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Relationship between markets and technology in large Western Canadian sawmills Lee, Lily 1997

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RELATIONSHIP BETWEEN MARKETS A N D TECHNOLOGY IN L A R G E WESTERN CANADIAN SAWMILLS by LILY L E E Bachelor of Engineering, Northeastern China University of Forestry, 1982 Master of Wood and Paper Science, North Carolina State University, 1994  A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF SCIENCE in THE F A C U L T Y OF G R A D U A T E STUDIES (The Faculty of Forestry) (Department of Wood Science)  We accept this thesis as conforming to the required standard  The University of British Columbia October, 1997 ©Lily Lee, 1997  In presenting this thesis in partial fulfilment 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.  ,  Department of The University of British Columbia Vancouver, Canada Date  DE-6 (2/88)  ' QUM  /6,  mi  ABSTRACT  The relationship between marketing and technology has been discussed in many articles, but little empirical research has been conducted to examine this subject, especially in wood product industry. Results of this study indicate that markets served by Western Canadian sawmills are closely linked with the technologies used in their production. Forty-eight sawmills with annual production over 50 million board feet on B C coast, in B C interior and Alberta were surveyed by personal  interview. Forty-three  questions  related to  marketing, products,  quality control  activities, and processing technology were presented to each participating mill. Data analysis shows that in 1995 there were two distinct markets served by Western Canadian sawmills: North America (predominantly the U S ) and overseas (predominantly Japan). Interior B C and Alberta sawmills focused more on the North American market, while coastal B C mills focused more on overseas markets. The two groups of mills with different market orientations also show differences in raw material supply, product, quality control factors, size control software, the age of machines, and optimized work centers. This study shows the current situation for the Western Canadian sawmilling industry, and highlights opportunities for using appropriate technology, marketing strategies, and quality control techniques to improve product quality and maximize value and volume of production from limited timber resources.  Key Words: market orientation, optimization, quality control activity, sawmilling industry, Sawmill technology, size control, Western Canadian sawmills,  ii  TABLE OF CONTENTS  ABSTRACT  ii  T A B L E OF CONTENTS  iii  LIST OF TABLES  v  LIST OF FIGURES  viii  1. INTRODUCTION  1  2. OBJECTIVES  3  3. LITERATURE REVIEW  .....6  3T HILL AND UTTERBACICS T E C H N O L O G Y I N N O V A T I O N M O D E L  6  3.2 W E S T S " A C T I V E " P R O C E S S I N G T E C H N O L O G Y T H E O R Y  ...9  3.3 I N T E G R A T I O N O F T E C H N O L O G Y I N N O V A T I O N  10  3.4 M A R K E T P U L L A N D T E C H N O L O G Y P U S H  12  4. RESEARCH METHODS  15  4.1 S A M P L E F R A M E  15  4.2 Q U E S T I O N N A I R E D E S I G N  16  4.3 D A T A C O L L E C T I O N  17  4.3.1 Sample Selection 4.3.2 Personal Interview  77 19  4.4 R E S T R I C T I O N S  20  5. DATA ANALYSIS  23  5.1 D A T A A N A L Y S I S B A S E D O N M A R K E T O R I E N T A T I O N  5.1.1 Market and Products 5.1.2 Quality Control(QC) Activities 5.1.3 Production Technology and Facilities 5.2 D A T A A N A L Y S I S B A S E D O N G E O G R A P H I C A L L O C A T I O N  5.2.1 Market and Products 5.2.2 Quality Control Activity. 5.2.3 Production Technology and Facilities  24  25 35 41 49  49 -56 62  5.3 D A T A A N A L Y S I S B A S E D O N C O M P A R I S O N O F R E S U L T S F O R S U R V E Y S IN 1991  A N D 1995  67  iii  5.3.1 Respondents Description and Production 5.3.2 Market and Products 5.3.3 Quality Control Activities  .  68 69 73  5.4 A D D I T I O N A L I N F O R M A T I O N N O T I N C L U D E D IN D A T A A N A L Y S I S  78  5.5 H Y P O T H E S I S T E S T S  83  5.5.1 Test of HO 1: There is no difference in market focus for mills in different locations... 84 5.5.2 Test of HO 2: There is no difference in the products produced by mills serving different markets : 85 5.5.3 Test of HO 3: There is no difference in the level of quality control for mills serving different markets : 87 5.5.4 Test of HO 4: There is no difference in manufacturing technology for mills serving different markets 88 6. DISCUSSION  91  6.1 D I S C U S S I O N O F S T U D Y R E S U L T S  91  6.1.1 Results from 1995 - BC and Alberta Mills Grouped by Market Served 6.1.2 Results from 1991 and 1995 - BC Mills Only 6.2 D I S C U S S I O N O F T H E O R Y A P P L I C A T I O N  6.2.1 6.2.2 6.2.3 6.2.4  91 97 100  Technology Innovation Model "Active" Process Technology Theory.. Integrated Technology Innovation Market Pull and Technology Push  101 101 102 104  6.3 N E E D F O R F U T U R E S T U D Y  104  7. SUMMARY AND CONCLUSION  107  7.1 S U M M A R Y  107  7.2 C O N C L U S I O N  Ill  8. REFERENCES  112  9. APPENDIX I  115  10. APPENDIX II  116  iv  LIST O F T A B L E S  Table  Table 3.1.1 - Functions O f Model O f The Dynamic O f Process Innovation In Industry  Page  8  Table 5.1.1 - Production A n d Employees  25  Table 5.1.2 - Mills Location A n d Markets Orientation  26  Table 5.1.3 - Volume Shipped T o Different Market From Each Group  27  Table 5.1.4 - Expected Markets Changes In Next Three Years  28  Table 5.1.5 - Products Volume Shipped T o Different Markets ( M M B F )  31  Table 5.1.6 - K i l n Dried A n d Planed Lumber Shipments In Different Groups  32  Table 5.1.7 - Species Distribution  33  Table 5.1.8 - Distribution Channels B y Groups  34  Table 5.1.9 - Employees Spent More Than 50% O f Their Time O n Lumber Grading  39  Table 5.1.10 - Devices For Size Control  40  Table 5.1.11 - Software For Size Data Analysis  41  Table 5.1.12 - Reasons O f Using Software  41  Table 5.1.13 - Facility Upgrading  42  Table 5.1.14 - Age O f Equipment (Average Age O f A l l Machines In Each Working Center) — 44 Table 5.1.15- Operation O f Machine Centers  45  Table 5.1.16 - Volume O f Lumber Planed A n d K i l n Dried  46  Table 5.1.17- Facilities For Value Added Products  47  Table 5.1.18 - K i l n Capacity  47  Table 5.1.19 - Technological Information Needed B y Sawmills (EP)  48  Table 5.2.1 - Production A n d Employee Data For Respondent Mills In 1995  50  Table 5.2.2 - Markets O f Volume Shipped In 1 9 9 5 -  52  Table 5.2.3 - Markets Changes In Next Three Years  52  Table 5.2.4 - Products A n d Volume Proportion  54  Table 5.2.5 - Dried A n d Planed/Surfaced Lumber Proportion In N A A n d Overseas  54  Table 5.2.6 - Species Distribution  55  Table 5.2.7 - Distribution Channels  56  Table 5.2.8 - Importance O f Q C Activities (EP)  57  Table 5.2.9 - Importance O f Work Center (EP)  58  Table 5.2.10 - N o . O f Employees Spending 50% More Time In Lumber Grading  59  Table 5.2.11 - Importance O f Training Programs (EP)  60  Table 5.2.12 - Measuring Device For Size Control  61  Table 5.2.13 - Software For Size Control  62  Table 5.2.14 - Reasons For Upgrading Processing Facilities Table 5.2.15 - Average Age O f Each Working Center Table 5.2.16 - H o w Machine Centers Operated  — 62 63 ~ 64  Table 5.2.17 - Mills Using Planer, Chipper, A n d K i l n  65  Table 5.2.18 - Percent O f Lumber Planed A n d K i l n Dried  65  Table 5.2.19 - K i l n Capacity  66  Table 5.2.20 - Technical Information Need (EP)  67  Table 5.3.1 - Lumber Production In 1991 A n d 1995  69  Table 5.3.2 - Markets O f Volume Shipped In 1991  70  Table 5.3.3 - Markets O f Volume Shipped In 1995  70  Table 5.3.4 - Products A n d Volume Proportion In 1991 —  72  Table 5.3.5 - Products A n d Volume Proportion In 1995  72  Table 5.3.6 - Importance O f Q C Activities (EP) In 1991 A n d 1995  74  Table 5.3.7 - Size Control A n d Software In 1991  75  Table 5.3.8 - Reason O f Software Chosen  ~ 76  Table 5.3.9 - Operations O n Production Working Centers  77  Table 5.4.1 - Frequency O f Size Control Checking B y Group O f Marketing Orientations (%)-- 79 Table 5.4.2 - Frequency O f Size Control Checking B y Group O f Geographical Locations (%) - 80 Table 5.4.3 - Feedback About Product Quality B y Group O f Marketing Orientations (%)  80  Table 5.4.4 - Feedback About Product Quality B y Group O f Geographical Locations (%)  81  Table 5.4.5 - Communication With Employees B y Group O f Marketing Orientations (%)  82  Table 5.4.6 - Communication With Employees B y Group O f Geographical Locations (%) — 82  vi  Table 5.4.7 - Frequency O f Value Table Updated Group B y Marketing Orientations (%)  82  Table 5.4.8 - Frequency O f Value Table Updated Group B y Geographical Locations (%)  83  Table 5.5.1 - Results O f Tests O n Marketing Focuses (a = 0.03)  85  Table 5.5.2 - Results O f Tests O n Species Distribution  86  Table 5.5.3 - Results O f Tests O n K i l n Dried A n d Planed Lumber (ct=0.05)  87  Table 5.5.4 - Results O f Tests O n Size Control Devices (a=0.1)  88  Table 5.5.5 - Results O f Tests O n Size Control Software--  88  Table 5.5.6 - Results O f Tests O n Facility Upgrading  89  Table 5.5.7 - Result O f Tests O n Age O f Equipment O n Working Centers (a=0.05)  89  Table 5.5.8 - Result O f Tests O n Working Center Operation  90  Table 6.2.1 - Application o f Technology Innovation Model in Sawmill  101  Table 6.2.2 - Application of Active Process Technology Theory in Sawmills  102  vii  LIST O F FIGURES  Figure  Figure 3.1  Page  A Model For The Dynamics O f Process Innovation In Industry  7  Figure 5.1 - Factors Impacted B y Q C Activities  36  Figure 5.2 - Important Work Centers For Q C Activities —  37  Figure 5.3 - Total Production O f Surveying Mills In 1995 (mmbf)  50  Figure 5.4 - Number O f Employees In Surveying Mills In 1995  51  viii  1. INTRODUCTION This research project was part of a larger project: Establishing Technology Benchmarks in Canadian Sawmills for Processing Quality Control and Training Needs. The main objective of this study was to identify the relationship between technological innovation and marketing in Western Canadian sawmills. This was accomplished by surveying sawmills on the B C coast, and in the B C interior and Alberta. Information was collected through interviewing respondents in each sampling unit (individual sawmills) in an attempt to analyze the current status in terms of technology levels, quality control activities, markets served and products produced. Changes to B C mills concerning technological innovation and marketing orientations were highlighted by comparing the research results of this study to a previous study completed four yeas ago. Research results provide a better understanding of the interrelationship between marketing and technology to the Western Canadian sawmill industry, and establishes benchmarks for marketing orientations, products, processing technology, and quality control activities in these sawmills.  This study was preceded by a previous study, conducted by Robert Smith in 1992 and published by Maness and Cohen in 1993, which indicated that there was a strong link between level of quality activities and marketing direction in British Columbia sawmills (Maness and Cohen, 1993). The results of this study compared the two main segments of British Columbia lumber production, coastal mills and interior mills, on their markets, products, and level of quality control activities. Two distinct markets, onshore (North America) and offshore (mainly Japan), were identified for B C sawmills, with each market served mostly by the different geographical regions. Coastal mills were highly focused on the Japanese market, while interior mills placed more emphasis on the U S market. Regional differences were also reflected in the products since  1  the  coastal  mills produced more  diverse and specialized products,  while interior mills  concentrated on producing commodity dimension lumber.  Market and products determined the location and type of technology applied in lumber processing, and quality control activities. Sawmills serving the overseas market tended to use more sophisticated levels o f technology and hire more quality control personnel at the front end of processing (bucking and primary processing) and updated and maintained their technology more frequently. Mills serving the North American market tended to focus on technology at the back end o f processing (trimming). Results o f previous research highlighted the necessity of extending the research breadth to the sawmill industry national-wide. This study reports on sawmills in Western Canada, which includes the B C coast, the B C interior and Alberta. Results also indicate changes regarding markets, products, technology innovation and quality control activity within the British Columbia sawmill industry for the past four years (1991-1995). In addition, data were collected using personnel interviews instead o f a mail survey which should improve the accuracy of the results (Tull and Hawkins, 1993).  After introducing this research, the objectives are stated in chapter two. This is followed by a comprehensive literature review in chapter three. Research methods then are discussed in the chapter four. The main body, results and a detailed data analysis are in chapter five. Discussions about study results and theory applications are in chapter six. Finally, a summary and concluding remarks complete this report.  2  2. OBJECTIVES There have been many theoretical discussions concerning the relationship between marketing and technology in the literature. However, little empirical research has examined this subject, especially in the wood products industry. The overall objective of this project is to better understand the technology-market relationship indicated by the pilot survey in B C sawmills by Maness et al (1994), and to identify the opportunities for using appropriate technology, marketing strategies, and quality control techniques to maximize the quality and value of products from our limited timber resources. These objectives will be accomplished by the following: 1  identifying the markets served by sawmills in the three regions in Western Canada;  2  examining quality control activities along with manufacturing processes and observe , what differences exist based on markets served;  3  obtaining first hand information about the current state of processing technological innovation in B C sawmills, and observing the differences based on markets served;  4  comparing the information obtained in previous study in 1991 and observing the changes on markets, products, quality control activities, and processing technology.  The objectives of the study can be also expressed by the following hypotheses: H O 1: Sawmills in coastal B C , interior B C , and Alberta have no differences in marketing focuses The initial study from 1991  indicated that two distinct markets, North America and overseas,  were served by the sawmills in different locations in B C . Coastal sawmills placed more focus on the overseas market (mainly Japan), while sawmills in the interior focused on the North  3  American market. Is the result of the pilot study still true today? B y including Alberta in the survey coverage, this study will investigate the current market orientation of large lumber manufacturers in the three areas.  H O 2: There are no differences in products based on the markets served by the sawmills It was shown in the pilot study that interior sawmills concentrated on producing commodity dimension lumber, while coastal mills produce more diversified and specialized products. This result will be examined in this study again by testing the products produced by the mills with different marketing focuses, and then comparing results from this study and with the previous one.  H O 3: There is no difference in the level of quality control (QC) activities based on markets served The level of Q C activities, which include Q C techniques, Q C factors at different working centers, and Q C staff levels, were also different between coastal B C sawmills and interior B C sawmills based on the results of the pilot survey. It is well known that the overseas market requires higher quality lumber products than the North America market. Mills that produce specialty products directed toward offshore markets have higher Q C staffing level and Q C techniques. Those results will also be verified by this study.  H O 4: There is no difference in process technology among the Western Canadian sawmills based on markets served It was also found in the pilot survey that the sophistication of technology, the type and frequency of technological maintenance, and the location of automated process control in B C sawmills  4  were different based on the markets that the sawmills served. Mills serving offshore markets tended to focus on sophisticated controls at the bucking and primary breakdown work centers, while mills serving the North American market tended to focus on technology sophisticated process control at primary breakdown and edging centers. B y adding age of equipment and a history of facility updating, this study will examine and test whether the process technology and facility innovation differ between mills with different marketing orientations.  Testing the above hypotheses (statistical tests for significance and descriptive statistics) will help to reveal the interrelationship between marketing and technology in Western Canadian sawmills. However, this study will place more emphasis on how the marketing strategy influence technology used in sawmills, which means that all of the technology attributes will be measured based on the different marketing orientations. N o reverse test will be applied. A  more  comprehensive study on the mutual relationship between marketing and technology with a focus on how technology affects marketing strategies is still needed (see discussion of marketing pull and technology push in the Literature Review).  5  3. LITERATURE REVIEW The  adoption of technology innovation in processing can be continuous or discontinuous.  Continuous technology innovation can be described as incremental improvement on technology adoption rather than dramatic change. Discontinuous technology innovation mainly refers to radical, new and/or different technology for manufacturing a product in a substantially different manner (Sinclair and Cohen, 1992). Technology innovation is usually a continuous process and therefore, discussion about technology innovation in this study mainly refers to continuous technology innovation.  Products, process, and management are the three major aspects of technology innovation in a manufacturing industry (Sinclair and Cohen, 1992). A s a result o f manufacturing, products are directly provided by the manufacturers to the market, while the process, or the operation o f manufacturing, indirectly connects the manufacturers with the market through the products. What management tries to do in setting the proper business strategy is to organize an efficient process to supply high quality products to consumers. Management technology is usually considered a type of business strategy. It is most frequently studied separately from product and process technologies because of its complexity and different functions (e.g. Brownile, 1987, Cowling, 1994, Maisseu, 1995, and Prabhaker, and Golehar, 1994).  3.1 HILL AND UTTERBACIPS TECHNOLOGY INNOVATION MODEL Studying the relationship between marketing and manufacturing technology, product innovation is often considered first since the product is the direct physical link between market and  6  technology. Thus, the importance o f process technology is usually shaded by the importance o f the product's technology.  Hill and Utterback (1979) thought that market competition required  the development and improvement of both products and process. Technology innovation of products and processes are closely interdependent with business development. This was clearly described by Hill and Utterback (1979) through a model of the dynamics of processes innovation in industry (Figure 3.1), in which technology innovation was divided into three periods and each innovation attribute had its special characteristics within each period.  Figure 3.1  A Model for the Dynamics of Process Innovation in Industry  First Period  Second Period  Third Period  Source: Hill and Utterback, 1979  Five aspects are presented for each period. They are: predominant type of innovation, stimulation for innovation, marketing competition emphasis, production process, and equipment. Table 3.1.1 summarizes the function of the model by illustrating the specific features on each of five attributes in the three different periods.  7  Table 3.1.1 - Functions of Model of the Dynamic of Process Innovation in Industry First Period  Second Period  Predominate type of innovation  frequent major change in products  major process change required by increasing production  Innovation stimulated by  information on customer's need and user's technical requirement functional products performance flexible and inefficient; major changes easily accommodated general-purpose, requiring highly skilled labor  opportunities created by expending of internal technical capacity products variation  Marketing competition emphasis on ; Production process  • ' Equipment  becoming more rigid, with major changes occurring in major steps subprocesses automated, creating "island of automation"  Third Period incremental for both products and process, with cumulative improvement in productivity and quality market pressure of cost reduction and quality improvement cost reduction efficient, capital intensive, and rigid; high cost of changes special-purpose, mostly automotive with labor tasks mainly monitoring and control  Table adopted from Hill and Utterback, 1979  This model shows that technological innovation is primarily stimulated by the market demand on products. Thus, product innovation is the first step in the innovation of process technology. A s the product innovation continues, process innovation become more important for increasing the product's variety and volume. With markets and products maturing, competition on production cost and product quality have to be emphasized. A t this stage, process innovation has to not only increase productivity, but to improve product quality. Therefore, process technology becomes much more important to satisfy market demand. Viewing the whole innovation course, the influence of markets on process technology innovation is critical in terms of a manufacturer's ability to compete, survive, and grow in the market place, although this linkage is not obvious at first glance.  Examples of the development of different forest products illustrate the model of process innovation much more clearly. Lumber products, as well developed products, are manufactured with more mature technology. The process technology would be categorized at the third stage according to Utterback's model, where innovation is mainly to improve product's quality and process productivity. Innovation is usually initiated by the requirement on price and quality from  8  markets. Manufacturing process emphasizes efficiency. However, engineered wood products are in the introduction period. The process technology is obviously at the first stage where major innovation is caused by frequent product changes, such as O S B (oriented strandboard), or L V L (laminated veneer lumber).  Innovative initiation often comes from the customer needs (e.g.  water proof requirement) and market demand (level of acceptance).  