log Homes Old Yale Log Homes Limited Original Log Homes Limited Owl Ridge Timber Framing Pacific Log Homes Limited Pacific Timber Frame Patrick Custom Log Homes Pattern Log Homes Peco Log Homes Pioneer Log Homes Limited Princeton Forest Products Limited Pro Log Homes Qci Log Homes Quality Log Homes Limited Quinkatla Development Corporation Radomske Log Homes Ltd. Ram Creek Log Homes Rasmussen Log Homes Limited Red Willow Rustic Log Homes Rockwood Homes Rocky Point Log Homes Rouck Bros Sawmill Limited Roundwood Log Homes Saik'uz Legacy Homes Limited Sea-Change Log Homes Shalalth Log Homes Sitka Log Homes Inc. Snowy Mountian Log Crafters Sonora Log & Timber Structures Sperlich Log Construction Stealth Log Homes Sun Peaks Log Homes Sunset Log Homes Ltd Superior Log Homes Surefit Log Homes Surelog Homes Ltd Swiz Timber Frame Homes Inc T.L. Timber/ Sierra Log Homes Tall Timber Log Builders Tanglewood Log & Timber Frame The Big Log & Timber House Company Ltd. The Log Connection-Log Home Specialists Tiny's Contracting Top Notch Log Construction Touch O Country Log Homes Limited Traditional Log Homes Limited Treehouse Log Homes True-craft Log Structures Limited Unique Timber Corporation Vancouver Island Log Homes Vintage Construction West Chilcotin Log Crafters West Coast Log Homes Limited Western International Log Homes Limited Whistler Log Homes Limited Whistler Valley Log Homes White Valley Log Homes Limited Woody Creek Homes Ltd 81 APPENDIX 7. NON RESPONSE BIAS RESULTS USING TWO TAILED T-TEST t-Test: Two-Sample Assuming Unequal Variances Business age Mean Variance Observations Hypothesized Mean Difference df tStat P(T<=t) one-tail t Critical one-tail P(T<=t) two-tail t Critical two-tail 15.4375 19.2 66.31854839 111.733333 32 10 0 13 -1.033802574 0.160038982 1.770931704 0.320077963 2.16036824 t-Test: Two-Sample Assuming Unequal Variances Full time employees Mean 9.962962963 8.285714286 Variance 156.4216524 86.57142857 Observations 27 7 Hypothesized Mean Difference 0 df 12 tStat 0.393577869 P(T<=t) one-tail 0.350398099 t Critical one-tail 1.782286745 P(T<=t) two-tail 0.700796198 t Critical two-tail 2.178812792 t-Test: Two-Sample Assuming Unequal Variances Total volume purchased Mean 1526.326 2572.5 Variance 2810365 15354738 Observations 26 6 Hypothesized Mean Difference 0 df 5 t Stat J -0.64058 P(T<=t) one-tail 0.274997 t Critical one-tail 2.015049 P(T<=t) two-tail 0.549994 t Critical two-tail 2.570578 APPENDIX 8. PRODUCT CATEGORY LIST AND DEFINITIONS A typical log home package consists of: log walls and posts log floor joists roof system (rafters, purlins, trusses, etc.) log stairs and railings (if applicable) through-bolts, pins, screw jacks (Houdek, 2001) ^ All product categories are built primarily of logs or large timbers that form the exoskeleton of the building: Custom log home not to lock up • building designed to customer specifications • manufacturing is limited to producing the building shell and roofing system • customer is responsible for building erection and all other construction and finishing phases Custom log home to lock up • building designed to customer specifications • manufacturing includes the production of the building shell and roofing system, supplying all doors and windows, plus any additional design features • manufacturer is responsible for building erection • manufacturer or owner responsible for all other construction and finishing phases depending on contract negotiation Pre-designed log home • customer chooses building plan from a selection provided by manufacturer Multiple units dwelling • buildings manufactured for the purpose to contain multiple self-contained dwellings Commercial building • buildings manufactured for the purpose to conduct commercial activities, for example, restaurants, lodges, bed and breakfast, or information centres. Other • respondent specified building type 83 APPENDIX 9. LIST OF RESPONSES TO QUESTION 29 OF THE MAIL SURVEY Advantages Probably the best building logs in the world Slow growth timber Wood Supply of Western Red Cedar logs required for the European market Best wood in the world Good fibre Very good supply Log source Fibre availability Fibre Access to raw materials Wood is available Quality of fibre We do have a good supply of quality lumber Good location to export to Japan Quality of fibre World recognizes BC quality fibre Close to international ports Own boss Fibre quality Access to logs in BC Location in the best forest in the world Availability of wood supply Proximity to excellent quality house logs (on Vancouver Island) None, we can use junk timber and cull poles but hand crafters have to use expensive straight logs. We lathe our logs straight. Availability of high quality wood Forest resources We have the growth potential to expand our USA markets if we could better access timber. Good logs if available Good reputation province wide Good supply of timber Interesting work Great timber (as long as it remains affordable and accessible) Access to good fibre International reputation of a superior product Supply of the best wood Variety of species Awesome potential for log supply APPENDIX 9. LIST OF RESPONSES TO QUESTION 29 OF THE MAIL SURVEY CONTINUED Advantages Trained personnel Good reputation Quality and variety of logs