3.2  WESTS " A C T I V E " P R O C E S S I N G T E C H N O L O G Y T H E O R Y  In contrast to the argument of process technology innovation as a 'passive' way for changing the company's position in the market, West (1992) listed four reasons why an institution actively seeks  potential opportunities for gaining advantages  over the competition by improving  manufacturing process technology. These are: 1)  Companies can gain an advantage by increasing the speed of manufacturing process, and therefore increase productivity.  2)  ; Investment in process technology can substantially improve the flexibility of production to enable moving from manufacturing one product to another.  3)  Process innovation could dramatically decrease the time taken in moving from the initial concept to the final finished product, using technologies such as computer-aided design ( C A D ) , computer-aided manufacturing ( C A M ) , and flexible manufacturing systems (FMS). These can become very important market forces and significantly influence the development of other types of innovation.  4)  Process innovation can improve the ability of production processes to deliver products with specified quality, and lower the production cost.  9  3.3 INTEGRATION OF TECHNOLOGY INNOVATION A s process technology is emphasized, it doesn't mean that process innovation is isolated from other types of technology innovations. Technology innovation requires changes in many facets o f the firm (Hill and Utterback, 1979). A s information technology develops with one generation and then, is quickly stepped over by another generation, marketing information and customer demand can be quickly obtained by the manufacturers.  Communication technology and information  systems are leading manufacturing technology to new concepts that are smarter, faster, better integrated, and far more flexible than previous ones. Firms are moving from product-driven to technology-driven and market-driven (Prabhaker and Golehar, 1994). A n apparent trend in the wood products industry is a move away from producing one or a few commodity products that favor certain markets to producing diversified products for a variety of markets. Enhancing production flexibility in the sawmills to produce small orders of specialty products requires new process  technologies  characterized  by computer  integrated  manufacturing  and flexible  manufacturing systems (Schuler and M e i l , 1990). Quality no longer only refers to products, but to services, packaging, and delivery, as well as the whole manufacturing process.  The concept of Quality Control (QC) has been accepted by manufacturers as improving product design, shortening production time, reducing cost, increasing productivity, enhancing product quality, and finally gaining profit, market share, product and company reputation. In sawmills, a Q C program can be applied at any step o f the lumber production process to achieve the goals of improving recovery in terms of value and/or volume of lumber from logs, ensuring lumber uniformity, and increasing productivity (Maness and Cohen, 1993). Technological innovation also  requires  personnel  with higher education  10  and skills to manage and operate  more  sophisticated manufacturing processes and facilities, such as the C A M process and statistic quality control activities in sawmills.  Another influence on process technology is the growth o f manufacturing value-added products which often requires technology innovation in the manufacturing process to add value to products and process (Goldsmith, 1969). In sawmills, value-added products and processes become more important than ever because o f increased supply o f lower quality raw material, the high cost o f logs, and increasing challenges due to the development o f engineered wood composites and non-wood alternatives (Maness and Cohen, 1993).  Technological innovation, even continuous process technology, cannot be entirely free from research and development (Goldsmith, 1969). Technology innovation in manufacturing process can build a bridge that transfers scientific research into fulfilling consumers' needs. A t present, there is not enough evidence showing active research and development (R & D ) in sawmills. The reasons for a lack o f R & D may result from the special characteristics of the industry, i.e. standardized products - lumber, and mature markets - residential construction (Sinclair and Cohen, 1992). However, with rapid market changes and the development o f R & D in competing products, both wood and non-wood, the importance of R & D in sawmills may become more recognized by industry management.  Technology innovation is not a simple, clear-cut process. The type of innovation in a particular industry or company depends on its market competition and the specific environment (West, 1992). The wood industry, specifically sawmills, has been undergoing substantial  technology  innovation with its special industrial environment o f marketing, manufacturing, and resources.  11  The competitive global market, increased public concern for the environment, and shortages o f supply of wood fiber require manufacturing facilities in sawmills to meet the demand o f quantity, quality, and variety of the products.  Process technology innovation can also help to solve the crisis of supply and demand in the market (Maness and Cohen, 1993). This previous study showed that technology focus and activity in firms differed based on market orientations. Alternatively, sawmills with different levels o f technology innovation have chosen to operate in different markets. Other evidence showed that firms who increase the adoption of process technology have superior performance in profitability and market share (Sinclair and Cohen, 1992).  3.4 M A R K E T P U L L A N D T E C H N O L O G Y P U S H Market pull and technology push have been regarded as the two distinct forces leading business to succeed in today's competitive marketing environment. These two forces are not mutually exclusive, but are connected together with a special link (Kiel 1984). Finding the link in these forces, understanding the link's interface, and combining them toward the same direction are keys to long term success for business institutions.  Marketing Pull can be defined as the development, application and transfer o f technology initiated by consumer demand on products. This can often require innovation on process and product technology. The process of Marketing Pull could be expressed as:  Consumer requirement —> Product specification —> Manufacturing and sales (Cohen, et al, 1994). 12  Applied research and development ->  Technology push, on the other hand, is the development o f new products or the improvement of existing products initiated by the research and development of new technologies. The process of Technology Push could be expressed as:  Scientific research and development ->  Financing and prototypes  ->  Manufacturing ->  Marketing and Sales (Cohen, et al, 1994).  Generally speaking, there are three major sections procurement,  in the manufacturing stream:  resource  manufacturing, and marketing. Technology and technological innovation are  applied to the whole manufacturing stream. T o a manufacturer, the type o f products, the amount of production, and the producing technology depend on both resources and markets.  Therefore,  technological innovation in manufacturing could be initiated by limited natural resources (e.g. decreasing log supply), social resources (e.g. shortage of labor), and even political resources (e.g. alteration  o f government  policies).  Technological innovation could also  be initiated by  competition within the market, such as, the price o f the product, the quality o f the products and services, the number of competitors, and even the differences in packaging format. West (1992) called innovation caused by resources "the demand led innovation" and innovation resulting from marketing requirements "the competitive led innovation". He also pointed out that the key factor determining most innovation, based on several survey results, is the effect o f competition. Here, we can interpret "the competitive led innovation" as the "marketing pull".  Like  other  industries,  the wood  products  industry  has been  experiencing  tremendous  technological changes. However, the wood products industry has its own special characteristic -  13  it relies heavily on a limited supply of natural resources.  It is reasonable to believe that  technological innovation in the wood products industry can also be stimulated by the limitation of natural resources. Because of changing fiber supply, sawmills have to adopt high performance manufacturing technology for some of the following reasons: 1)  to offset expensive log costs  2)  to maximize lumber yield  3)  to keep lumber prices competitive, and,  4)  to place high quality products in the marketplace.  Compared to marketing directed technology innovation, resources  led innovation could be  understood as "technology push".  A s previously mentioned, there are three groups that are generally classified within technological innovation: product technology, process technology, and management technology (Sinclair and Cohen, 1992). This study will focus mainly on process innovation in sawmills and its connection with  market  orientation.  Other innovations (here referring to  product  innovation and  management innovation) will be also discussed since the three types of technological innovation are highly related and influence each other. Products, functioning as a bridge, always transfers technology information to the market place, as well as bringing market requirements back to the manufacturing facility. Quality Control, as an activity of management innovation, runs through the whole manufacturing process, and directly involves process technology and influences marketing. Therefore, these two factors, Products and Quality Control, will be examined and discussed in this study.  14  4. RESEARCH METHODS This chapter is composed of four major parts: Sample Frame, Questionnaire Design, Data Collection, and Restrictions. Sample Frame discusses the survey population and the sample frame. Questionnaire Design describes the contents of the questionnaire and the design steps. Data Collection includes two parts: Sample Selection, where a special sampling method, size sampling, was introduced, and Personal Interview which explains the reasons for this technique. Restrictions discusses two major limitations of the sampling method used in this study, nonrandom sampling error and nonresponse bias. This study was conducted in five steps: 1)  secondary data collection;  2)  questionnaire design;  3)  data collection;  4)  data analysis; and  5)  report writing.  4.1 SAMPLE FRAME The sample frame consisted of 127 sawmills which was 43% of the total sawmills and planing mills industry (Standard Industry Code 2512)  in B C and Alberta. It represented the survey  population defined as, sawmills that produced more than 50 M M B F  (million board feet)  softwood lumber in 1994 in these two western Canadian provinces. Information about the mills in the sample frame was collected concerning major products, types o f manufacturing facilities, main destination of shipments, and each mill's location, address, and contact persons. Some lumber associations were also contacted to make the population list as complete as possible. M i l l information was taken from the Madison Canadian Lumber Directory (1996), North American 15  Factbook (1995-1996), Forestry Directory of British Columbia (1996), and Forestry Directory of Alberta (1995-1996), as well as the directories o f several industry associations.  4.2 Q U E S T I O N N A I R E D E S I G N Questionnaire design is a crucial step in marketing research. Questionnaire design for this study was mainly based on a previous questionnaire used to survey sawmills in the Maritime in 1994. However, question consistency with the survey in 1991 for B C sawmills was also considered to compare results between this study and the one in 1991. The two previous surveys in 1991 and 1994 were considered the pre-tests for this study. Changes and modifications to the current survey were completed based on the results of these pre-tests. Other advice and suggestions on questionnaire design were obtained from professionals and experts both at U B C and from within industry.  The major parts of the questionnaire collected information on: 1)  company profiles,  2)  technology focusing on quality control activities,  3)  product/market orientations of the sawmills, and  4)  technology innovation in manufacturing process and facilities  16  4.3 DATA COLLECTION Two  sections are presented in Data Collection: Sample Selection and Personal Interview. In  Sample Selection a special sampling method - size sampling, is introduced, and Personal Interview explains the reasons for this specific interviewing technique.  4.3.1  S A M P L E SELECTION  Due to budget restrictions, time constraints, and transportation difficulties resulting from the regional location of mills, a geographically stratified purposive selection (discussed below) of the large manufacturing facilities was used as the sample selection method. Sample mills were selected from the sample frame based on the convenience of traveling between mills. Between 35 - 45% of the sawmills in each of the three areas were sampled resulting in 48 selected mills with the following breakdown for each regional strata:  B C coast (13 mills), interior B C (27 mills),  and Alberta (8 mills). Survey results showed that all 48 mills had kept their production level over 50 M M B F in 1995.  Sampling only the larger mills (size sampling) is well accepted in industrial marketing research (Karmel and Jain, 1987) because of its higher efficiency. Using size sampling in this study was based on two major reasons. Firstly, this study was not designed to represent the entire population of Western Canadian sawmills in terms of technology and marketing, instead the objective was to provide more accurate results of the relationship between technology level (advanced technology vs. appropriate technology) and marketing orientations (North American market vs. overseas market). Based on the experience of pre-tests, large sawmills tended to be more active in overseas markets and have capabilities and resources  17  to apply advanced  technology. Therefore, it is more efficient to survey only large sawmills to obtain sufficient information to analyze the interaction between technology and marketing with a restricted budget and limited time. Secondly, mills in the list o f the sample frame encompass  94% o f the  production o f the entire industry (based on information collected for sample frame, see chapter 4.1, Sample Frame), it is reasonable to assume that the samples selected for this study represent a substantial proportion of the Western Canadian sawmilling industry.  Statistical research has showed that, for any given data, a stratified sample consisting o f units with the largest value of the auxiliary variable in each stratum is the most efficient strategy (Karmel and Jain, 1987). This study compared simple random sampling and techniques such as stratification, systematic selection, and probability proportional to size selection with purposive sampling that use auxiliary and survey variables in terms of  a model to measure error for  distribution. Evidence from over 12,000 industrial business samples, showed that purposive design sampling performed much better than simple random design on estimating Mean Square Error ( M S E ) and sample error. The study suggested that, i f no information about a population is available, a sensible procedure  is to use simple random sampling. However, i f auxiliary  information is available, there is a great deal be gained by using other sampling schemes to produce more accurate estimates. In the case o f this study, auxiliary information (mill size) is available, therefore,  selecting samples with higher annual production is believed to be an  appropriate sampling method. Using size-based sampling, which has been well applied in industrial marketing research, is a well established alternative (e.g. Sinclair and Cohen, 1992).  18  4.3.2  PERSONAL INTERVIEW  Four survey methods can be applied in marketing research: personal interviews, telephone interviews, mail interviews, and computer interviews (Tull and Hawlins, 1993). Each o f the four surveys has its own advantages and problems. Personal interview is regarded as a survey method with a higher response rate and the least bias caused by a misunderstanding o f the questions, so it is widely accepted as a survey technique in industrial marketing research (Morris, 1988). However, it is relatively expensive, it can have a higher bias on sensitive questions, and it could have a higher sampling error since it restricts the application o f simple random sampling. Comparing the different bias that exist among the different interview processes, a lower response rate has the most influence on the accuracy of the final analysis (Tull and Hawlins, 1993). Based on the result o f a similar mail survey tested in the Maritimes in 1994, response rates were insufficient for acceptable analysis and results. Therefore, personal interview was considered as the most suitable survey method for this study because it could increase the response rate, and it is capable of handling the complex technological questions which comprise the major part of this study,  T o ensure a high rate o f response, several steps were taken: 1)  the most suitable respondent in each company was contacted by telephone;  2)  the questionnaire was sent to the respondent by fax for interview preparation;  3)  an interview appointment was made by telephone;  4)  the actual personal interview was conducted at the sawmill.  The interviews were conducted by two interviewers and therefore a training program with an interview rehearsal was completed before the actual field survey.  19  This ensured that both  interviewers had a thorough understanding of the objectives of the questionnaire design and the interview technique. The main purpose of the interviewer training was to reduce the possible bias created by the interviewers. explaining the questionnaire.  Care was taken to avoid asking leading questions, or not properly This ensured that consistent data were collected for accurate  analysis.  The 48 responding mills represents 38% of the sample frame, which consists of 127 sawmills with annual production over 50 M M B F in 1994 in British Columbia and Alberta.  4.4 RESTRICTIONS Industrial marketing research is different from the consumer marketing research and the research in social science. Sample size of industrial marketing research is smaller, but survey time tends to be longer and cost is higher. Respondents are more difficult to access and personal interviews with managers in targeted companies are typical for industrial marketing research. Understanding the special technology involved in the industry is required and interviewer training is necessary (Morris, 1988). Special characteristics of the industrial market lead to some restrictions in marketing research particularly in terms of sample selection and interview technique. Two major limitations to this study were non-random sampling error and non-response bias.  In survey research, there are two components of total survey error, sampling error and nonsampling error. Sampling error is caused by the sample selection which is unable to represent the test population often due to non-random sampling, while non-sampling errors are caused by nonresponse error that occurs when sample members do not respond, and response error that  20  occurs when sample members respond inaccurately (Assael and Keon, 1982). In this study, sampling error could be introduced by non-random sampling, and nonsampling error could be caused by nonresponse.  Random sampling error is easy to control by careful sample selection and by increasing the sample size. However, time and budget constrains prohibited using a strict random sampling method or increasing the sample size in this study. B y using non-random sampling (geographical stratification with convenience along the travel routes), sampling error could be introduced into the survey results. Therefore one must assume  that mills close to the travel route were not  different from mills that were not close to the route in terms o f all variables o f interests (productions, products, marketing orientations, quality control activities, and process facilities and technology). This assumption is needed to be able to infer results from the sample to the population and to accept the hypothesis tests.  Study results of Assael and Keon (1982) indicate that nonsampling error is, on average about 95%  o f total survey error. Although personal interview prohibits using complete random  sampling in the survey, its capability of dealing with more complicated technology questions to ensure the quality o f survey data was the major reason for choosing personal interviews as the survey technique in this study.  Non-response error is caused by the difference between those who respond to the survey and those who do not respond. Generally, the lower the response rate, the higher the probability o f non-response error (Tull and Hawkins, 1993). In this study, the non-response rate was only 10%, that is over 90% of the mills approached for an interview agreed to participate. It is believed that 21  such lower nonresponse rate could not create influential nonresponding error  for the  interpretation of the results. Therefore, nonresponse error was not considered as a major factor in the total survey error. Furthermore, non-response error is a problem only when a difference between the respondents and non-respondents results in an incorrect conclusion or decision. Since this research did not measure the difference between the respondents and non-respondents, it is assumed that there is no difference between the mills who responded and those refused to participate or those were not asked to participate, in terms of all variables of interests (productions, products, marketing orientations, quality control activities, and process facilities and technology).  22  5. DATA ANALYSIS There are four sections in this chapter: Data Analysis Based on Market Orientation, Data Analysis based on Geographical Location, Data Analysis based on Comparison of Results for surveys in 1991  and 1995,  and Hypothesis Tests. Data analysis was completed from three  perspectives: grouping respondent mills by market orientation, grouping them by geographical location, and comparing current results with the previous survey.  In grouping respondents by market, mills were classified based on their geographical market focus: North America and overseas (predominantly Japan and other Asian markets). Mills with overseas shipments exceeding 50% of their total production were counted as having an overseas market orientation, while mills with more than 50% of shipments to Canada and U S were classified as having a North American market orientation. O f the 48 respondent mills, there were only nine mills considered as having an overseas market orientation, with the remaining 39 mills having a North American market focus.  The second method classified mills based on the three different geographical locations of the processing facility: Coastal B C , Interior B C , and Alberta. This classification method facilitated comparing results from this survey with one completed four years ago in B C concerning technology, products and markets (Maness and Cohen, 1993). Although the questions asked in the two surveys were not exactly the same, many questions regarding technology and markets were designed to ensure comparability. Comparison of the two survey results highlight the changes  in the B C sawmilling industry regarding  technology application and marketing  orientation over time. Further analysis explored what has changed and why there were changes.  23  For the analysis which compares B C sawmills over time, Alberta mills are omitted since no prior information was available.  Not all survey respondents answered all questions and some answers could not be coded for statistical analysis. For this reason, the average number of acceptable responses for each question has been included in this report. Averages were used for each group to compensate for the uneven numbers of mills in each group. The statistical methodology used in this analysis was primarily descriptive, as is typical with benchmarking studies.  Interviews were completed with management personnel.  Titles of interviewees ranged from  general manger to production manager to division manger, and so on. The reason for choosing managers for the interviews is because they are the people with the broadest knowledge of the mill and therefore, they could answer the questions most accurately. M i l l mangers at two thirds of the mills were available to be interviewed, while another 23% of those interviewed were quality control personnel. The remaining 10% were supervisors and superintendents.  5.1 DATA ANALYSIS BASED ON M A R K E T ORIENTATION Respondent mills were grouped into two classes: mills who focused on North America markets and mills whose focused on overseas markets.  There were nine mills with overseas shipments  that accounted for over 50% of their total production and there were 39 mills with more than half of their production sold into the North American market in 1995. The following data analysis describes the differences between these two groups of mills for markets and products, quality control activities, and production technology.  24  5.1.1  M A R K E T AND PRODUCTS  This section presents  results of the analysis on Respondents Description and Production,  Markets, Products, Species Distribution, and Distribution Channels.  5.1.1.1 Respondents Description and Production The total 1995 production o f the 48 surveyed mills was 6,847 M M B F . sawmills produced 5,668 M M B F  The 40 responding B C  which represented 41% of all B C lumber production in 1995  (total production was 13,820 M M B F according to B C Forest Industry Statistical Tables - C O F I April 1996). The eight responding Alberta mills produced 1,179 M M B F that represented 59% o f softwood lumber production in Alberta (total production was 2,000 M M B F according to Canada & U S Softwood Lumber Production Outlook - Wood Market 96').  Production for the sawmills predominantly  serving overseas markets was 1,406  MMBF  representing 21% o f all respondents' production, while those predominantly serving the North American market produced 5,441 M M B F which represented 79% o f all respondent production. Eight o f the nine mills making up the overseas group (89%) were coastal B C mills, while in the N A group (39 mills) the majority were from the interior o f B C (69%), and the remainder from Alberta (18%) and the B C coast (13%). For details on production and mill location see Tables 5.1.1 and 5.1.2.  Table 5.1.1 - Production  and Employees  Total Overseas Group North American Group Total Surveyed Mills  Employees  Production  No. of Mills % of Total  Total  Average  % of Total  Total  Average 278  % of Total 25.4  9  23.7  1,406  156.2  20.5  2,501  39  76.3  5,441  139.5  79.5  7,352  189  74.6  100.0  9,853  259  100.0  48  100.0  6,847  142.7  25  Table 5.1.2- Mills Location and Markets Orientation BC coast  BC Interior  Alberta  Overseas Group  8  0  1  North American Group  5  27  7  Total Surveyed Mills  13  27  8  The average production per sawmill for the overseas group was 156.2 M M B F . higher than the N A group which produced on average 139.5 number of employees working at sawmills  This was slightly  M M B F per mill.  The average  in the overseas group was 278 while the average  employees per sawmill in the N A group was 189.  Given the average production and employees,  production for each employee was 0.56 M M B F for the overseas group and 0.74 M M B F for the N A group.  5.1.1.2 Markets There were seven markets that Western Canadian sawmills targeted in 1995. Canada, U S A , Europe, Japan, Other Asia, Middle East,  These were:  and Oceana (New Zealand and  Australia). The 47 mills (one mill didn't answer this question) that estimated the proportion of volume shipped to the different markets in 1995 indicated that the U S A was the biggest market for Western Canadian sawmills. Approximately 58% of total lumber shipments went to the U S and 23% went to Japan. Local Canadian markets were numbered the third, accounting for 16% of shipments. These three countries alone accounted for 96% of total shipments from the 47 respondent mills in 1995 (Table 5.1.3).  There were nine mills with over 50% of their shipments going overseas. This represented, on average, 84% of their 1995 annual production. Three mills in the overseas group shipped more  26  Table 5.1.3 - Volume Shipped to Different Marketfrom Each Group OS Group 9  47  1,406  5,356  6,762  Shipment  141.6  3,748.2  3889.7  % of NA  61.6  78.9  78.1  Production (MMBF)  US  Canada  NA  OS Market  % of Total  10.1  68.9  57.5  Shipment  88.2  1,002.6  1090.7  % of NA  38.4  21.1  21.9  % of Total  6.3  18.7  16.1  Shipment  229.7  4,750.7  4980.4  % of Total  16.3  88.7  73.7  1,022.2  518.8  1,541.0  %ofOS  86.9  85.7  86.5  % of Total  72.7  9.6  22.8  Shipment  57.9  14.6  72.5  % of OS  4.9  2.4  4.1  % of Total  4.1  0.3  1.1  Shipment  57.5  51.0  108.5  %ofOS  4.9  8.4  6.1  % of Total  4.0  1.0  1.6 60.3  Shipment Japan  Other Asian  Europe  Total Mills  38  No. of Mills  NA Market  NA Group  Others  Shipment  39.4  20.9  (Middle East  % of OS  3.4  3.5  3.4  & Oceana)  % of Total  2.8  0.4  0.9  OS  Shipment  1,176.9  605.3  1,782.2  % of Total  83.7  11.3  26.4  than 90% of production volume overseas in 1995. Japan was the major market for this group of mills, with all nine mills selling over 50% of their total production in the Japanese market. O n average, the typical mill shipping offshore sent more than 70% of their total production to Japan, and the Japanese market accounted  for 87% of the total overseas shipments of the responding  firms that focused on offshore markets. Other Asian countries and Europe were the other two exporting destinations for this group accounting for approximately representing only 5% of their overseas shipments in each area.  27  4% of total production, and  There were 39 surveyed mills that focused mainly on the North American market. The U S was the biggest market for this group of mills, accounting for 69% of their total production in 1995 which represented 79% of all North America shipments. The remaining 21% of North American sales were consumed locally in the Canadian market, which represented 18% of the total production in the 47 surveyed mills.  Among the group of mills with overseas market orientation, there was little expected change on volumes shipped to the North American market over the next three years. Thirty-seven point five percent of mills in this group indicated that their sales in the U S market would increase in next three years. Another 37.5% of mills expected sales to remain at current levels. Only 25% of them expected a decrease in sales to the U S market (Table 5.1.4).  Table 5.1.4 - Expected Markets Changes in Next Three Years  i Increase USA  Canada  Japan  Others  %ofOS 38  North A. n=32 1  % of NA 3  % of Total  Total Mills n=42 4  10  ISame  3  38  5  16  8  19  I Decrease  2  25  26  81  28  70  j Increase  3  38  20  63  22  55  ISame  3  38  11  34  14  35  ! Decrease  2  25  1  3  4  10  j Increase  3  38  26  81  29  73  jSame  5  63  6  19  11  28  0  0  [Decrease  0  0  0  0  1 Increase  5  63  3  9  8  20  3  38  29  91  31  78  •Decrease  0  0  0  0  0  0  i Increase  2  25  4  13  6  15 80  Other Asian jSame  Europe  Overseas • ' n=8 3  ISame  4  50  28  88  32  j Decrease  2  25  0  0  2  I Increase  2  25  3  9  5  13  |  5  ISame  6  75  29  91  35  88  I Decrease  0  0  0  0  0  0  28  However, there was a negative attitude regarding increased sales to the U S within the North American group of mills due to the U S quota. More than 80% of the respondent mills indicated that they expected a decrease in shipments to the U S in next three years. Only 16% expected to export at the current level, and just 5% expected increasing exports to the U S market. However, 63% of mills in this group expected increased sales in the Canadian market which was regarded as a way to offset the decreasing sales in the U S market. Quota restrictions obviously had a major impact on decisions regarding future market development among sawmills currently focused on the North American market.  Overall, Western Canadian lumber manufacturers will focus on the Japanese market in the next three years. There were 73% of responding mills interested in increasing sales in the Japanese market, with the remaining  27% expecting to remain at current levels. Not a single mill  indicated an expected decline in exports to the Japanese market.  Future strategies for the Japanese market were different between the two groups. Mills focusing on the North American market showed more interest in increasing shipments to Japan in the next three years than those already focused on Japan. This could be explained by two reasons. First, due to export restrictions to the U S A , mills that mainly shipped lumber there in previous years have to find alternative markets for their products. Second, the large consumption of wood products in Japan attracted Canadian lumber manufacturers to switch to this market. A s a result, several issues regarding to the Japanese market have to be considered. First, how large will the Japanese market become; that is, how much more lumber and/or other wood products can the Japanese absorb? Second, how much market share can Western Canadian sawmills capture given  29  competition from other exporting regions? Third, what kinds o f products do the Japanese prefer and what technology should be adopted to produce the right products for this market?  Japan is the biggest net importing country o f wood products (calculated based on VHI-7&8, Selected Forestry  Statistics  Canada, 1996). Because  o f this, all wood products-exporting  countries have targeted Japan. However, Japan is a small country. There is a question concerning what the maximum consumption o f the Japanese is, and how much market share Canadian lumber producers can capture. Although Canada has a long history o f exporting lumber to Japan, exports from B C to Japan have accounted for less than 20% of total annual export volume for each of the last ten years (British Columbia Forest Industry Statistical Table - April 1996 by COFI).  This may be due to the geographical distance,  cultural differences, and limits to the  quality o f timber supply. How to help Canadian sawmills understand and develop the Japanese market is a continuous challenge for marketing researchers.  5.1.1.3 Products Surveyed mills provided information regarding the types  of products they produced as well as  the proportion of each product shipped in 1995. There were eight products listed in the questionnaires (see Table 5.1.5). Dimension Lumber was the most important product, accounting for approximately 53% of total production. The other products, ordered by production volume, were: Specialty Metric Sizes (14%), Studs (9%), M S R (6.5%), and Clears (5.6%). It is interesting to note that Specialty Metric Sizes was the second major product group by volume for Western Canadian sawmills (Table 5.1.5). This fact might indicate an increasing trend towards  30  offshore exports  since the Specialty Metric Sizes is a major product demanded by overseas  markets.  Table 5.1.5 - Products Volume Shipped to Different Markets (MMBF) Dimension  Overseas n=9 152.8  %ofOS 10.9  North A. n=38 3,485.7  % of NA 64.1  Studs  23.1  1.6  605.7  11.1  Boards  63.6  4.5  209.8  0  0  445.2  0  0  67.6  MSR Siding Timbers  Total Mills n=47 3,638.5  % of Total 53.1  628.8  9.2  3.9  273.4  4.0  8.2  445.2  6.5  1.2  67.6  1.0 0.9  23.4  1.7  35.3  0.7  58.6  Clears  256.4  18.2  123.7  2.3  380.1  5.6  Metric Size  880.9  62.7  106.8  2.0  987.7  14.4  5.4  0.4  31.7  0.6  37.1  0.5  0  0  329.3  6.1  329.3  4.8  Fingerjointed Others  I  The average proportion for each product category were quite different between the overseas group and the North American group. Specialty Metric Sizes, with 63% of production volume, was ranked first by the overseas group, Clears with 18% was second, and Dimension Lumber with 11% was third. The North American group ranked Dimension Lumber first with 64%  of  production volume, followed by the Studs with 11%, and then M S R with 8%. The different production volumes in each group represented the different needs of overseas and North American markets. Specialty Metric Sizes was the most preferred product for overseas markets, particularly in Japan and other Asian countries, while Dimension Lumber, as a traditional construction product, dominated the North American market.  Approximately 48% of overseas shipments and 83% of North American shipments were kiln dried. Approximately 75% of overseas shipments and 95% of North American shipments were planed (Table 5.1.6). It seems as though the North American market preferred more finished products compared to the overseas market. Usually, products shipped to the overseas market are  31  a larger dimension and are more difficult to dry. Higher moisture content timber harvested from coastal areas could be another reason for less production of kiln dried products in the overseas group in which majority were coastal B C mills. Drying this lumber is not only more difficult, but also very expensive.  Table 5.1.6 - Kiln Dried and Planed Lumber Shipments in Different Groups NA Group n=39  Overseas Group n=9  Kiln Dried  Planed  to NA market  Volume (MMBF) 87.4  % 38  Volume (MMBF) 4,088.3  %  Total Mills n=48 %  86  Volume (MMBF) 4,175.7 4175.7  42  84  to O S market  207.2  18  536.6  89  to NA market  143.4  62  4,577.3  96  8,351.4  95  96  12527.0  72  581.3  to O S market  706.0  60  Total Shipments to NA market  229.7  4,750.7  20,878.4  to O S market  1,176.3  605.3  167.0  With the development of new technology for wood drying and shipping and wrapping, as well as the acceptance of standard of North American products by major importing countries, dried and planed lumber is becoming preferred by some overseas markets.  Mills with a predominant overseas focus shipped a small proportion of kiln dried lumber to both overseas and North American markets in 1995, at 18% and 38%, respectively. The proportion of kiln dried lumber shipped by the North American group was much higher with the proportion shipped overseas at 88% which  was even higher than the 86% shipped to North American  markets. The proportion of planed lumber shipped by the overseas group to both overseas and North American markets was about 60%. This was  much less than the proportion of planed  lumber shipped by the North American group which was about 96% to both markets. The reason may be the lack of drying and planing facilities for coastal mills who were used to shipping green lumber overseas.  32  5.1.1.4 Species Species used in Western Canadian sawmills (see Appendix I for scientific names) were mainly lodgepole pine, spruce, hemlock, true fir, Douglas-fir, and cedar (see Table 5.1.7 for proportion of each species). Geographic location was the main reason for mills to select species. In B C coastal areas, the dominant species used in sawmills were hemlock, cedar, and Douglas-fir while in the B C Interior and Alberta, the majority species were lodgepole pine, spruce, and true fir (see details in Table 5.1.7).  Table 5.1.7- Species  true fir  Total Mills n=48  OS Group n=9  NA Group n =39  90.0  I % of OS Iproduction 6.4  l% of Species Volume ;% of NA iproduction jTotal 2,299.8 96.1 40.6  0  0  Volume lodgepole pine  Distribution i % of Species Volume jTotal 2,209.8 3.9 0  I % of Total 68.5  654.4  12.0  100.0  654.4  9.6  97.0  1,659.9  24.2  60.3  569.4  8.3  49.2  3.5  3.0  1,610.7  29.6  D-fir  226.3  16.1  39.7  343.1  6.3  hemlock  .759.9  54.1  81.7  170.3  3.1  18.3  930.2  13.6  9.0  0.6  2.1  417.3  7.7  97.9  426.3  6.2  0  0  0  24.6  0.5  100.0  24.6  0.4  271.6  19.3  96.2  10.9  0.2  3.9  282.5  4.1  spruce  cedar larch others  •  •  Differences in preferred species between the two groups were a result of the mills' geographical location. Because the majority of mills in the overseas group were from the B C coast area, the typical species in this group were the western coastal species (e.g. hemlock and Douglas-fir). Since most mills in the North American group were  from the B C interior and Alberta, the  species in this group represented the western interior species (e.g. lodgepole pine and spruce). Timber size and timber quality may be two of the reasons that there were more mills from coastal B C mills focusing on overseas markets than those from interior B C and Alberta.  33  5.1.1.5 Distribution Channels There were four types o f distribution channels listed in the questionnaire: Office Wholesaler (takes no ownership but arranges for lumber to be shipped from mill to customer without acquiring lumber), Agent or Distributor (takes ownership o f lumber and redistributes to customers often grouping different mills lumber together, break bulk and regroup), Direct sales to industrial users or retailers, and Other Channels as  specified by the respondents.  Results  indicated that the distribution channel most used was the Wholesaler. Both the overseas group and the North American group had more than 35% o f their sales through this kind of selling mechanism. The Agent or Distributor was the second most important selling channel for the overseas group and accounted for 27% o f total shipments in 1995 while it was the third most important distribution channel for the North American group (about 20% o f production). Mills focusing on the North American market ranked Direct Sales as the second important distribution channel responsible for 25% o f their shipments, but mills in the overseas group shipped only 12% of production through this channel (see Table 5.1.8).  Table 5.1.8 - Distribution Total Shipment (MMBF)  Channels by Groups  Office Wholesaler (takes no ownership)  Agent/Distributor (takes ownership)  Direct Sale Industry or Retailers  Others  Shipments ;% of Group Shipments;% of Group Shipments i % of Group Shipments ;% of Group j Production [Production ; Production i Production OS Group  1,406  498  j  35.5  376  j  26.7  167  I  11.9  364  j  25.9  NA Group n=33 Total Mills n=42  4,481  1,935  !  35.6  1,067  ;  19.6  1,333  i  24.5  146  j  2.7  5,887  2,433  j  41.3  1,443  I  24.5  1,500  j  25.5  510  !  8.7  Volume  shipped through  Other  Distribution Channels,  mainly  specified  as customer's  distributors and Japanese distributors, was much higher in the overseas group (26%) than in the North American group (3%). Shipping products to overseas markets is more complex than selling in North America because o f the different culture and formalized distribution systems. 34  Mills in the overseas group had to deal with more diversified distribution channels, including the channels in the importing country. Therefore, customer's distributors and overseas selling agents are becoming more popular channels for the overseas group to distribute their products to offshore markets.  5.1.2  QUALITY CONTROL(QC) ACTIVITIES  There has been much interest in Q C activities in the sawmill industry in recent years because of two factors: higher expectations of product and service quality in the market and more expensive raw material requiring more efficient manufacturing. Q C activities are discussed under five topics: Factors Impacted by Q C Activities, Important Work Centers for Q C Activities, Q C Staff Training, Lumber Grading, and Size Control.  5.1.2.1 Factors Impacted by Q C Activities Respondents ranked the three most important factors that could be modified by Q C activities (see figure 5.1.1). Ranked orders were converted to Evaluation Points (EP) that gave the first ranking 3 points, the second one 2 points and the third rank 1 point. A l l points were summed for each factor to create a relative numeric rating (EP) with the higher numbers being the more important factors in terms of Q C results.  Among all 48 responding mills, Value Recovery was ranked as the most  important factor with  an average E P of 2.01. Volume Recovery was second with an average E P o f 1.49, followed by Dimension Uniformity with average E P of 1.11 (Figure 5.1.1). Rankings were fairly consistent between the two different marketing groups, even though the average E P for Value Recovery  35  from the overseas group (2.24) was higher than that from the North American group (1.90) and the average E P for Volume Recovery and Dimension Uniformity from the North American group were higher than for the overseas group. These differences indicated that the Value Recovery was more important to the overseas group whereas Volume Recovery and Dimension Uniformity were more important to the North American group.  Figure 5.1 - Factors Impacted by QC  Activities  (^overseas • North America Dtotal mills  The higher rank for Value Recovery by the overseas market group might result from the use o f more expensive, large size, first growth timber commonly used in mills with an overseas marketing focus. Therefore, increasing Value Recovery from the costly logs through various Q C activities seems more important to these mills. The higher rank of Volume Recovery and Dimension Uniformity by the North American market group could be caused by the large volume of commodity dimension lumber manufactured by this group o f mills. Thus, they would put more emphasis on these factors to maximize profit to the companies.  36  5.1.2.2 Important Work Centers for QC Activities From .the rough logs coming into the production line to the finished dried lumber shipped out of the mill, there are usually six steps or work centers for processing: bucking, primary breakdown, secondary breakdown, edging, trimming, planing, and drying. A l l six steps are not necessarily followed in each mill. Respondents were asked to rank the relative importance of each of the six work centers, in terms of Q C activities, for lumber processing. Results indicated that Primary Breakdown was the most important work center with an average E P o f 2.13. The second most important  was Stem Bucking with E P of 1.62, and followed by Edging (0.82), Drying (0.79),  Planing (0.34), and Trimming (0.29) (Figure 5.1.2). relative  to Trimming indicated that moisture  The higher E P for Drying and Planing  uniformity and surface finishing was more  important than uniformity o f the timber length, or that trimming was always exact and therefore there was little need for control.  i-  Figure 5.2 - Important Work Centers for QC Activities  at  1 in  <0 CM  r g  8  » o  o  1  1  :JT1  5  ° HP  g o  _ i  '  •  I  •  & c .£ to 2 -c u £1  [•overseas UNorth America Dtotal mills j  Ranking for work centers between the two market groups was slightly different.  