compared to rest of North America Variety of log species Close to markets or shipping aboard (sic) excess Can -> USA exchange Currency exchange We do have a good supply of quality lumber Log home manufacturing centre History of craftsmanship Should have good wood supply Future world growth/demand Excellent marketing to US customers Image of Canadian wilderness People resources Small town atmosphere Access to shipping ports Challenging locations US competition International reputation for the finest timber Best trained builders backed by professional association. Low shipping costs of raw material Close to Western States Access to markets globally Location in relation to U.S. & port of Vancouver Reputation worldwide Apprentice program Environment conclusive to developing sophisticated levels of craft Recreation for employees Travel to different cultures Skilled labour APPENDIX 9. LIST OF RESPONSES TO QUESTION 29 OF THE MAIL SURVEY CONTINUED Disadvantages Trucking costs to haul bug killed logs down from up North Limited demand in BC and Canada Long distance shipping costs to Europe Inconsistent fibre supply Pre-fabbed log homes to Europe must be kiln dried , except Cedar ,kiln drying logs is expensive As we use dry wood we should pay just over pulp price, however because of illegal log exports we pay the same as majors for #1 sawlogs Fibre being made available Taxes Quality of raw materials Wood is hard to get Softwood tariff Too many log manufacture Expense of fibre Lack of local market Despite the amount of logs in BC still hard to get good wood Acquisition of logs/suitability Taxes Not enough skilled workers Lack of gov't help programs Property taxes (industrial) Lack of understanding in resource management Time for accessing proper timber for a fair price Competition Large forest company monopolies Timber supply in general Access to good fibre Shortage of skilled workers High shipping costs Vulnerable to price swings Poor access to fibre Prices soaring as soon as you saw house logs We pay too much for house logs Proximity to markets Red tape Establishing clients First Nations competition - i.e. they pay no taxes so they can sell cheaper APPENDIX 9. LIST OF RESPONSES TO QUESTION 29 OF THE MAIL SURVEY CONTINUED Disadvantages Forestry pays no attention to our needs Qualified log builders Competitor subsidies - i.e. to ethnic minorities and specialinterest groups Transportation costs Social/economics Competing for BC timber against US companies with US $ Special zoning which is not a blanket industrial Vancouver Island -ferries Lack of a sustainable approach to our resources Difficulty accessing proper timber for a fair price. BC government changing timber sale criteria to none employment Foreign competition on our soil Cost of fibre Excessive time committed to ensuring a steady fibre supply Difficult export restrictions Lack of understanding by Govt as to how big our industry is Price variation APPENDIX 10. COMMENTS RECEIVED IN QUESTION 31 OF THE MAIL SURVEY Comment I would like to see more areas in BC designated for select logging of mature trees instead of typical clear cutting of all tress in mature treed areas. Thus saving government costs of replanting & thinning & spraying, etc. We rarely experience difficulty acquiring good quality logs. My observation is that log home companies with good purchasing policies / that work to develop rapport with log suppliers / that pay on time...don't have a problem with fibre supply. The log home companies that play an adversarial game with suppliers can be weeded out. This is the same in any business. I know of companies that have a difficult time buying wood...but not because of availability. We like what we been doing, the future looks bright. There is a hugh (sic) market out there. I have been trying for 2 weeks to source 5 loads (200 m3) of bug killed pine house logs (11"+ tops) - nothing. Most of it goes across the border is my understanding. I could sell more of it -but I can't get it. The spirit of the craft has increased my knowledge as an individual and as a log building team, we are able to display this vast knowledge in our craft. For us, 'log building' has turned into an incredible vehicle to show some of the true values that we have been blessed with in BC! I believe and recomend (sic) to others that our approach to resource utilization become 'cultural based'. I did not have any orders for log houses in 2002. I did send two to Switzerland in 2001 & will be doing so in 2003 most likely. Order a copy of "Log building constructional manual" by Robert Chambers. www.logbuilding.org and "log home building standards" from the Int. Log Building Ass. Lumby, BC. *Coast old growth is too big and tends to "pitch ring", & rot. I support small privatised (sic) sortyards not for goverment (sic) revenue, but profit to the small guy. Why should the gov. run the sortyards, they'll just line their pockets & keep it. Focus on building small business. The LBI association has accomplished a number of things that have helped our operation: - apprentice program - health and safety program - maintaining industry profile with govt. 88 APPENDIX 10. COMMENTS RECEIVED IN QUESTION 31 OF THE MAIL SURVEY CONTINUED We are located here because of excellent input