Primary  Breakdown and Stem Bucking were still the most important work centers with an average E P of 2.36 and 1.91 for the overseas group and an average E P of 2.03 and 1.51 for the North American group. The third important work center  for the overseas group was Edging (EP o f 1.02),  followed by Drying and Planing with EPs o f 0.47 and 0.24. Trimming was ranked last with an E P  37  of zero. However, in the North American group, Drying was ranked third with and E P of 0.85, followed by Edging with E P of 0.76 and then Planing and Trimming with E P ' s of 0.36 and 0.35.  It is understandable that drying and planing were thought less important by the overseas group because of the small portion of dried and planed lumber they produced. Trimming was ranked as having "no importance at a l l " by the overseas group, mainly because of the special lumber lengths required by the Japanese market (three or four meters). Therefore,  mills that mainly  focus on the Japanese market had no need to put much Q C efforts on Trimming.  Higher rankings for Drying and Edging than Planing and Trimming in the North American group reflected the quality demanded in the North American market. Drying quality has a direct impact on moisture uniformity of lumber, and drying defects could dramatically lower the lumber grade. Edging has the function of  controlling the lumber sizes which may be changed  frequently  depending on market prices.  5.1.2.3 L u m b e r G r a d i n g Lumber grading sometimes was misunderstood by respondents as Q C . Actually, lumber grading is only a process of classifying lumber into product groups. However, lumber grading is important to quality control as it functions as the final check of lumber quality and classifies the lumber according to generally accepted grades. Only one question regarding lumber grading was asked in the questionnaire and that was how many employees worked over 50% of their time in lumber grading. The results may represent the importance of lumber grading in the responding mills to some degree, but it should not be the only criteria to evaluate the mills' emphasis on lumber grading. Some mills required all on-site employees to have a Lumber Grading Ticket, and  38  they believed that knowledge of grading lumber helped the operators to produce higher quality and higher value products.  The number o f employees in lumber grading were separated into salaried and hourly employees (Table 5.1.9). The results showed that there were more lumber graders (both in numbers and in proportion) in mills with an overseas market focus than mills with a North American market focus. The reason may be due to the higher product quality demanded by overseas customers, but also the more sophisticated lumber grading criteria required for overseas markets, such as J A S (Japanese Agriculture Standard).  The large variety o f products sizes and grades for overseas  markets may also contribute to the higher number o f graders and Q C personnel at mills with an offshore focus.  Table 5.1.9 - Employees spent more than 50% of their time on Lumber Grading average hourly employees salary employees total  21.0  %of employee 7.6  Total Mills n=48  North America n =39  Overseas n=9 MMBF/ grader 7.4  average 11.6  %of employee 6.2  MMBF/ grader 12.0  13.4  %of employee 6.5  average  MMBF/ grader 10.7  1.3  0.5  120.2  0.5  0.3  279.0  0.7  0.3  203.9  22.3  8.0  7.0  12.1  6.4  11.5  14.0  6.8  10.2  5.1.2.4 Size C o n t r o l A size control program is a system used to measure, record, evaluate, and control lumber size at each step of manufacturing (Williamston, 1985).  There were 98% of respondent mills using a size control program in their daily production. The measuring devices used for size control were  electronic calipers, mechanical calipers, and tape  measures. Electronic calipers were the most popular measuring device for both the overseas and  39  the North American group (Table 5.1.10). The second most popular measuring device was the tape measure, followed by mechanical calipers. O n one hand, the higher application of electronic calipers indicated more advanced technology involved in the sawmilling industry. O n the other hand,  the substantial use o f tape measures  showed that traditional methods were augmenting  more modern, technologically sophisticated techniques In fact, 93% of mills using tape measures also used electronic calipers.  Table 5.1.10- Devices for Size Control No. of mills  Total Mills n=48  North America n=39  overseas n=9 % of OS  No. of mills  % of NA  No. of mills  % of total  47  98  use size control  9  100  38  97  electronic calipers  8  89  34  89  42  88  mechanical calipers  4  44  16  42  20  42  30  63  3  6  tape measure  5  56  25  66  other  1  11  2  5  Computer programs have shown a very powerful capability in size control because o f their accuracy, speed, and capability of using statistic to analyze large amounts o f size data.  Forty-two of the 48 surveyed mills had installed software to perform the function o f size control (89% of mills in each market group). There were 35 mills that indicated the name of the software they were using in size control (Table 5.1.11). They were: L-Size with 50%, and S I C A M with 24%, Newness and Lusi (named as others in Table 5.1.11), with 5% o f each. When asked the reason for using the software, 50% of mills in the overseas group specified the 'Power of Program' and 50% indicated the 'Ease o f Use'. In the North American group, 71% of mills chose the software because of ease o f use, and 50% because of the availability. Some mills stated more than one reason.  40  Table 5.1.11 - Software for Size Data Analysis overseas n=9  No. of mills  8  89.0  34  5  62.5  5  12.5  20  25.0  9  26.5  No. of mills use software SICAM L-Size  1  Other  2  j  j  Total Mills n=47  North America n=37  %ofOS  j  % of total  % of NA  No. of mills  92.0  42  89.4  14.7  10  21.3  58.8  21  44.7  10  21.3  j  Results indicated that ease of use was the most important reason for mills to chose software for size control (Table 5.1.12). However, mills with an overseas market focus placed more emphasis on the power of the program and mills with a North American market orientation emphasized availability. B C coastal mills were more likely to use S I C A M , while L-Size was more popular in the B C interior and Alberta.  Table 5.1.12 - Reasons of Using Software overseas n=8  North America n=34 j  Total Mills n=42 No. of mills j  % of total  No. of mills  j  % of O S  No. of mills  power of program  2  \  25.0  12  35.3  14  33.3  ease of use  3  37.5  24  70.6  27  64.3  cost  2  25.0  10  29.4  12  28.6  availability  3  37.5  17  50.0  20  47.6  bundled with equipment  1  12.5  1  2.9  2  4.8  35.3  15  35.7  other  5.1.3  3  j ;  37.5  12  % of NA  PRODUCTION TECHNOLOGY AND FACILITIES  With more computer technology being used in lumber manufacturing, the overall technology in Western Canadian sawmills is at a higher level than ever before. More automatic equipment and optimization software have been installed in production lines. Technology innovation may be initiated by either market requirements or raw material limits. In this section, five topics are discussed regarding technology innovation in Western Canadian sawmills: facility upgrading, age of processing equipment, automation and optimization of production lines, value added facilities, 41  and  technology  information. This section will provide information needed to analyze  the  relationship between technology and markets.  5.1.3.1 Facility U p g r a d i n g The survey results showed that about 96% of the surveyed mills had updated their facilities in the last five years. A l l of the mills in the overseas group had upgraded their facilities while 95% in the North American group had upgraded theirs.  Table 5.1.13 shows that the reasons for updating the operation lines were mainly: 'to increase fiber recovery' and 'to improve quality'. In the overseas group, 100% of mills specified  'to  increase fiber recovery' as one of the reasons for upgrading, and 89% of mills indicated 'to improve quality, to control/reduce the cost, and to change and add new products' as the other three major reasons. In North American group, 89% indicated that 'to increase fiber recovery' was the major reason,  73%  chose 'to improve the quality' and 62%  stated 'to  production'.  Table 5.1.13 - Facility Upgrading North America n=39  overseas n=9 No. of mills |  % of OS  No. of mills ;  upgraded  9  100  37  change raw material  5  56  14  % of NA  Total Mills n=48 No. of mills j  % of total  46  96  38  19  41  29  63 91  95  to increase production  6  67  23  62  to increase fiber recovery  9  100  33  89  42  to improve quality  8  89  27  73  35 27  59  I  76  to control/reduce cost  8  89  19  51  to change/add new products  8  89  8  22  16  35  other  2  22  5  14  7  15  42  increase  It was clear that 'to increase fiber recovery' was more important for the overseas group than for the North American group, while 'to increase production' was emphasized more by the North American group than by the overseas group.  These results support the idea that the overseas  group is focusing more on value recovery to offset the higher cost o f good quality logs, and the North American group is focusing more on volume recovery to maximize their profit margin in producing a commodity product. Since the products required by overseas market were diversified and customized, mills in the overseas group seem to frequently update their production lines to satisfy their market needs.  5.1.3.2 Age of E q u i p m e n t The age o f equipment can represent a mill's technology level to a certain degree. Increasing production can require new machine installations. Expanding product variety or changing products is another reason for purchasing new equipment. Therefore, mills with newer machines were more likely to utilize higher levels o f process technology.  Generally speaking, mills in the overseas group have younger machines than ones in the North American group. Since the machines used in all the surveyed mills were quite different, the average machine ages of each work center was used to compare the two group o f mills. There were five work centers (Stem Bucking, Primary Breakdown, Edging, Trimming, and Drying) with 18 types o f machines listed in the questionnaire, and one "other" option in each working center. The average ages in the Stem Bucking center were similar for both groups (Table 5.1.14). Machines in Primary Breakdown used by the overseas group were much newer (average age of 6.5 years) than those used by North American mills (10.6 years). Edging was the only center where the machines in the overseas group were older (9.8 years) than the ones in the North 43  American group (8.9 years), and the difference was small. Trimmers and Drying facilities were newer in the mills with overseas focus compared to the North American group.  Table 5.1.14 -Age of Equipment (average age of all machines in each working center) stem bucking  primary breakdown  edging  trimming  drying  overseas n=9  10.27  6.50  9.83  4.11  6.00  NA n=39  10.45  10.59  8.94  9.20  14.42  total mills n=48  10.42  9.96  9.13  8.77  13.22  The reasons for mills in the overseas group using newer machines in processing may be due to changing products, as well as the higher quality requirement from overseas customers. Newer processing equipment in Primary Breakdown in the overseas group indicated the importance o f this process center. Special requirements on lumber length by overseas markets required mills focused on these markets to adapt their trimmers. Newer kilns in these mills indicated the intention of increasing production volume of dried lumber.  5.1.3.3 Automation and Optimization Mills were asked to specify whether they used optimization (referring to as computerized control in drying hereafter) or manual operation on the five processing work centers. Primary Breakdown was the most highly optimized work center in both the overseas group (89%) and the North American group (85%). Edging was second, followed by Drying, for both groups. Optimized Trimmers were  installed more frequently in the North American group (71%) than in the  overseas group (33%), while optimized Bucking was the opposite, with higher utilization in the overseas group (56%) than in the North American group (44%) (Table 5.1.15).  44  TheTower volume of kiln dried products from the overseas group resulted in less optimization in drying. Less variety of product lengths, stated in Important Work Centers for Q C Activities, reduced the number of mills using an optimized Trimmer in production lines in the overseas group. Again, more expensive logs pushed mills in the overseas group to use an optimized Bucking centers to maximize fiber recovery.  Table 5.1.15 - Operation of Machine Centers North America n=39  overseas n=9 No. of mills* j bucking  primary breakdown  edging  trimming  drying**  jmanual  No. of mills* ;  % of NA  Total Mills n=48 No. of mills* I  % of total  44.4  29  74.4  33  69  43.6  22  46  [optimization  5  55.6  17  jmanual  2  22.2  14  35.9  16  33  [optimization  8  88.9  33  84.6  41  85  jmanual  4  44.4  12  30.8  16  33  joptimization  6  66.7  33  84.6  39  81  jmanual  6  66.7  12  30.8  18  38  joptimization  3  33.3  28  71.8  31  65  jmanual  2  40.0  9  25.0  11  27 78  !  3  60.0  29  80.6  32  jmanual  18  41.9  76  35.2  94  36.3  joptimization  25  58.1  140  64.8  165  63.7  joptimization total machine center  4  % of OS  jtotal machine  216  43  259  * manual and optimization may exceed # of mills since some mills using both manual and optimization in production ** only 5 mills in overseas group and 36 mills in NA group had drying facilities  Generally, higher utilization of optimization on production lines in the North American group helped these mills to increase productivity and volume recovery targeting the North American market by providing large volumes of residential construction lumber. The lower rate of optimized processing lines in the overseas group resulted from more specialty products being required by the customers and more sophisticated criteria used in offshore markets. Here, one clarification should be raised that shows the difference between appropriate technology and advanced technology. Appropriate technology is the technology which is the most suitable given the raw material supply, the market requirements, and the general skills of the work force. 45  Advanced technology could be defined as a technology which is more sophisticated and complex. In this case, the lower use o f advanced technology in the overseas group did not mean that they produced lower quality products. O n the contrary,  providing higher quality products  was the main reason for the mills to use more appropriate technology to satisfy the needs of the customer and maximize their profit.  5.1.3.4 Facilities for V a l u e A d d e d Products In sawmilling, the primary value adding processes are kiln drying and planing. The proportions of planed lumber and kiln dried lumber in the surveyed mills were 92% and 71% in 1995 (Table 5.1.16). In the overseas group, these numbers were 71% and 32%, and in the North American group they were 93% and 84%. A s a consequence o f different market demands, the overseas group again, showed a lower proportion o f kiln dried and planed products than the North American group.  Table 5.1.16 - Volume of Lumber Planed and Kiln Dried North America n=39  overseas n=9  Total Mills n=48  MMBF  %ofOS  MMBF  % of NA  MMBF  % of total  Lumber planed  993.7  71  5,085.8  93  6,079.5  92  Lumber kiln dried  321.0  32  4,555.7  84  4,876.8  74  The same results were found regarding the use of kilns and planers. Eight-nine percent of mills in the overseas group used planers and 56% used kilns. In the North American group, 100% of the mills used planers and kilns (Table 5.1.17). Average kiln capacity in the overseas group was smaller than for the North American group, with 516,000  board feet per kiln  charge  (MBF/Charge) versus 688 MBF/Charge in second group as shown in Table 5.1.18. The average number of kilns was 5.4 per mill in the overseas group while it was only 3.5 kilns per mill in the  46  North American group. The small kiln capacity in the overseas group may be due to the reason mentioned above that mills focused on the overseas market produced less volume of kiln dried lumber than mills serving the North American market. The large number of kilns possessed by the overseas group could be a sign that the mills in this group were catching up with the increased demand for dried products in overseas markets by gradually installing more drying facilities. The newer kiln age in the overseas group supports this explanation. Larger product size produced in the overseas group also requires much longer in drying process. Therefore, mills in the overseas group need more capacity (more kilns) for the same level of production.  Table 5.1.17 - Facilities for Value Added Products North America n=39  overseas n=9 No. of mills  % of OS  No. of mills j  Total Mills n=48  % of NA  No. of mills  % of total  Planer  8  89  39  100  47  98  Chipper  9  100  39  100  48  100  Kiln  5  56  36  92  41  85  Table 5.1.18- Kiln Capacity # of kilns  capacity (MBF)/charge total overseas group n=5  average  total  total capacity average  average  2,580  516.0  27.0  5.4  2,786  N. A group n=35  24,103  688.7  127.5  3.5  2,438  total mills n=40  26,683  667.1  154.5  3.9  2,575  Another product made by sawmills are chips which, as a side-product, can contribute to profits when the pulp prices are high. There was no difference between the overseas group and the North American group on the questions concerning chippers used in the mills. Both groups showed 100% chip utilization.  47  5.1.3.5 Technology Information Needed by the Sawmills Respondents ranked five choices regarding the most valuable technology information for their production sites (see Table 5.1.19).  Benchmarking for Primary Processing was ranked first by both groups, although the E P of 2.11 in the overseas group was higher than E P o f 1.64 in the North American group (Table 5.1.19). The second most valuable type o f technology information for the overseas group was General Technology Information which was ranked  third by the North American group.  The second  most important type in the North American group was Information on Specific Machine Centers, ranked third by the overseas group. Benchmarking for Secondary Processing was ranked fourth by both groups, with Logistics and Material Handling ranking fifth. The closeness o f the E P ' s indicates relatively similar importance for the first three types of information.  Table 5.1.19 - Technological Information Needed by Sawmills (EP) overseas n=9 general technology information benchmark for primary processing benchmark for secondary processing logistics and material handling information on specific machine centers  North America n=39  Total Mills n=48 total E P  Ave. E P  total E P  Ave. E P  total E P  Ave. E P  13  1.44  53.0  1.36  66.0  1.38  19  2.11  64.0  1.64  83.0  1.73  9  1.00  41.5  1.06  50.5  1.05  3  0.33  13.0  0.33  16.0  0.33  10  1.11  56.5  1.45  66.5  1.39  Because of the more expensive raw material supply to mills with overseas market focus, primary processing seems more important  to these mills than to mills in the other group. They were  trying to increase sales value by producing higher quality lumber from expensive logs. The higher ranking for General Technology Information trends by the overseas group may have resulted from more diverse competition in the overseas market, and more diversified products  48  manufactured by these mills. Competitors for the overseas group were mainly from other wood exporting countries. Therefore, the General Technology Information from all of the world may attract the attention of mills who were in the international market. They also needed more technology  information about the different products  technological trend on  in overseas market,  as well as  the  equipment to enhance their manufacturing process, to update the  production lines, to continuously improve both product quality and production levels, and to secure their competitive levels in overseas markets.  General Technology Information was not as important for the North American group as for the overseas group. Instead, mills were more interested in Information on Specific Machine Centers. This may be because the competition for North American markets was from other North American sawmills using similar technology.  5.2  D A T A ANALYSIS BASED O NGEOGRAPHICAL LOCATION  Analysis was also completed examining Western Canadian sawmills based on geographical location. The 48 surveyed sawmills were classified into three geographical groups: coastal B C (13 mills), interior B C (27), and Alberta (8). Analysis was consistent with the methods in the previous section.  5.2.1  M A R K E T AND PRODUCTS  This section includes three main topics: Production, Markets, Products and Species, Distribution Channels.  49  and  5.2.1.1 Production The average lumber production per mill for the 48 surveyed mills was 140 M M B F . Alberta mills had a higher average of 147 M M B F , while B C Coastal mills averaged 135 M M B F , and B C interior mills averaged  141 M M B F  per mill (see Table 5.2.1). These are only moderate  differences and may be caused by the sampling method in which only the mills with higher productions in 1994 (above 50 M M B F ) were selected for interviews.  Table 5.2.1 - Production and Employee Data for Respondent Mills in 1995 Sawmill Location  Total Production (MMBF)  Total Employees  A v g . Employees per Mill  1,751  Average Production (MMBF) 135  3,353  258  Interior B C n =27  3,709  141  4,563  169  Alberta Mill n = 8  1,179  147  1,557  195  Total n = 48  6,729  140  9,473  197  Coastal B C n =13  Total employment in the 48 surveyed mills was about 9,500 with an overall average o f approximately 200 employees in each mill: B C coastal mills employed more people (258 per mill) than mills in the other two regions (170 for B C interior and 197 for Alberta, see Table 5.2.1 and Figure 5.2.1 and 5.2.2). B C interior mills achieved a higher production per employee than in other regions: B C interior 0.83 MMBF/person/year, Alberta 0.75 MMBF/person/year, and B C Coast 0.52 MMBF/person/year.  Figure 5.3 - Total Production of Surveying Mills in 1995 (MMBF) Total Production (of survey mills) in 1995 (MMBF) Alberta Mill (8 Mills) 18%  Interior BC (27 Mills) 56%  50  Figure 5.4 - Number of Employees in Surveying Mills in 1995 Total Employees (of survey rrills) Alberta Mill (8 Mills) 16% /  Coastal BC (13 Mills) 35%  Interior BC (27 Mills) 48%  5.2.1.2 Markets Survey results indicated that B C coastal mills supplied more lumber to the Japanese market than mills in the other survey areas. In 1995, approximately 64% of respondents' Japanese shipments were from B C coastal mills. Mills in the B C interior and Alberta were more focused on the U S market, which accounted for 74% and 57% of their total shipments respectively. Table 5.2.2 provides detailed information regarding markets for each producing region.  The different market preferences were mainly due to different sources of raw material supply and geographical proximity to markets. O n the B C coast, logs supplied to sawmills are regarded as old growth with large diameters, high rings per cm and high quality grain and strength properties, which are much preferred by Japanese consumers. Alternately, timber received by mills in the B C interior and Alberta are mostly small diameter trees with lower quality (more knots) than B C coastal wood.  Species is another reason which contributes to market differences between B C coastal mills and interior mills. Natural characteristics of different species, such as cypress, may affect quality or  51  appearance of the products that cause market preference. From this perspective, market focus for the sawmilling industry is heavily impacted by raw material supply.  Table 5.2.2 - Markets of Volume Shipped in 1995  Canada USA  Coastal B C Mills n=13 MMBF % of group 207.5 11.2 471.7  25.2  2,742.8  73.9  82.1  4.4  26.4  0.7  Europe Japan  Alberta Mills n=8 MMBF j % of group 336.1 28.5 675.2  Total n=48 MMBF j % of group 1,090.7 16.1  57.3  3,889.7 108.5  1.6 22.8  j  57.5  988.4  52.9  395.5  10.7  157.1  13.3  1,541.0  60.6  3.2  1.2  0.0  10.7  0.9  72.5  1.1  0.9  0.0  !  19.5  0.3  j  40.3  0.6  Other A s i a Middle East  18.6  1.0  Others  40.3  2.2  Total Production  Interior B C Mills n=27 MMBF ; % of group 547.2 14.7  1,896.00  j  100.00  3,714.00  1,179.00  100.00  100.00  100.00  6,762.00  Table 5.2.3 - Markets Changes in Next Three Years  Canada  USA  Europe  Increase  Coastal B C Mills n=12 # of mills j %0f 5 42  Interior B C Mills n=20 # of mills I %of 14 70  Alberta Mills n=8 %of # of mills I 4 50  Total Mills (n=40) # of mills % of 57 23  same  6  50  5  25  3  38  14  35  decrease  1  8  1  5  1  12  3  8  Increase  2  17  0  0  2  25  4  10  same  5  42  2  10  1  decrease  5  42  18  90  5  Increase  3  25  3  85  0  j  13  8  20  62  28  70  0  6  15 82  67  17  15  8  100  33  8  0  0  0  0  1  4  33  17  85  8  100  29  72  same  8  67  3  15  0  0  11  28  decrease  0  0  0  0  0  0  0  0  Other  Increase  6  50  0  0  2  25  8  20  Asia  same  6  50  20  100  6  75  32  80  decrease  0  0  0  0  0  0  0  0  Increase  0  0  2  10  0  0  2  5  100  38  95  0  0  0  Japan  Middle East  Others  same  8  decrease  1  Increase  same  ;  j  j  12  100  18  90  8  decrease  0  0  0  0  0  Increase  3  25  0  0  0  (Australia  same  9  N. Z.)  decrease  0  j  75  20  0  0  j  52  100  8  0  0  j  j  i  3  0  3  8  100  37  92  0  0  0  Expected market changes were previously discussed in section 5.1.1.2. Ninety percent of B C interior mills expected that shipments to the U S market would decrease (Table 5.2.3) mainly due to the Canadian-US Lumber Export Quota. Japan seems to be the most popular target market for the B C interior and Alberta in the next three years. Table 5.2.3 shows that 85% o f B C interior respondents and 100% o f Alberta respondents expected that their Japanese sales will increase. The Canadian domestic market is also expected to grow in importance for Western Canadian sawmills to offset the market impacts of the U S quota. Seventy percent o f B C interior mills and 50%) o f Alberta mills indicated a potential increase in sales in the Canadian market in next three years. Since the B C coastal mills mainly focused on overseas market, there was no such impact on their marketing strategies (Table 5.2.3).  5.2.1.3 Products and Species Overall, the major product produced by western Canadian sawmills in 1995 was Dimension Lumber (see discussion in part I - Markets). Special Metric Size was the most important product for coastal B C mills and was responsible for 45% of their production. The second largest volume produced by coastal B C mills was Dimension Lumber which represented 23% o f production. Clears accounted for 19% of production (see Table 5.2.4).  Dimension Lumber was the dominant product for both B C interior (63% o f production) and Alberta mills (69%), because their major customer  was the U S construction industry. Other  products manufactured by B C interior mills in order of importance were: Studs (13%), M S R (9%), and Boards (4%). Major products, other than Dimension Lumber for Alberta mills were: M S R (10%), Special Metric Size (9%), Studs (8%) and Boards (3%) (Table 5.2.4).  53  Table 5.2.4 - Products and Volume Proportion  dimension lumber  Coastal BC Mills n=13 MMBF %of 436 23.3  Interior BC Mills n=27 MMBF % 0 f 2,461 62.8  Total Mills n=48 MMBF %of 3,715 53.1  Alberta Mills n=8 %of MMBF 69.4 818  studs  23  1.2  511  13.5  94  8.0  629  9.2  boards  84  4.5  154  4.1  36  3.0  273  4.0  -  -  332  8.7  113  9.6  445  6.5  siding  68  3.6  -  -  -  -  68  1.0  timber  45  2.4  6  0.2  7  0.6  59  0.9  clears  345  18.5  33  0.9  2  0.2  380  5.6  special metric  827  44.3  52  1.4  9  9.2  988  14.4  11  0.6  15  0.7  -  -  25  0.5  MSR  fingerjoined others total production  30  1.6  135  8.0  -  -  164  4.8  1,869  100.0  3,799  100.0  1,179  100.0  6,847  100.0  The proportion of kiln dried and planed lumber shipped to both North America and overseas markets from coastal B C mills was lower than from B C interior and Alberta mills (Table 5.2.5). Only about 13% of overseas shipments and 16% of North American shipments were kiln dried from B C coastal mills. A l l lumber shipped from the B C interior and Alberta to overseas markets was kiln dried. Information on markets and products for all mills showed that the overseas markets received a lower portion o f kiln dried and planed lumber (48%  kiln dried and  planed) than the North American market (83% dried and 95% planed) in 1995.  Table 5.2.5 - Dried and Planed/Surfaced Lumber Proportion in NA and Overseas Kiln Dried Lumber Overseas Coastal BC  MMBF  NA  152.1  110.2  Planed/Surfaced Lumber NA  Overseas 740.0  506.4 74.7  n=6  %of  12.8  16.3  62.1  Interior B C  MMBF  640.0  2,941.6  639.7  n=27  %of  100.0  93.1  100.0  98.1  Alberta  MMBF  167.8  995.2  123.5  985.5  n=8  %of  100.0  98.4  73.6  97.5  Total  MMBF  959.4  4,047.0  1,503.3  4,591.9  83.5  75.2  94.7  n=41  % of  48.0  j  54  j  3,100.0  Total Production NA  Overseas  678  1,191  640  j  3,159  168  1.011  1,999  4,848  75%  Table 5.2.6 shows that the major species manufactured in coastal B C mills were hemlock (49%), western red cedar (22%), and Douglas-fir (12%); while in the B C interior, they were lodgepole pine (44%>), spruce (30), and true fir (16%); and Alberta mills only manufactured three species: lodgepole pine (54%), spruce (40%) and true fir (6%).  Table 5.2.6- Species  Distribution  Coastal BC Mills n=13 Production %of (MMBF) Lodgepole Pine Fir  Interior BC Mills n=27 Production %0f (MMBF) 1,664 43.8  Alberta Mills n=8 %of Production (MMBF) 636 53.9  Total Mills n=48 Production %of (MMBF) 33.6 2,300  587  15.5  68  5.7  654  9.6  49  2.6  1,1135  29.9  476  40.4  1,660  24.2  226  12.1  343  9.0  569  8.3  Hemlock  910  48.7  20  0.5  930  13.6  W. Red Cedar  412  22.0  14  0.4  426  6.2  25  0.7  25  0.4  Spruce D-Fir  Larch Hem-Fir  150  8.6  150  2.2  Cypress,  108  6.2  108  1.6  14  0.8  14  0.2  11  0.2  6,847  100.0  Yellow Cedar Ponderosa Pine / White Pine Total Total Species  1,869  100.0  7  11  0.3  3,799  100.0  8  1,179  100.0  3  11  Species manufactured in different areas are due to the natural distribution of the species. Interior B C and Alberta share a similar climate and geography, so that the species distributions are very similar. Species distribution in coastal B C is different from the other two areas.  5.2.1.4 Distribution Channels Results showed that the Office Wholesaler (see definition in chapter 5.1.1.4) was the most used distribution channel for B C sawmills. In coastal B C , Office Wholesalers distributed 37% of total production, and interior B C mills shipped 53% of their production through this type o f channel member (Table 5.2.7). However, Alberta mills used Direct Sales most frequently (47% of their shipments in 1995). A n Agent/distributor (see definition in chapter 5.1.1.4) was the second  55  preferred channel for coastal B C and Alberta, responsible for 27% o f B C coast shipments and 35% o f Alberta shipments. The second most important distribution channel for interior B C mills was Direct Sales, responsible for 26% of the total 1995 production.  Table 5.2.7 - Distribution  office wholesaler  Channels  Coastal BC Mills n=13 MMBF %of 605 32.4  Interior BC Mills n=23 MMBF %of 1,683 53.3  Alberta Mills n=6 MMBF %of 146 17.0  Total Mills n=48 MMBF %of 41.4 2,434  agent/distributor  504  27.0  639  20.2  300  35.0  1,443  24.5  direct to end user  280  15.0  816  25.8  403  46.9  1,5  26.2  others  480  25.7  20  0.6  10  1.1  510  8.7  1,714  100.0  3,159  100.0  859  100.0  5,732  100.0  total production  Some other channels also took distribution responsibility for sawmills, especially for the coastal B C mills. The percentage o f sales by other distribution channels, specified mainly as customers' distributors and stock distributors, was 26% in B C coastal mills. This may be due to the use o f large integrated Japanese trading houses which distribute much o f the special metric sizes in Japan.  The more diversified the markets  and products, the more complex and diverse  distribution channels are needed. This is especially true for the overseas market.  5.2.2 QUALITY C O N T R O L ACTIVITY 5.2.2.1 Factors Impacted by Q C Activities Quality control is of key concern to Western Canadian sawmills. For evaluating and analyzing the importance o f the Q C activities, eight factors were listed (see Table 5.2.8). Rank orders o f importance among the three geographical regions were quite different. Although all the mills in the three areas ranked Value Recovery as the most important factor, the different E P ' s indicated that the B C coastal mills focused much more on this factor than the mills in the other two areas  56  (Table 5.2.8). Volume Recovery was ranked as the second most important factor for both the B C interior and coastal mills, but the rating for the interior was  slightly higher than for the coast.  Dimension Uniformity was the second most important factor for Alberta mills, but it was ranked third for interior B C mills and fourth for coastal B C mills. The ranking of the Q C activities indicated that Value Recovery was the most important factor for coastal B C mills, while the interior B C mills treated Value Recovery and Volume Recovery at the same importance level, and Alberta mills emphasized both Value Recovery and Dimension Uniformity.  Table 5.2.8 - Importance of QC Activities (EP) Coastal BC n=13  Interior BC n=27  Alberta n=8  Total Mills n=48  Average E P 0.55  Average E P 1.15  Average E P 1.88  Average E P 1.11  0.08  0.11  0.25  0.13  Volume Recovery  1.55  1.76  0.50  1.49  Value Recovery  2.32  1.87  2.00  2.01  Productivity  0.71  0.65  0.38  0.62  Cost Reduction  0.55  0.15  0.75  0.36  Stable Process Flow  0.23  0.28  0.25  0.26  Safety  0.00  0.04  0.00  0.02  Dimension Uniformity Surface Finish  It is understandable that all the mills ranked Value Recovery as the most important factor because of continuously increasing log costs in the past few years. The different ranking on the Q C factors could be caused by different raw material supply, different marketing focus, varying technical level of equipment, education level of employees, or management philosophy. More expensive raw material supply and higher product requirements from overseas markets pushed B C coastal mills to focus more on Value Recovery. Large amounts of commodity lumber for the North America residential market required interior B C and Alberta mills to put more emphasis on Volume Recovery and Dimension Uniformity than coastal B C mills.  57  5.2.2.2 Important Work Centers for QC Activities A similar measuring technique was applied to evaluate the relative importance of manufacturing centers for Q C activities. Six work centers were presented in the questionnaire (see Table 5.2.9). Results showed that Primary Breakdown was the most important work center for mills in all three geographical areas (Table 5.2.9).  Stem Bucking/Slashing was ranked as the second most  important work center, and Edging/Resawing was in the third place overall, but this was largely due to its very high E P from the B C coastal mills (1.40). K i l n Drying filled the fourth position overall, but was ranked third by both the B C interior and Alberta mills.  Table 5.2.9- Importance of Work Center (EP) Coastal BC n=13 Average EP 1.40  Interior BC n=27 Average EP 1.67  Alberta n=7 Average EP 1.86  Total Mills n=47 Average EP 1.62  Primary breaking  2.55  1.93  2.14  2.13  Edging / Resawing  1.40  0.65  0.43  0.82  Trimming  0.15  0.35  0.29  0.29  Planing  0.25  0.35  0.50  0.34  Kiln drying  0.25  1.06  0.79  0.79  Stem bucking / slashing  Although all three area groups ranked Primary Breakdown first, the E P o f coastal B C mills was much higher than the other two groups. This may be because Primary Breakdown is the key process in producing the highest value recovery, particularly for the Japanese market which often pays a substantial premium for appearance characteristics such as grain direction. Areas which considered volume recovery as very important ranked Stem Bucking/Slashing as a key work center with higher EPs in the interior B C mills (1.67) and Alberta mills (1.86) than in coastal B C mills (1.40), and with a higher proportion of mills in the interior o f B C (48%) and Alberta (50%) ranking it first.  58  5.2.2.3 Lumber Grading The importance of lumber grading in sawmilling could be measured by the number of employees and their working times spent on lumber grading. Results showed that mills in coastal B C had more employees, both salaried and hourly, who spent  50% or more of their time on lumber  grading than mills in interior B C and Alberta (Table 5.2.10). Considering the total employee number in each area group, the percentage o f lumber graders employed by B C coastal mills was still higher than the numbers in B C interior and Alberta mills, in term of hourly employees. Alberta mills had the higher percentage of salaried employees in lumber grading, but this may be the result of the small number of mills surveyed in this area.  Table 5.2.10 - No. of Employees Spending 50% More Time in Lumber Grading # of Hourly  # of Salaried Total  Average  Total  %of  Average  %of Employees  Employees C o a s t a l B C n=13  13  1.63  0.39  283  35.38  8.44  Interior B C n=27  10  0.37  0.22  268  9.93  5.87  8  1.00  0.51  91  11.38  5.84  31  0.65  0.33  642  13.38  6.78  Alberta Mill n=8 Total n=48  5.2.2.4 Training Programs Ranking for the importance of training programs in sawmill operations was fairly consistent with the results shown in Table 5.2.11. Coastal B C mills ranked Lumber Grading as the most important training program for their operations with an E P of 1.91 which was much higher than Quality control (in second place) with an E P of 0.99. Alberta mills also gave Lumber Grading the highest E P with 1.57 while B C interior mills gave it an E P o f 0.78. Quality Control was ranked as the second most important training program for both coast and interior B C mills. Machine Maintenance was ranked second in Alberta mills, third in B C coastal mills, and fourth in B C interior mills.  59  Table 5.2.11 - Importance of Training Programs (EP) Coastal BC n=13 Average E P 0.57  Interior BC n=27 Average E P 0.72  Alberta n=7 Average E P 1.14  Total n=47 Average E P 0.74  machine operation  0.34  0.41  0.43  0.39  machine calibration  0.53  0.52  0.29  0.49  lumber grading  1.91  0.78  1.57  1.21  machine maintenance  quality control  0.99  1.04  0.43  0.93  size control  0.45  0.48  0.71  0.51  computer programming  0.07  0.00  0.00  0.02  computer skills in operation  0.31  0.20  0.13  0.22  communication  0.31  0.89  0.38  0.66  cross-training  0.31  0.48  0.50  0.45  Although the evaluation points and ranking places were different among the three area groups, the three categories mentioned above were the most important training programs for Western Canadian sawmills. There was one more program, Communication, which ranked second with an E P of 0.89 by interior B C mills, with five of those mills choosing it as the most important program. Communication could be understood in many different ways, such as:  internal  communication within the sawmilling operation, communication between mills within the same company, or communication between the sawmill and customers, suppliers, or distributors. Further study is needed to properly analyze the results of this question.  5.2.2.5 Size Control Size control can be used in the different work centers, along with the manufacturing process, to ensure that manufactured lumber attain its target sizes with a minimum amount of waste.  Results indicate that all of the respondent mills in the interior of B C and Alberta used size control as did 92% of the coastal B C mills (Table 5.2.12).  60  Table 5.2.12 - Measuring  Device for Size  Control other  mechanical calipers 5  tape measure 8  1  38  62  8  Coastal  # mills  12  electronic calipers 9  BC n=13  %of  92  69  Interior  # mills  27  25  11  15  1  56  4  size control  BC n-27  %of  Alberta  # mills  ioo  '  93  41  8  8  4  7  1  n=8  %of  100  100  50  88  13  Total  # mills  47  42  20  30  3  n=48  %of  98  88  42  63  6  Three devices were used to measure sizes: Electronic Calipers, Mechanical Calipers and Tape Measures. Electronic caliper, a technologically sophisticated measuring device, was the most popular method (88% of surveyed mills). This was followed by Tape Measures (63%) and then by Mechanical Calipers (42%). The numbers do not add up to 100% since most mills use more than one method of size control. Different measuring devices may be located at different machine centers or used to double check measurements for precision. Electronic Calipers were the major device used for size control in both Alberta mills (100%) and interior B C mills (88%), while they were used in only 69% of coastal mills.  Different software packages were  used to analyze size data. Eighty-eight percent of mills  indicated that they used one of four kinds o f software: S I C A M , L-size, Newness and Lusi (Table 5.2.13). Within these software packages, L-Size was widely used by B C interior mills (72%), and S I C A M was commonly used by coastal B C mills (70%). A l l four kinds were used in Alberta with the L-size having a higher proportion of 43%. Availability was the main reason for software selection (80% o f respondent mills). This explains the predominance o f one type o f software for each region: S I C A M in B C coast and L-Size in B C interior.  61  Table 5.2.13 - Software for Size Control  Use Software  Coastal BC Mills n=13 # of mills %of 10 77  Interior BC Mills n=27 # of mills %of 25 93  Alberta Mills n=8 # of mills %of 7 88.0  Total Mills n=48 %of # of mills 42 88.0  SICAM  7  70  2  8  1  14.3  10  23.8  L-Size  0  0  18  72  3  42.9  21  50.0  Newness  1  10  0  0  1  14.3  2  4.8  Lusi  0  0  0  0  2  28.6  2  4.8  Don't know  2  20  5  20  0  0  7  16.7  5.2.3  PRODUCTION T E C H N O L O G Y AND FACILITIES  5.2.3.1 Facility Upgrading The vast majority of the mills (96%)  have upgraded their facilities within last five years, with all  of the mills in B C completing upgrades.  Mills also indicated the reasons for upgrading (Table 5.2.14). Increasing fiber recovery was the number one reason in all regions. Improving quality was the second most important reason for facilities upgrading. B C coastal mills indicated that Reducing Costs was the third key reason (77%  of mills), while the B C interior and Alberta mills considered Increasing Production as the  third reason. This is logical given increasing log cost, especially to B C coastal mills.  Table 5.2.14 - Reasons for Upgrading Processing Facilities  raw material changing  Coastal BC Mills n=13 # of mills %of 7 54  Interior BC Mills n=27 # of mills %0f 9 . 33  Alberta Mills n=6 %of # of mills 50 3  Total Mills n=46 %of # of mills 41 19  increase production  8  62  15  56  6  100  29  63  increase fiber recovery  13  100  23  85  6  100  42  91  35  76  improve quality  11  85  18  67  6  100  control/reduce cost  10  77  14  52  3  50  27  59  change/add new products Others  9  69  5  19  2  33  16  35  2  15  3  11  2  33  7  15  62  5.2.3.2 Age of Equipment Table 5.2.15 shows that equipment used in both regions o f B C was older than that used in Alberta mills. In B C mills, the average age of equipment was of 11 years, while in Alberta it was six years. Trimmers were older in coastal B C mills (13.5 years), but kilns were newer than in interior B C mills. This could be due to increasing demand o f kiln dried products on overseas markets in recent years. Respondents of B C coastal mills indicated that they were going to install more kilns in the next few years to meet customers' requirements.  A l l machines in all work centers in Alberta mills were newer than the machines in B C (see Table 5.2.15) due to the recent expansion of processing facilities in Alberta.  Table 5.2.15 - Average Age of Each Working  Center  11.2  Alberta n=8 5.2  Total n=48 10.4  11.2  5.4  10.0  8.7  5.8  9.1  13.5  8.1  3.4  8.8  9.1  15.7  8.5  13.2  11.2  11.0  5.7  10.3  Coastal BC n=13 11.6  Interior BC n=27  Primary Breakdown  10.3  Edging  11.3  Trimming Drying Ave. of all machine center  Stem Bucking  5.2.3.3 Automation and Optimization One very important factor which could be used to evaluate technology levels in the sawmilling industry is the application of optimization systems.  63  These can be used in almost every work  center during lumber processing to maximize the lumber production to ensure higher volume and/or value recovery.  Questions were asked about whether the five work centers (bucking, primary breakdown, edging, trimming, and drying) were operated manually or using some form o f optimization (see Table 5.2.16). Overall, primary breakdown was the most highly optimized work center (85% o f mills), edging was second (81%), and drying was third (78%). Only 46% o f the mills used optimization systems at their bucking center (Table 5.2.16).  A m o n g the three areas, Alberta mills had the  highest utilization o f optimization in manufacturing, while B C coastal mills had the lowest levels.  Table 5.2.16 - How Machine  bucking  manual  Coastal BC Mills n=13 # of mills* | %of 9 69.2  Alberta Mills n=8 # of mills j %of 4 50.0  Total Mills n=48 # of mills ; %of 33 69  12  44.4  6  75.0  22  46  53.8  8  29.6  1  12.5  16  33  9  69.2  24  88.9  8  100  41  85  9  69.2  5  18.5  2  25.0  16  33  6  46.2  26  96.3  7  87.5  39  81  10  76.9  6  22.2  2  25.0  18  38  optimized  3  23.1  22  81.5  6  75.0  31  65  manual  4  66.7  6  22.2  1  12.5  11  27  4  primary  manual  7  breakdown  optimized  edging  manual optimized  drying**  Interior BC Mills n=27 # of mills | %of 74.1 20  30.8  optimized  trimming  Centers Operated  manual  i  j  2  33.3  22  81.5  8  100  32  78  total  manual  39  61.9  45  29.8  10  22.2  94  36.3  machine  optimized  24  38.1  106  70.2  35  77.8  165  63.7  centers  total  63  optimized  45  151  259  * # of manual and optimization may exceed # of mills since some mills using both manual and optimization in production ** only 6 coastal BC mills had drying facilities  The lower utilization o f optimization in B C coastal mills may be due to the complicated quality requirements  o f products  for the offshore  markets,  especially  in terms  o f appearance  characteristics such as, color and grain direction. While scanners and optimization are useful in  64  maximizing the amount of product produced from logs or lumbers based on their shapes and sizes, they can not yet deal with some appearance factors of wood such as color or grain direction.  5.2.3.4 Facilities for Value-added Products The primary value-added products in Western Canadian sawmills are planed and kiln dried lumber and chips for pulp production. Planers, kilns and chippers are the main facilities used to manufacture these value-added products. Survey results indicated that 100% o f surveyed mills used chippers in their mills, and 100% o f interior B C and Alberta mills used planers and kilns as well (Table 5.2.17). Only on the B C coast did some of the mills not have planers (8%) or dry kilns (54%).  