fibre/logs - BC is known for its excellent log homes (hand crafted & milled) due to this and our advances in worker skills, provide us with the best logs so we can stay on top! Find another use for the bugey (sic, referring to bug killed timber) and rock hard waste logs. i.e. export them & keep our best for value added use! There is a great opportunity for growth. It may seem like a waste of wood to use so much in logs or timber frame homes but the primary lumber industry provides little employment and low value to high quality fibre. As our homes sold in 2002 have ranged in size from 300 sq. ft. to 112,000 sq. ft. it is impossible to provide an accurate unit price. Some log building outfits in BC have received large amounts of money to build their business particularly if they work with natives. I think this whole native thing is getting out of hand. MOF is cattering (sic) to big business and not eneough (sic) to small value added company's. 1) Never enough quality fibre 2) Competing against First Nations who pay no taxes is completely unfair as we have paid their share of taxes to keep them going only for them become subsidized competitors. 3) Not enough interest by government for training. Serious undersupply of personnel. 4) Emergence of Log Building Industry Association of BC has helped significantly. ' Dear Sir/Madam I would like to thank you for asking these questions as I think that this industry could be a lot bigger in BC because the international market place is virtually endless. I really like the idea of woodlots or some tract of land that we could manage with the assistance of RPF's in our province. The very trend of tree farm licences becoming larger, should be an obvious indication that (true) small business is no longer a noticeable portion of the industry. If, in BC we still have any voice whatsoever it should be to vito (sic) the advancement & inevitable takeover by the Americanization & sellout. Our birthright & heritage is crumbling. Our forefathers are rolling in their graves! Big Foot Log Homes - owned and operated by R.C Core Japan and Unique Timber Corp -owned and operated by Baumstemm Germany. There are another Vz dozen company's on the coast owned by Asian head offices and all have timber sales under the small business program. The government will soon issue the new sales to the highest bidder as their new policy and this will seal the fate of many Canadian owned and operated small business. 89 APPENDIX 10. COMMENTS RECEIVED IN QUESTION 31 OF THE MAIL SURVEY CONTINUED In general, - Stop all exports of raw logs - Promote & support manufacturing in BC. Please contact the Log Building Industry Association of BC for data gathered with respect to many issues asked in this questionnaire. It would be benneficial (sic) if our industry was allowed to voice our opinions at government held discussions concerning fibre access. If we had a good source of fibre we feel confident we could have a labour force of 100 people or more. We "turn down" orders every week! For us to ask for beetle killed timber say in the Quesnel forest district one would be told "no, we have no fibre for you." Do we not have a beetle problem and what a waste of fibre and jobs. To whom it may concern; We do not use raw logs, we use sawn cants in our homes, so many of the questions do not relate. As a note, it is a constant struggle to get raw wood fibre as a supply (good wood) since many of the majors (sawmills) dominate the market. It does not seem to be a concern that high value added manufacturers as ourselves are recognized as we should be. Keep the idiots that run the forestry out of our planning. In 1991, they awarded us a V added sale that was supposed to be 16,000 meters and told us we had to use 50% and could sell the rest. They also told us it was worth $85 per meter on the Market. Well, it sold for $47 per meter and our cost to log were $42 plus stumpage of $15. They then told us we had to log 2000 meters of each. Cedar, hemlock & cypress before reducing the price, needless to saw (say?) we nearly went broke. Also we logged 47,000 meters off there, 16,000 meters (illegible) they then informed us we were not in compliance because we didn't use 23.5 thousand meters in 2 years. As far as I am concerned, forestry is nuts. It took me 10 years to get back out of the hole. 90 APPENDIX 10. COMMENTS RECEIVED IN QUESTION 31 OF THE MAIL SURVEY CONTINUED Dear Sirs. I filled part of your questionnaire out with reluctance because any time I have been involved with a person that does nothing but plan for an industry that he does not own or operate it turns to be a job making enterprise for the planer and does not help us guy that use our money and labour to start and operate a business. I started make log homes by hand in the 1960's. So what happened Alan Mackay (a woodwork instructor in School) gets a grant to teach people to make log houses he couldn't and probably still can't make one at a reasonable cost and it goes on and on. I made a lathe to use junk logs and make a reasonably priced house now there is so many god damned many building inspectors that don't know anything about insulation re. log house that they are killing the log home business. 91 

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