Table 5.2.17 - Mills Using Planer, Chipper, and Kiln Use of Planer  Use of Kiln  Use of Chipper  Total  Percentage  Total  Percentage  Total  Percentage  Coastal BC n=13  12  92  13  100  6  46  Interior BC n=27  27  100  27  100  27  100 100 85  Alberta Mill n=8 Total n=48  8  100  8  100  8  47  98  48  100  41  Table 5.2.18 - Percent of Lumber Planed and Kiln Dried Lumber Kiln Dried  Lumber Planed Coastal BC n=13 Interior BC n=27 Alberta Mill n=8 Total n=48  Total production 1,398  % of production 87.3  Total production 197  % of production 12.3  3,625  95.4  3,435  90.4  1,058  89.7  1,147  97.3  6,080  92.4  4,690  71.3  Table 5.2.18 shows the proportion of lumber planed and kiln dried in the three regions. B C interior mills produced a higher proportion of planed lumber (95%) than the mills in Alberta  65  (87%) and on the B C coast (87%). Alberta mills manufactured a higher proportion o f kiln dried lumber in 1995 (97% o f total production) than either the B C interior (90%) or the B C coast (12%).  Among the mills with kilns (Table 5.2.19), those in the B C interior had an average kiln capacity of 716 MMBF/charge, while in B C coastal mills kilns were much smaller (455 MMBF/charge). However, the average number o f kilns in B C coastal mills (5.83) was higher than in interior B C mills (3.46) and Alberta mills (3.42). Those mills on the B C coast that did have kilns had a higher average capacity per mill (2.65 M M B F / m i l l ) than the B C interior (2.48 M M B F / m i l l ) or Alberta (2.25 M M B F / m i l l ) .  Table 5.2.19 -Kiln  Capacity Ave. # of Kilns  Ave. Capacity MMBF / per mill  35.0  5.83  2,653  716  93.5  3.46  2,477  4,610  659  24.0  3.42  2,254  26,683  667  153.0  3.83  2,554  Coastal BC (6)  Total Capacity MMBF / per charge 2,730  Ave. Capacity MMBF / per charge 455  Interior BC (27)  19,343  Alberta (7) Total (40)  # of Kilns  5.2.3.5 Technology Information To improve product quality and enhance the technology level of the processing facility, sawmills often need technology information. Mills were asked to rank the types of information that could be provided by government agencies, industrial organizations, consulting companies, and/or universities. Benchmarks for primary processing was considered the most important type of information for sawmills, followed by information for specific machine centers,  and general  technology information (Table 5.2.20). Different preferences were found in different areas. Both  66  B C coast and interior mills thought information on primary processes and specific machine centers were more important, while Alberta mills preferred general technology information and benchmarks for secondary processes.  Table 5.2.20 - Technical Information Need (EP)  general technology trend benchmark for primary process benchmark for secondary process logistics & material handling inf. for special machine centers  Coastal BC Mills n=13 total E P avg. E P 14 1.1  Interior BC Mills n=27 avg. E P total E P 1.4 37.0  Alberta Mills n=8 avg. E P total E P 1.9 15  Total Mills n=48 avg. E P total E P 1.4 66.0  26  2.0  46.0  1.8  11  1.4  83.0  1.7  13  1.0  24.5  0.9  13  1.6  50.5  1.1  6  0.5  6.0  0.2  4  0.5  16.0  0.3  19  1.5  42.5  1.6  5  0.6  66.5  1.4  5.3 DATA ANALYSIS BASED ON COMPARISON OF RESULTS FOR SURVEYS IN 1991 AND 1995 A survey was completed in British Columbia sawmills to assess quality control activities in 1991.  This information provides a benchmark to monitor changes to the British Columbia  sawmilling industry over four years by comparing responses to similar questions for 1995. Only the data from B C mills is comparable, since Alberta mills were not included in the 1991 survey.  The main objective  of the previous research was to  assess Q C activity  in the  lumber  manufacturing industry. However information regarding products, technology and markets was also collected. Comparative analysis between the two surveys will be as consistent as possible for Production, Markets and Products, and Quality Control Activities.  67  5.3.1  RESPONDENTS DESCRIPTION AND PRODUCTION  The 1991 survey used a sample frame of all B C mills with annual production of over 35 M M B F . This sample frame changed for the 1995 survey. T o keep the number of site visits reasonable, an increased production cut-off point (from 35 M M B F in 1991 to 50 M M B F in 1995) was used in the 1995 survey, while the 1991 study could incorporate more mills as a mail survey was used and the cut-off point was lower. That said, results o f 1991 survey showed that all mills, except one, had annual productions of over 50 M M B F . In other words, the comparison o f the average annual production between the two surveys (1991 and 1995) was reasonable. The annual production in the 1995 survey was 140 M M B F per mill which was higher than 116 M M B F for the 47 surveyed mills in 1991 survey (Table 5.3.2).  Total softwood lumber production of B C sawmills in 1991 was 13,308 M M B F (Table 5.3.1) which was only 3.7% lower than 13,819 M M B F in 1995 (British Columbia Forest Industry Statistical Table - C O F I , April 1996). Table 5.3.1 shows the total production and the average production in coastal B C mills, interior B C mills, and total surveyed mills in 1991 and 1995. The annual production of B C sawmills in the two surveys (5,338.5 M M B F in 1991 and 5,460 M M B F in 1995) were both responsible for 40% of total production of B C sawmills in 1991 and 1995. It should be noted that although the production criteria for sample mills increased from 35 M M B F in 1991 to 50 M M B F in 1995 (30% higher) and the number of mills surveyed decreased from 46 in 1991 to 39 mills in 1995, both groups o f respondent mills represented the same proportion of total provincial production. This fact indicated that the large B C sawmills had expanded production, while the total production of B C sawmills remained relatively stable. Growth in average production for B C coastal mills (23.3%) was higher than for interior mills (15.5%), although the average production in both regions had grown for the last four years.  68  Table 5.3.1 - Lumber Production in 1991 and 1995 Sawmill Location Coastal BC n=22/n=13  Total Production (of survey mills in MMBF) 1991 1995 2,408 1,715  Average Production (of survey mills in MMBF) 1991 1995 135 109.5  Interior BC n=25/ n=26  2,931  3,709  122.1  141  Total  5,339  5,460  116.1  140  5.3.2  n=46/n=39  M A R K E T AND PRODUCTS  Similar product categories and market regions were used  in both surveys, to facilitate a  comparison of markets and products.  5.3.2.1 Markets Results of the survey in 1991 classified two distinct markets served by B C sawmills: the onshore market (Canada and the United States) and the offshore market (predominantly Japan). O f the responding mills, 43% of interior mills shipped at least 75% of their annual production to the United States which represented nearly 70% of the total production in 1991  (Table 5.3.3).  However, among the 20 surveyed coastal mills, only 5% of them focused on the U S market which took 23% of coastal mill's annual production. Meanwhile, Japan was the biggest market for B C coastal mills, responsible for 44.7% of total production and 18% of the coastal mills shipped at least 75% of their production to this destination.  Results from 1995 showed that the regional differences in market focus in the B C sawmills has not changed since the last survey. Interior mills still focused on the U S market while coastal mills still focused on the Japanese market. However, the proportion of the production volume shipped from these two distinctive areas to their preferred markets has increased, from 44.7% to  69  52.9%  for coastal mills' shipments to Japan, and from 69.7% to 73.9% for interior mills' shipment to the US (Table 5.3.2 and Table 5.3.3). This increased reliance on a single market for each region could be considered specialization and may represent over reliance on a single market. Table 5.3.2 - Markets of Volume* Shipped in 1991 Coastal BC Mills n=20 MMBF Canada  292  USA  487  Europe Japan Other offshore Total Production  i  % of group total 13.8  Interior BC Mills n=22 MMBF 432  % of group total 16.2  Total Mills n=42 MMBF  % of total  724  15.1  2,342  49.0  23.0  1,855  69.7  302  14.2  60.0  2.2  361  7.6  948  44.7  304  11.4  1,252  26.2  91  4.3  12  0.4  103  2.2  2,120  4,783  2,663  *volume counted only from complete responses  Table 5.3.3 - Markets of Volume* Shipped in 1995 Coastal BC Mills n=13  Interior BC Mills n=26  MMBF  MMBF  % of group total 11.2  MMBF  208  USA  472  25.2  2,743  73.9  3,215  57.3  82  4.4  26  0.7  109  1.9  Japan  988  52.9  396  10.7  1,384  24.7  Other offshore  120  5.4  2  0.1  121  2.2  1,896  100.0  3,714  100.0  5,610  100.0  Total Production  755  % of group total 13.5  Canada  Europe  547  % of group total 14.7  Total Mills n=39  •volume counted only from complete responses  BC lumber shipments to local Canadian markets slightly decreased from 15.14% of total production (1991) to 13.45% (1995). However, shipments to the European market decreased dramatically in the past four years, from 7.6% to 1.9% of total production. Both BC coastal and interior mills reduced their shipments to the European market. Export proportion to other offshore markets remained at the same level.  70  Generally, exporting was still the main business for B C lumber industry in 1995, although the proportions destined to different export markets had changed. A s the U S shipments increased from 49% to 57%, offshore shipments decreased. However, this situation is not expected to continue according to the mills surveyed in 1995 due to the U S quota restriction. Japan will be the major targeted market for B C lumber shipments in the next three years.  5.3.2.2  Products  Survey results in 1991 showed that interior mills concentrated  on producing commodity  dimension lumber (76.3%) while coastal mills produced more diverse and specialized products (48.8%) (Table 5.3.4). This did not change according to results for 1995. Dimension Lumber was still the main product for interior sawmills, although its proportion dropped to 52% in 1995 (Table 5.3.5). Special Metric Lumber responsible for 44.2% of total production was the most important product manufactured by coastal mills in 1995. Because Special Metric Sizes were not specified in the 1991 survey, there could not be a direct comparison in this category. However, there must have been an increase in terms o f proportion of production for Special Metric Size for coastal mills since the proportion of this single category in 1995 (44.3%) is even larger than the multiple category of "other products" in 1991 (42.1%).  The increase in proportion of production for M S R for interior mills and Special Metric Size for coastal mills is consistent with the increase in shipments to the U S market for interior mills and the Japanese market for coastal mills. This may indicate further specialization o f sawmills for specific product/markets.  71  Table 5.3.4 - Products and Volume Proportion Coastal B C Mills n=18 dimension lumber studs  MMBF 467  % of group 24.9  in 1991  Interior BC Mills n=20 MMBF 1,907  % of group 76.3  Total Mills n=38 MMBF 2,373  %of 62.5  0  0  275  11.0  275  7.2  boards  79  4.2  129  5.1  208  5.5  MSR  11  0.6  70  2.8  81  2.1  3.2  0  0  59  1.6  siding  59  timber  74  3.9  0  0  74  1.9  clears  271  14.4  12  0.5  283  7.4  J-housing  126  6.7  45  1.8  171  4.5  others  790  42.1  61  2.5  852  22.4  total production  1,877  2,498  Table 5.3.5 - Products and Volume Proportion Coastal BC Mills n=13 dimension lumber  MMBF 436  % of group 23.3  4,375  in 1995  Interior BC Mills n=27 MMBF 2,461  % of group 62.8  Total Mills n=40 MMBF 2,897  %of 52.0  studs  23  1.2  511  13.5  534  9.6  boards  84  4.5  154  4.1  238  4.3  MSR siding timbers clears fmgerjoined special metric others total production  0  0  332  8.7  332  6.0  68  3.6  0  0  68  1.2  45  2.4  6  0.2  51  0.9 6.8  345  18.5  33  0.9  378  11  0.6  15  0.7  25  0.5  827  44.3  52  1.4  879  15.8 3.0 100.0  30  0.6  135  8.0  164  1,868  100.0  3,698  100.0  5,566  Changes for other products were minor, except M S R and Timber. The proportion of M S R almost tripled from 2.1% to 6.0 % ,  and Timber dropped from 1.9% to 0.9%. The increase of M S R  indicated that the market demand has grown for this product, especially for trusses and as chords in I beams used in construction. The decrease in the production of Timber resulted from trends in Japan to more laminated posts and beams and less "timber sized" green support members.  72  A s discussed before, sawmill managers in B C expected the volume o f Dimension Lumber produced for the U S market to decrease because of the tariff agreement. Most managers were expecting to increase shipments to Japan to compensate for these declines.  5.3.3  QUALITY C O N T R O L ACTIVITIES  Because the main objective of the 1991 survey concerned the Q C activities in B C sawmills, more information was available for comparison of Q C issues.  Since the data used in calculating EPs in the two surveys were not same, a direct comparison on EPs would not be appropriate. However, ranking represented by E P s produce some meaningful comparisons, and a modification o f the E P s also provides an alternative to compare results for the two surveys.  5.3.3.1 Factors Impacted by Q C Activities For comparing EPs between two surveys, rankings in 1991 data was modified so that the EPs in both data sets were consistent.  There was little difference in terms of ranking for the important factors for Q C activities between the two surveys. Value recovery and Volume recovery were ranked as the first and second most important variables in the two surveys, for all surveyed B C mills and for each of the two regions (Table 5.3.6). Ranking order for the other categories were also similar between 1991 and 1995 (Table 5.3.6)  73  Table 5.3.6- Importance of QC Activities (EP) in 1991 and 1995  Dimension Uniformity Surface Finish  Coastal BC Mills Ave. E P 1991 1995 n=21 n=13 1.14 0.55 0  0.08  Interior BC Mills Ave. E P 1991 1995 n=27 n=25 0.92 1.15 0  0.11  Total Mills Ave. E P 1991 n=45 1.02  I  0  1995 n=40 0.96 0.10  Volume Recovery  1.56  1.55  1.63  1.76  1.56  1.69  Value Recovery  2.33  2.32  2.17  1.87  2.33  2.02  Productivity  0.76  0.71  0.79  0.65  0.76  0.67  Cost Reduction  0.29  0.55  0.42  0.15  0.29  0.28  Stable Process Flow  0.04  0.23  0.08  0.28  0.04  0.26  However, there were some changes between 1991 and 1995. A s EPs for Value Recovery (2.33 and 2.32) and Volume Recovery (1.56 and 1.55) remained the same in coastal B C mills after four years, the ones in interior mills changed. The E P for Value Recovery decreased (2.17 to 1.87), and the E P for Volume Recovery increased (1.63 to 1.76). These changes indicated that coastal mills had kept emphasizing Value Recovery, but interior mills had focused more on Volume Recovery.  The average E P of Dimension Uniformity for coastal B C mills had decreased from 1.14 in 1991 to 0.55 in 1995, while the one for interior mills had increased (0.92 to 1.15). Even though Dimension Uniformity was still ranked as the third important Q C factor by both regional groups, the relative position switched. It was higher for coastal mills than for interior mills in 1991, but it reversed in 1995. The decline in Dimension Uniformity indicated a decreased in its importance for coastal mills. The E P for Cost Reduction increased (0.29 to 0.55) in coastal mills, but decreased (0.42 to 0.15) in interior mills. A l l these changes could be better explained by the increased focus and reliance on different markets (Japan and North American). This has been discussed in the preceding discussion of production and markets in this chapter.  5.3.3.2 Size C o n t r o l In B C sawmills size control use increased from 89% in 1991 to 98% in 1995 (Table 5.3.7). Among the mills that used size control programs, the proportion that installed computer software for size control increased from 79% in 1991 to 90% in 1995. S I C A M and L-size were the most popular computer software systems used in B C sawmills for size control. In 1991, more mills used S I C A M (52%) than L-size (39%) in the 33 mills that had computer software for size control. However, in 1995, L-size became more popular (51%) than S I C A M (26%), especially in interior B C mills.  Table 5.3.7 - Size Control and Software in 1991 Software Size Control** Using Size control 1991 1995 19 12  Coastal BC  # mills  n=22 (1991) n=13(1995) Interior BC  %of  86  # mills %of # mills  Using Software* 1991 1995 13 10  L-Size  SICAM  Others  1991 3  1995 0  1991 9  1995 7  1991 1  1995 3  23  0  69  70  7.7  30  92  68  83  23  27  20  25  10  18  8  2  2  0  92  100  87  93  50  72  40  8  10  0  42  39  33  35  13  18  17  9  3  3  n=47 (1991) %of 89 98 79 90 39 51 52 n=40 (1995) * Numbers in raw of " % of represent the % of mills using Size Control in its regional group ** Numbers in raw of " % of represent the % of mills using Software in its regional group  26  9.1  8.6  n=25 (1991) n=27 (1995) Total  In 1991, 'Availability' was the most important reason for sawmills choosing size control software (61% of respondent mills), followed by 'Ease of Use' with 55% (Table 5.3.8). In 1995, these two factors still were the dominant reasons for B C mills to choose computer software for size control (Table 5.3.8). However, 'Ease of Use' became the most important reason, followed by 'Availability'. More interior mills chose 'Ease of U s e ' , and more coastal mills chose 'Availability' as the most important reason.  75  Table 5.3.8 - Reason of Software Chosen Sophistication*  Interior BC Total  # mills i %of  Cost # mills ;  other  Availability  # mills  %of  1991 n=13  4  31  6  46  1  7.7  9  69  2  15  1995n=10  1  10  5  50  4  40  6  60  4  40  i  Coastal BC  Ease of use  # mills j %of  %0f  # mills j %of  1991 n=18  6  33  11  61  4  22  10  56  0  0  1995 n=24  11  46  21  88  6  25  14  58  10  42  1991 n=31  10  32  17  55  5  16  19  61  2  6.5  1995 n=34  12  35  26  76  10  29  20  59  14  41  * N a m e d P o w e r o f P r o g r a m i n 1996 s u r v e y  5.3.3.3 Production Technology and Facilities Because the questions were different in the two surveys regarding  processing  technology,  comparison is limited to data concerning optimization at the working centers.  Three types of operation controls defined in the 1991  survey were: Manual Process Control,  Table Driven Process Control, and Optimization. However, the Table Driven Control was not specified as one of the operation technologies in the 1995  survey. Based on the definitions of  these three control technologies in the report of 1991 survey (Maness and Cohen, 1992), and the definitions of the two types of controls (Manual and Optimization) in the 1995 (Appendix II), comparison of production technology focused on  questionnaire  two categories: Manual and  Optimization. Table Driven Control and Optimization were combined from the raw data collected in 1991 and compared to the data collected in 1995.  Table 5.3.9 reveals the changes between the 1991  and 1995. Generally, the percentage of mills  using optimization technology at each working center increased except for overseas group, and for primary breakdown in the North American group.  76  bucking in the  A s indicated  in Table  5.3.9, optimized  edging  and trimming  had dramatically increased  throughout B C while optimized bucking in the North American group also increased.  Table 5.3.9 - Operations on Production Working Centers Location  bucking  primary breakdown  edging  trimming  Man.  Optim.  Man.  Optim.  Man.  Optim.  Man.  Optim.  Overseas  1991 n=16  42  58  29  71  79  21  83  17  % of mills*  1995 n=8  50  50  22  78  44  56  63  38  Changes %  +19  -14  -24  +10  -44  +167  -24  +124  North America  1991 n=31  80  20  29  72  73  27  59  41  % of mills*  1995 n=32  66  34  33  67  27  73  33  67  Changes %  -18  +66  +14  -7  -63  +170  -44  +63  Total Mills  1991 n=47  82  33  29  72  75  25  67  33  % of mills*  1995 n=40  63  37  31  69  . 30  70  39  61 .  Changes %  -23  +12  +7  -4  -60  +180  -42  +85  * % in 1995 calculated by: % manual = # of mills using manual / (# of mills using manual + # of mills using optimization) or % optimization = # of mills using optimization / (# of mills using manual + # of mills using optimization)  Some results o f the 1991 survey no longer applied. For example, "sawmills serving overseas markets used more optimization at the bucking center than mills serving North  American  market" (Cohen and Maness, 1992) is no longer true. Test results showed that there was no significant difference between the two marketing groups based on optimization at the bucking stations in 1995. This change was caused by the dramatic increase o f optimized bucking centers in the mills serving the North American market in 1995 (66%). Changes also occurred in the edging station. Results from 1991 survey indicated that "difference of operation technology on edging was minor based on market served". However, this difference was statistically significant for the 1995 data. This indicates that mills serving the North American market used more optimization technology at the edger than mills serving the overseas market. This is also a result of increasing optimization in edging in the North American group  77  Although the use of optimization increased 124% at the trimming center for the overseas group, it was not high enough to catch up to the North American group. The difference on the trimming station between the two market groups was still significantly different in terms of the application of optimization technology. There was little change in optimization at primary breakdown for the two groups from 1991 to 1995.  5.4 ADDITIONAL INFORMATION NOT INCLUDED IN DATA ANALYSIS There were some additional information collected that was not part of the data analysis. The major reason for this omission was either that the data were not suitable for statistical analysis or that they were not relevant to the main research objectives of this study.  The questionnaire used in this study was designed as part of a nation-wide research project titled Establishing Technology Benchmarks in Canadian Sawmills for Processing Quality Control and Training Needs. However this thesis is only one part of the larger project, covering only two Western Canadian provinces, and focuses on interrelationship between marketing and processing technology in Western Canadian sawmills. Therefore, not all information in the questionnaire were analyzed for the purpose of this study.  Although some of the information collected was not included in the Data Analysis, they might be valuable for the reader of this thesis. The results from four additional questions are added in this section as followings: Frequency of machine center checked for size control, Feedback from  78  customers about products quality, Communication between mill managers and employees, and Frequency of value table updating for optimized machine centers. There is no sub-classification applied for this extra information.  5.4.1.1 Frequency of Machine Center Checked for Size Control Respondents were asked to indicated how often their work centers were checked for size control. There were five work centers and seven time periods listed as a cross table in the questionnaire (see Appendix II). Table 5.4.1 and 5.4.2  show that head rigs, edgers and planers were checked  more frequently for size control than bucking centers and trimmers. Table 5.4.1  also indicates  that mills in the overseas group checked more frequently than mills in the North American group, especially at head rigs and edgers. Table 5.4.2 shows that Alberta mills seemed check their work centers for size control more frequently than B C mills.  Table 5.4.1 - Frequency of Size Control Checking by Group of Marketing Orientations (%) quarterly bucking  head rig  edging  trimming  planing  monthly  weekly  overseas n=9  0  11  NA n=38  8  13  29  overseas n=9  0  0  NA n=38  0  overseas n=9  0  daily  44  11  every shift 33  every 4 hrs. 0  every 2 hrs. 0  < 1 hr 0  if prob. occur 0  18  21  3  0  0  3  0  0  22  11  44  22  11  0  13  32  34  5  13  3  0  0  0  0  33  11  33  22  11 3  NA n=38  0  0  3  39  26  5  18  5  overseas n=9  0  11  11  11  67  0  0  0  0  NA n=38  3  ii  21  32  16  5  8  3  3  overseas n=8  0  0  0  25  0  25  25  25*  NA n=38  3  0  11  37  3  18  23  1*  0 0  * specified as other frequent category  79  l  Table 5.4.2 - Frequency of Size Control Checking by Group of Geographical Locations (%) quarterly bucking  head rig  edging  monthly  weekly  daily  every shift 25  every 4 hrs. 0  every 2 hrs. 0  < 1 hr  if prob. occur 0  j coast BC n=12  17  17  33  8  : inter. BC n=27  0  7  37  26  26  0  0  0  4  j Alberta n=8  13  25  13  0  13  13  0  0  25  j Total n=47  6  13  32  17  23  2  0  0  6  j coast BC n=12  0  0  0  8  33  8  42  8  0  I inter. BC n=27  0  0  15  33  33  4  11  4  0  i Alberta n=8  0  0  13  25  25  13  13  13  13  I Total n=47  0  0  10  25  32  6  19  6  2  j coast BC n=12  0  0  0  17  . 33  8  33  8  0  I inter. BC n=27  0  0  4  33  33  4  19  7  0  I Alberta n=8  0  0  0  50  b  13  13  13  25  9  4  '  0  0  0  2  32  28  6  21  trimming j coastBCn=12  8  8  25  8  50  0  0  0  0  I inter. BC n=27  0  7  22  33  19  4  7  4  4  I Alberta n=8  0  25  0  38  13  13  13  0  0  ; Total n=47  2  11  19  28  26  4  6  2  2  j coast BC n=12  0  0  0  8  33  0  17  17  17*  j inter. BC n=27  4  0  0  11  41  0  22  18  4*  I Alberta n=8  0  0  0  0  13  13  13  63  0  j Total n=47  2  0  0  9  34  2  19  25  4*  • I Total n=47  planing  * specified as other frequent category  5.4.1.2 Feedback from Customers about Product Quality In the section concerning communication about product quality respondents were asked to indicate what types of methods they used to obtained feedback from customers. There were eight categories provided (see Table 5.4.3 and 5.4.4)  Table 5.4.3 - Feedback about Product Quality by Group of Marketing Orientations (%) no feedback  customer tour your facilities  tour your customers facilities  surveys  sales department  look at number of claims  initiated by customers  others  11  90  78  56  78  56  67  22  NA n=39  0  90  85  44  95  67  95  10  total n=48  2  90  83  46  92  65  90  13  overseas n=9  80  Table 5.4.4 - Feedback about Product Quality by Group of Geographical Locations (%) no feedback  customer tour your facilities  tour your customers facilities  surveys  sales department  look at number of claims  initiated by customers  others  coast BC n=13  8  85  77  54  85  62  69  15  inter. BC n=27  0  89  85  44  96  67  96  11  Alberta n=8  0  100  88  38  88  63  100  13  Table 4.4.3 and 5.4.4. indicated that obtaining information from 'sales department',  'customer  tour of sawmill facilities', 'suggestions initiated by customers', and 'tour customers facilities' were the most common methods o f getting feedback from customers. The numbers in the tables also show that mills in the North American group communicate more frequently with their customers compared to mills in the overseas group regarding product quality. The closer geographic location and the common language for North American suppliers and their customers resulted in communication and visits being easier for mills in this group.  5.4.1.3 Communication Between Mill Managers and Employees Information concerning how communication conducted about product quality among employees in the sawmills was also collected. Table 5.4.5 and 5.4.6 indicate that 'informal discussion with supervisors' and 'informal discussion with Q C staffs' were the most common communication methods in production. These were followed by 'regular meeting with supervisors' and 'regular meeting with Q C staffs'. It seems that supervisors and Q C staffs played important roles in ensuring product quality in sawmills. There was little difference between mills based on market focus or on geographical location.  81  Table 5.4.5 - Communication with Employees by group of Marketing Orientations (%) newsletter updates  informal discussion with supervisors 78  regular meeting with supervisors 67  informal discussion with QC staffs 89  regular meeting with QC staffs  chalkboard/ bulletin board  others  44  44  44  overseas n=9  44  NA n=39  51  77  69  69  51  41  23  total n=48  50  77  69  73  50  42  27  Table 5.4.6 - Communication with Employees by group of Geographical Locations (%) newsletter updates  informal discussion with supervisors 85  regular meeting with supervisors  informal discussion withQC staffs 92  85  regular meeting with QC staffs  chalkboard/ bulletin board  others  46  38  46  coast BC n=13  69  inter. BC n=27  48  70  63  67  56  41  22  Alberta n=8  25  88  63  63  38  50  13  5.4.1.4 Frequency of Value Table Updated for Optimized Machine Centers The  frequency of value table updates could be used to measure how well the mills utilizing their  optimization system. Information about how often the value tables were updated at optimized machine centers was also collected. Table 5.4.7 and 5.4.8 show the results o f responses.  Table 5.4.7 - Frequency of Value Table Updated Group by Marketing Orientations (%) quarterly bucking primary  < every shift 0  if prob. occur 0  market demand 17  product change 0  0  0  83  33  19  29  0  0  10  5  5  j overseas n=5  0  0  80  40  0  0  20  0  29  19  32  0  0  10  6  3  0  0  67  33  17  0  17  0  28  22  28  0  0  16  6  3  0  0  60  20  0  20  20  0  7  4  j overseas n=6  j overseas n=5 j NAn=28  drying  daily  33  i NAn=32 trimming  weekly  1 overseas n=6 j NAn=21  breakdown I NA n=31 edging  monthly  j overseas n=3 ! NAn=22  29  21  29  0  0  14  0  0  33  33  0  0  33  33  23  5  18  0  5  36  5  9  82  Table 5.4.8 - Frequency of Value Table Updated Group by Geographical Locations (%)  bucking  coastal BC n=5  quarterly  monthly  weekly  daily  < every shift  if prob. occur  market demand  product change  0  0  0  0  80  40  0  0  interior BC n=16  38  19  25  0  0  13  0  7  Alberta n=6  17  17  50  0  0  0  33  0  primary  coastal BC n=5  20  0  60  40  0  0  0  0  breakdown  interior BC n=23  26  22  35  0  0  9  4  4  Alberta n=8  25  17  39  6  0  8  8  3  coastal BC n=5  17  0  50  33  17  0  0  0 4  edging  trimming  drying  interior BC n=16  28  24  28  0  0  16  4  Alberta n=6  24  18  34  6  14  29  0  14  0  0  50  25  0  25  0  0  interior BC n=27  32  23  27  0  0  14  5  5  Alberta n=7  14  14  43  6  14  29  0  14  0  0  0  50  0  0  0  50  interior BC n=16  25  6  19  0  6  25  6  13  Alberta n=7  14  0  29  0  0  57  14  0  coastal BC n=4  coastal BC n=2  Because of the high non-response rate (>30%  of surveyed mills) on this question, non-response  error could be substantial. Therefore, it was not included in the main body of the Data Analysis.  5.5 HYPOTHESIS TESTS Based on the objectives of this study, that is to understand the technology-market functional relationship in B C sawmills, hypothesis have been tested by several statistical methods. The hypothesis tested include: HI:  There is no difference in market focus for mills in different locations,  H2:  There is no difference in manufacturing technology for mills serving different markets,  83  mutual  appropriate  H3:  There is no difference in the level of quality control for mills serving different markets, and  H4:  There is no difference in products for mills serving different markets.  Three different statistical techniques were applied according to the different data types. Student T tests were used to test interval data, the chi-square test was applied to test nominal data, and the Z test was used to test proportional data. A l l the data samples were assumed to be independent with equal variance, with close to a normal distribution. A l l data used in the tests were collected in 1995.  5.5.1  T E S T OF H O 1:  T H E R E IS NO DIFFERENCE IN M A R K E T FOCUS FOR MILLS IN DIFFERENT LOCATIONS  Data concerning the proportion of volume shipped to the different markets was used to test this hypothesis. There were four shipping destinations  for Western Canadian sawmills: North  American (US and Canada), the United States only, Overseas (all the other countries other than U S and Canada), and Japan only. The reason of testing U S and Japan was that they represent the majority of North American, and overseas shipments among the mills surveyed in 1995. The three mill groups tested were based on geographical location: coastal B C , interior B C , and Alberta. For each of the four markets, three T tests, with Bonferroni's tests for adjusting probability levels, were conducted between each pair of groups (coast B C versus interior B C , coast B C versus Alberta and interior B C versus Alberta) to determine i f there was a difference on marketing focus based on mill location.  84  Tests results showed that the marketing focus for coastal B C mills was statistically different from B C interior mills and Alberta mills (Table 5.4.1). Interior mills and Alberta shipped significantly more lumber to both North American as whole and to the U S in particular compared to coastal mills in 1995.  Shipments from coastal mills to both overseas markets and particularly the  Japanese market were significantly higher than for mills in the interior of B C and Alberta. (See Table 5.4.1 for specific probability information on significance testing)  Test results indicated that there were no significant differences between markets for Interior B C and Alberta mills for all four shipping destinations.  Results of tests rejected the hypothesis that coastal mills, interior mills and Alberta mills have the same marketing focus. Coastal B C mills focused more on overseas market, particularly Japan, while interior B C and Alberta mills focused more on North America, especially the United States.  Table 5.5.1 - Results of Tests on Marketing Focuses (a = 0.03) Coastal BC n=13 vs. Interior BC n=26 Coastal BC n=13 vs. Alberta n=8 Interior BC n=26 vs. Alberta n=8  5.5.2  NA  US  Overseas  Japan  Reject H1  Reject H1  Reject H1  Reject H1  Reject H1  Reject H1  Reject H1  Reject H1  Accept H1  Accept H1  Accept H1  Accept H1  T E S T OF H O 2: T H E R E IS NO DIFFERENCE IN T H E PRODUCTS PRODUCED BY MILLS SERVING DIFFERENT MARKETS  Statistical tests for products compared the two different groups of companies serving the North American and overseas market. T tests were used to compare tree species used in each sawmill,  85  the proportion, by volume, of each o f the nine products produced in each sawmill in 1995, the proportions of kiln dried and planed lumber shipped to North American and overseas markets, and the proportions o f lumber kiln dried and planed in each mill (see Table 5.4.2 for results o f tests).  There was a statistically significant difference between some species used by the mills serving different marketing areas (Table 5.4.2). Mills in the overseas group used more hemlock and other species (mainly Cypress) than the mills in the North American group.  Conversely, the North  American group used more lodgepole pine, and spruce than the overseas group (see Table 5.4.2 for specific probability information on significance testing). There was no statistical difference on the use of Douglas-fir, true fir, cedar and larch.  Table 5.5.2 - Results of Tests on Species  overseas vs. North A.  Distribution  L. Pine  Balsam Fir  Spruce  D-Fir  Hemlock  Cedar  Larch  Others  reject H 2 "  accept H2  reject H2*  accept H2  reject H2**  accept H2  accept H2  reject H 2 "  * statistical significance at a=0.1 ** statistical significance at a=0.05  The product groups which showed a significant difference were Dimension Lumber, Clears, and Special Metric Sizes (t tests with a=0.05). Mills in the North American group produced significantly more Dimension Lumber than those in the overseas group, while mills in the overseas group manufactured significantly more Special Metric Sizes and Clears than those in the North American group.  The proportion of manufacturing and shipping to different destinations for kiln dried and planed lumber were both significantly different (a=0.05) between the two marketing groups (Table  86  5.4.3). Z test results showed that the proportion by volume for both kiln dried and planed lumber produced by the North American groups were significantly higher than for mills in the overseas group. The same was true regarding shipping volume, that is mills in the North American group shipped more kiln dried and planed lumbers to both overseas and North American market than the mills in the overseas group.  Table 5.5.3 - Results of Tests on Kiln Dried and Planed Lumber lumber kiln dried  lumber planed  (a=0.05)  lumber kiln dried  lumber planed  toNA  to o v e r s e a s  toNA  to o v e r s e a s  Reject H 2  Reject H 2  Reject H 2  Reject H 2  overseas Reject H 2  vs;  Reject H 2  North A m e r i c a  5.5.3  T E S T OF H O 3: T H E R E IS NO DIFFERENCE IN T H E L E V E L OF QUALITY CONTROL FOR MILLS SERVING DIFFERENT MARKETS  Statistic tests for quality control activities were conducted between the two groups o f mills (offshore and North American). A t test was applied to test the number o f lumber grading employees, and several Z tests compared the proportion of mills using 1) size control, 2) devices used for size control, 3) computer software analyzing size data, 4) type of size control software, and  5) reasons for choosing size control software.  Results regarding size control in different marketing groups are shown in Table 5.4.4. There were no statistical difference concerning the proportion o f mills using a size control program, or the proportion of mills using computer software for size data analysis.  Test results also indicate that differences in devices used for size control were not statistically significant between the two groups of mills.  87  Table 5.5.4 - Results of Tests on Size Control Devices (a=0.1) mills use size control  devices used for size control electronic caliper  overseas vs. North A.  Accept H3  mechanical caliper  Accept H3  Accept H3 ,  tape measure  others  Accept H3  Accept H3  However, there was a significant difference between the two group o f mills for computer software used in size control (Z tests at a=0.05). More mills in the overseas group used S I C A M , while more mills in the North American group used L-Size (Table 5.4.5). The only reason for software selection for size control which showed a significant difference (a=0.05), between groups was "Ease o f Use". More mills in the North American group chose it as a reason than mills in the overseas group. N o statistical differences were found for the other six reasons: Power of Program, Cost, Availability, Bundled with Equipment, and Others.  Table 5.5.5 - Results of Tests on Size Control Software mill used software  software program SICAM  overseas vs. North A.  Accept* H4  Reject** H4 * statistical significance at a=0.1 statistical significance at a=0.05  5.5.4  reasons for choosing software  L-size  power  easy use  cost  available  Reject** H4  Accept* H4  Reject** H4  Accept* H4  Accept* H4  with equipmen t Accept* H4  others  Accept* H4  T E S T OF H O 4: T H E R E IS NO DIFFERENCE IN MANUFACTURING TECHNOLOGY FOR MILLS SERVING DIFFERENT MARKETS  Four items were used for testing this hypothesis: facilities upgrades and reasons, age of equipment, operation technology used in the five working centers (manual or optimized), and number of kilns and kiln capacity.  88  Result of the Z tests indicate that there was no significant difference regarding the proportion o f mills that had upgraded their facilities between the two market groups (Table 5.4.6). Among the seven reasons for upgrading sawmill operation, only 'to control and reduce the cost' and 'to change or add new products' showed significant differences among the two groups of mills (Chisquare tests and Z tests at a=0.05). Upgrading their operation facilities to reduce cost and change or add new products were more important to the mills focused on overseas markets than mills with a North American market orientation.  Table 5.5.6 - Results of Tests on Facility  Upgrading  mills upgraded  reasons for facility upgrading  change raw material overseas vs. Accept* Accept* North A. H4 H4 * statistical significance at <x=0.1  increase production Accept* H4  fiber recovery Accept* H4  improve quality Accept* : H4  reduce cost Reject** H4  add new product Reject** H4  others Accept* H4  ** statistical significance at a=0.05  T test results showed no difference in the age o f equipment used in the four primary working centers (bucking, primary breakdown, edging/resaw, and trimming).  There was a significant  difference (oc=0.05) between groups for drying, where the average age was older in the North American group than in the overseas group (see Table 5.4.7).  Table 5.5.7 - Result of Tests on Age of Equipment on Working Centers (a=0.05)  overseas vs. North A.  stem bucking  primary breakdown  edging  trimming  drying  Accept H4  Accept H4  Accept H4  Accept H4  Reject H4  Operation technology used in sawmills is the most important factor which reflects technology differences. A Z test was used to compare the proportion o f mills that used either manual operation or optimization at the five working centers between the two marketing group. Only the trimming and drying stations showed significant differences between mills in the two groups (see  89  Table 5.4.8  for specific alpha information on significant testing). The proportion of mills that  used optimized trimming and drying kilns in the North American group were significantly higher than the mills in the overseas group. There were no statistical differences in the other three working centers in term of the optimization utilization.  Table 5.5.8 - Result of Tests on Working Center Operation bucking  overseas vs. North A.  manual Reject" H4  optm. Accept* H4  primary breakdown manual Accept* H4  optm. Accept* H4  edging manual Accept* H4  optm. Accept* H4  trimming manual Reject** H4  optm. Reject** H4  drying manual Accept* H4  optm. Reject* H4  * statistical significance at a=0.1 ** statistical significance at ot=0.05  Surprisingly, mills with overseas markets focus that did have kilns had significantly more drying kilns per mill than mills with a North American orientation (t test at a=0.01). However, there was no significant difference in kiln capacity between the two marketing groups, either in total kiln capacity or average capacity for each mill.  Although some assumptions have made before the tests, using the test results with caution is suggested. Because of an incomplete random sampling used in this study, sampling error could be introduced which is incapable of measurement.  90  6. DISCUSSION Three parts are presented in this chapter: Discussion of Study Results, Discussion of Theory Application, and Need for Future Study. In the Discussion of Study Results, the results of the data analysis are capsulized and some implications are highlighted. The Discussion of Theory Application focuses on the results of this study in terms of the theories presented in the literature review. Need for Future Study discusses what has been learned from this study and how to improve this study should it be replicated.  6.1  DISCUSSION O F STUDY RESULTS  Discussion of Study Results includes two parts: first, a discussion of the results from the  1995  data concerning markets, products, quality control activities, and production facilities based on mills with different marketing orientations, and second, a discussion comparing the results of the information collected in B C for 1991 and 1995.  6.1.1  RESULTS FROM 1995 - B C AND A L B E R T A M I L L S GROUPED BY M A R K E T SERVED  There were two distinct markets served by Western Canadian sawmills: North America (mainly the U S ) , and the overseas market (mainly Japan). Results indicate that there was a difference in technology used in mills with different marketing orientations in terms of manufacturing facilities, quality control techniques, and products. However, not all factors examined showed significant differences.  91  6.1.1.1 Markets The United States was the biggest market for Western Canadian sawmills (about 55% of total shipments), but this may change in the next three years due to the U S lumber import quota. More than 80% of mills that focused on the U S market expressed an expected decline in U S shipments. Most of these mills were going to switch their marketing focus to Japan (81%) and/or Canada (63%). A s global interest in exporting to the Japanese market increases, Canadian lumber exporters should be aware o f more intensive competition in the Japanese market. Competition will be from lumber manufacturers in other countries, from other wood products, such as the engineered wood products and from wood substitutes. H o w to assist Western Canadian sawmills to be successful in the increasingly competitive Japanese market, or to help find alternative markets, should be of growing concern to industry organizations, government agencies, and research professionals.  The volume o f kiln dried and planed lumber shipped to both overseas and North American markets from the mills with an overseas marketing focus was much lower than for mills with a North American marketing focus. This situation resulted largely from the traditional preference for large size and high density lumber or squares by the Japanese housing construction industry. However the attributes of timber from the B C coast makes them costly and difficult to dry. The low production of kiln dried and planed lumber from this group could change gradually in the near future for several reasons.  First, the Japanese culture is becoming more and more  westernized and some North American standards  are already accepted  by the Japanese  construction industry. Second, coastal B C mills are increasing their drying capacities to catch up with market changes. Third, mills in the B C interior are increasing their exports o f kiln dried  92  lumber to Japan. These factors will contribute to an increase in kiln dried and planed lumbers to overseas markets from Western Canadian sawmills.  6.1.1.2 Products Products are the bridge that connects markets and process technology. A change in market orientation will lead to a technological change through information transferred by the products. Process technology improvement will increase market competitiveness by producing higher quality products. This study showed that mills with a different marketing focus produced different products.  Dimension lumber was the most important product for Western Canadian sawmills, responsible for about 53% of total production in 1995. Mills mainly serving the North American market produced much more dimension lumber than the mills serving the overseas market with average production for each mill almost six times greater than for a mill in the overseas group. However, shipments to the U S market are expected to decline in the next three years, replaced by increased exports to the Japanese market.  Metric Sizes were the second most important lumber product for Western Canadian sawmills in 1995,  representing 14.4%  of total production. Although much lower than the production of  dimension lumber, it is expected to increase since most mills expect to increase shipments to Japan, the major market for Metric Size lumbers.  Differences were also found in the species used by mills with different marketing orientations. However, these difference were most likely not caused by market needs, but were due to 93  geographical location, and the inherent natural species distribution. Because the majority of mills in the overseas group were from the B C coast area, the typical species of this group were the western coastal species: hemlock, Douglas-fir, and yellow cedar. Abundance of natural growth, high quality timber gave coastal B C sawmills an advantage to access overseas markets where large size hemlock and Douglas-fir lumber with tight rings and preferred color are desired by Japanese customers. In 1995, more than 50% of the production from mills in the overseas group was hemlock and 17% was Douglas-fir. Since most mills in the North American group were from the B C interior and Alberta, the species used in this group were mainly western interior species: lodgepole pine, spruce, and true fir with 37%, 29% and 12% of production, respectively.  Timber size and quality may be the reasons for more coastal B C mills focusing on overseas markets than interior B C and Alberta mills.  However, mills in the interior of B C and Alberta  intend to increase their shipments overseas. It will be a challenge for these mills to successfully shift their market focus given their lower quality timber supply. One solution may be the development of engineered wood products such as laminated lumber and finger joined lumber, all made from smaller size and lower quality material. The acceptance of more North American products by Japanese customers may also help these mills enter the Japanese market.  6.1.1.3 Quality C o n t r o l Similarities and differences in Q C between the two groups of sawmills with different marketing orientations were observed.  Both the overseas group and the North American group ranked  Value Recovery as the first important factor in Q C activities, Volume Recovery as the second one, and Dimension Uniformity as third. However, Value Recovery and Cost Reduction were considered more important for the overseas group with higher EPs than in the North American 94  group, and Dimension Uniformity and Productivity were considered more important in the North American group than in the overseas group.  The higher ranking for Value Recovery and Cost Reduction by the overseas group may be the result of more expensive, larger size, first growth timber in coastal B C mills. Thus, increasing Value Recovery through various Q C activities seems more important to these mills. The higher rank of Dimension Uniformity and Productivity in the North American group could be caused by the large volume of commodity dimension lumber demanded by the U S construction industry. Thus, they would put more emphasis on Productivity and Dimension Uniformity by Q C activities to maximize profits.  Mills in both marketing groups considered Primary Breakdown as the most important work center and Stem Bucking as the second. The North American group ranked Drying  as third  which was higher than it was in the overseas group who ranked Drying as fourth. The higher ranking of Drying in the North American group reflected the demand of product quality in the North American market, since drying quality is important in housing construction. The overseas group ranked Edging higher than in the North American group since lumber sizes change frequently depending on Japanese market prices. It was commonly accepted that the closer the Q C activities were to the front end of the process, the more value recovery could be gained. Based on the ranks of the importance at work stations, mills that served overseas markets tended to focus more on the front end of processing to obtain higher value recovery and lower the cost, while mills with a marketing focus on North American emphasized the back end for better finishing and uniformity.  95  In 1995, 98% of mills surveyed used size control in their daily production and nearly 90% of them analyzed size data by computer software programs. S I C A M and L-size were the two most popular software systems used in Western Canadian sawmills. Results of the data analysis indicated that mills with different marketing focuses used different size control software. Mills serving the overseas market tended to install S I C A M for size control while more mills serving the North American market used L-size. Availability could be the main explanation for software selection.  More than 70% of mills in the North American group thought that Ease of Use was the most important reason for selecting size control software, compared to 38% for mills in the overseas group.  6.1.1.4 Production Facilities The overall technology used in Western Canadian sawmills was at a higher level than ever before. More automatic  equipment and optimization software  have been installed in the  production lines. This technological innovation may be initiated by either market requirements or raw material limits.  Survey results showed that 96% of mills had updated their production facilities in the last five years. The major reason for the upgrading was ' T o increase fiber recovery', which was stated by both marketing groups. ' T o reduce cost' and ' T o change or add new products' were stated as the other two important reasons for the mills in the overseas group, since products required by  96  overseas markets were diversified and customized. Mills in the overseas group may frequently update their production lines to satisfy their overseas customers.  Equipment used in the manufacturing process was older in mills with a North American marketing focus. This fact again proved that mills in the overseas group upgraded their facilities more frequently than mills in the North American group.  Approximately 91% of mills had installed optimization systems in at least at one work station on the processing line. In general, mills in the North American group had higher optimization control at each work center (73%) than the mills in the overseas group (61%).  More mills in the overseas group used optimization for stem bucking and primary breakdown, while more mills in the North American group applied optimization at edging, trimming and drying. Here again, more expensive timber supply may have pushed the mills in the overseas group to use advanced technology (here referring to Optimization) on the front end of the process to maximize fiber recovery. Meanwhile, less product variety limited the number of mills in the overseas group using optimized trimmers. More specialty products required by customers and more sophisticated criteria used in offshore markets forced mills in the overseas group to use a lower but more appropriate technology (here referring to manual operation) at the edging center.  6.1.2  RESULTS FROM 1991 AND 1995 - B C M I L L S O N L Y  The information in the 1991  survey provides a benchmark to monitor changes to the British  Columbia sawmilling industry within the past four years. Only data from B C mills is comparable, since Alberta mills were not included in the 1991 survey. The comparative analysis between the 97  two surveys is as follows: Markets, Products, Quality Control Activities, and Production Facilities.  6.1.2.1 Markets Comparison o f the two surveys showed that the regional differences on market focus in B C sawmills has not changed since the last survey. Interior mills still focused on the U S market, while coastal mills still focused on the Japanese market. However, the proportion of the production volume shipped from these two distinctive areas to their preferred markets has intensified. This increased reliance on a single market for each region could be considered specialization or over-reliance on a single market.  6.1.2.2  Products  There was no change in products based on the markets served by the two regional groups of mills in B C . Dimension lumber was still the main product for interior sawmills, although its proportion had dropped. Special Metric lumber was the most important product manufactured by coastal mills in 1995, and the proportion of production increased.  Changes in other products were  minor, except that the production o f M S R increased  dramatically, and Timber production decreased sharply. The increase o f M S R production reflected increased market demand for this product, especially for trusses and as chords in I beams used in residential construction. The decrease in export of green timber to Japan was due to the growth of  more laminated posts and beams and less "timber sized" green support  members.  98  Sawmill managers in B C expected that the volume of dimension lumber produced for the U S market by B C sawmills would decrease because of the tariff agreement concerning exports to the U S market. Most managers were expecting to increase shipments to Japan to compensate for these declines.  6.1.2.3 Quality C o n t r o l Activities There was little difference in terms of ranking for the important factors for Q C activities between the two surveys. Value Recovery was ranked first, in terms of importance, and Volume Recovery ranked second in both surveys. Rankings for the other categories were also similar between two surveys. However, the detailed changes in EPs between the surveys by the two regional groups indicated that: 1) interior mills placed more emphasis on Volume Recovery, 2) there was a decrease in importance of Dimension Uniformity in coastal mills, but an increase in interior mills, and 3) the importance of Cost Reduction increased in coastal mills, but decreased in interior mills. Different marketing demands and raw material supply may be responsible for these changes.  Ranking orders on the importance of work stations were also the same between the two time periods. Since question formats were different in the two surveys, no comparison was made in terms of work station ratings.  B C sawmills using size control in processing increased from 89% in 1991 to 98% in 1995. The installation rate of computer software for size control has also increased from 79% to 90%. The  99  increase of size control may reflect sawmills having more interest in 1) improving lumber recovery, 2) minimizing waste (reduce the cost), and 3) integrating operations.  The most popular computer software package used in B C sawmills for size control were S I C A M and L-size, and each one had its geographical market. S I C A M was more popular in coastal area and L-size was more popular in interior, as indicated by the both surveys. Availability and the Easy of Use were the two main  reasons for B C sawmills choosing software in size control.  Further study may be needed to understand the differences between the two software packages, and to identify the causes of this geographical preference.  6.1.2.4 Production Facilities Generally, the percentage of mills using optimization technology in all four working centers has increased (except for Bucking in the overseas group and Primary Breakdown in the North American group). Optimized edging and trimming has increased dramatically in both marketing groups, along with bucking in the North American group. In 1995,  mills serving the North  American market used more optimization technology than mills serving the overseas market.  6.2  DISCUSSION O F T H E O R Y APPLICATION  In this section, study results are used to test the theories stated in the Literature Review to see how these theories apply to the Western Canadian sawmilling industry.  100  6.2.1  T E C H N O L O G Y INNOVATION M O D E L  The relationship between products and process was explained by the model of dynamic of process innovation in industry (see H i l l and Utterback Technology Innovation Model in the Literature Review). Results of this study indicate that the current situation for technology and marketing in Western Canadian sawmills is located in the third period of this model.  Table 6.2.1 - Application  of Technology Innovation Model in Sawmills Third period of model  predominate type of innovation  Study results  cumulative improvement in productivity and quality  96% of mills updated the processing equipment in last five years increasing application of size control and optimization technology  innovation stimulated by  market pressure of cost reduction and quality improvement  higher ranking for increasing fiber recovery, improving quality, increasing production and reduce cost as the reasons of facility upgrading increasing number of Q C staffs and lumber graders  marketing competition emphasis on  cost reduction  higher ranking on value recovery as the important factor for quality control  production process  efficient, capital intensive, and high cost of change  increasing installation of optimization on major working centers  equipment  special-purpose, mostly automotive with labor tasks mainly monitoring and control  higher ranking on specific machine centers as the most valuable technology information  6.2.2  " A C T I V E " PROCESS T E C H N O L O G Y THEORY  This study found that " A c t i v e " Process Technology is not completely suitable for Western Canadian sawmilling industry. There are four reasons listed by the " A c t i v e " Process Technology Theory which show how an institution actively gains competitive advantage by improving process technology. The following table shows the study results and the theoretical reasons.  101  Table 6.2.2 - Application  of Active Process Technology Theory in Sawmills  "Active" Process Technology theory  Study results Y e s , increasing application o f software for size control that speed u p  companies can gain advantage by increasing speed o f manufacturing process, and therefor increase productivity  the size control process and increase both productivity and products  i n v e s t i r K :nt i n process technology can improve  Y e s , increasing installation o f optimization o n major w o r k i n g centers  flexibilit y o f production to enable m o v i n g from one product to another  to produce different lumber products precisely and q u i c k l y  quality  N o , lower ranking for change/add new products as t h e reason for facility upgrading  process nnovation c o u l d decrease time i n m o v i n g from i n i ial concept to final product by using C A D , C A M , aiud F M S  N o , there is not m u c h products design i n v o l v e d i n manufacturing and  Process innovation can improve ability o f production process to deliver p r o d u c t with special quality and lower production coast  Y e s , higher ranking o f cost reduction as the reason for facility upgrading and increasing application o f computer software for size control and optimization on w o r k i n g center  n o C A D , C A M and F M S i n processing  N o , lower optimized E d g i n g and T r i m m e r i n overseas group because current technology on scanner and optimization can hardly deal w i t h special requirement o f overseas market, such as c o l o r and grain direction  The  study results cannot support the " A c t i v e " Process Technology theory due to the special  characteristic of the sawmilling industry and its products (see section 3.3 for details).  6.2.3  INTEGRATED T E C H N O L O G Y INNOVATION  Five aspects were discussed in integrated technology innovation: technology of communication and information system, quality control, value added products, research and development, and environment and resources. A l l of these factors have been confirmed as the key elements in lumber manufacturing technology innovation.  Communication  played  an  important  role  in  sawmills  both  internally  and  externally.  Communication was ranked as the third most important training program by the surveyed mills (proceeded by lumber grading and Q C ) . More than 70% of the responding mills indicated that  102  their line employees had regular meetings with supervisors and informal communication with Q C staff . Sawmills also closely communicated with their customers by inviting customers 111  touring their facilities and by getting feedback from customers, as well as obtaining information from their sales departments^ . 21  Since Q C is one of the major parts of this study, there was much supporting information on the importance of Q C in sawmills technology innovation. Lumber grading and Q C were ranked as the two most important training programs, and mills spent considerable amounts of money on both in-house and outside training in Q C  [ 3 ]  . More than 50% of responding mills indicated that  their Q C staff level would increase in the next three years and the remainder indicated that they would stay at the same l e v e l  [4]  Value added products increased in proportion of the total products produced. More than 90% of lumber manufactured was planed and approximately three quarters was kiln dried. However, fingerjointed lumber was unexpectedly less than 1% of the total production.  There was no question asked regarding research and development in sawmills in this survey. Further study is needed as this topic becomes an interest.  this information was in the questionnaire, but not included in the data analysis this information was in the questionnaire, but not included in the data analysis this information was in the questionnaire, but not included in the data analysis this information was in the questionnaire, but not included in the data analysis 103  6.2.4  M A R K E T P U L L AND T E C H N O L O G Y PUSH  Both market pull and technology push occurred in the sawmilling sector. Different marketing requirements for products distinguished the technology used in the two groups of mills having either an overseas markets focus or a North American market orientation.  Results of this study showed that, because of varying market demands, differences occurred in the production of some products such as more Dimension Lumber produced in the North American group, and more Special Metric Sizes in the overseas group, and more planed and kiln dried lumber in the North American group (Marketing Pull - competitive led innovation, see details in Literature Review). Operation technology was also different in the two groups because of the distinct marketing focuses. Mills in the North American group used more optimized trimmers and kilns than mills in the overseas group and drying kilns were older in the North American group. More mills in the overseas group rated 'reduce cost' and 'add new products' higher than the North American group because of the more expensive raw material supply (Technology Push - demand led innovation, see details in Literature Review). More new products were manufactured by the overseas group.  6.3  NEED FORFUTURE STUDY  Two kinds of experience have been gained during the process of this research. The first concerns the research methods that include sample selection, questionnaire design, interview technique, and statistical tests. The second one is about the additional information needed either to improve the current study or extend it for further research.  104  Personal interview is an appropriated interview technique in industrial marketing  research,  because of its capability of achieving higher responses and of dealing with complex technical questions. However, it is difficult to apply the complete random sampling in sample selection, and therefore restricts the statistical tests in data analysis. T o improve sampling method of this study, a combination of stratified sampling and cluster sampling is suggested to randomize the samples without a cost increase. The details of the suggested sampling method are: 1) stratify the samples into large geographical regions (e.g. B C coast, B C interior, and Alberta), 2) within each stratum, sub-stratify the samples into geographical clusters and then randomly select sample clusters, 3) interview all samples in each cluster. Cluster sampling is regarded as less costly than simple or stratified random sampling (Mendenhall et al, 1971).  In questionnaire design, collecting the appropriate type of data for later statistical tests must be carefully considered. Ordinal data could prohibit application of many useful statistical tests. Therefore, designing questions with interval or nominal answering data is recommended.  Several subjects should be added to the survey i f this study is replicated. Raw material supply is a very important factor that initiates technological innovation in sawmills. From the stand point of Technology Push, it could have considerable influence on  the mills' marketing strategy (see  Market Pull and Technology Push in Literature Review). The British Columbia wood product industry has been facing a decline of raw material supply both in quantity and quality, and the technological innovations initiated by limited natural resources have been found in this study.  105  Therefore, a comprehensive study on how raw materials supply causes technology innovation and how technology affects marketing strategy in the sawmills is needed.  Results of this study indicate that Western Canadian sawmills are targeting Japan as their future market. More than 70% of sawmills expected to increase their sales to Japan in the next three years. H o w large can the Japanese market be? H o w much market share can Western Canadian sawmills capture? What kinds of products do Japanese prefer and what technology should be adopted to produce the right products for the Japanese market? The industry needs the answers to these questions and more studies are needed to assist Western Canadian sawmills industry to understand and develop the Japanese market.  Question about R & D in sawmills was not studied in this research. It is commonly thought that R & D in sawmills is not as active as in other sectors in the wood products industry such as, panel production and secondary manufacturing due to the market maturity and standardized products of lumber. Is this still true? Could market changes, limited raw material supply, and global competition of other products initiate and promote R & D in sawmills? Future study is needed.  106  7. S U M M A R Y A N D C O N C L U S I O N  7.1 SUMMARY This study examined the current situation on marketing orientation, products, Q C activities, and process facilities in 48 Western Canadian sawmills with annual production over 50 M M B F . The study was conducted by interviewing sawmills mangers and Q C staff to complete 43 predesigned questions. The objective of the study was to find the relationship between marketing and technology in sawmills, and assist in providing direction to the sawmill for healthy development.  Results of the study show two distinct markets served by Western Canadian sawmills: the United States and Japan. More than 81% of surveyed mills (mainly from interior B C and Alberta) shipped more than 50% of production to the U S market in 1995, which represents 79% of all respondents' production. The remaining 20% of mills (mainly from coastal B C ) shipped more than 50% of their production to Japan, which was the destination for 21% of total respondents' production. Mills mainly focused on U S market were titled as the North American group, while mills mainly focused on Japanese market were classified as the overseas group.  Regional differences in market focus in the B C sawmills has not changed since the 1991 survey. Interior mills still focused on the U S market while coastal mills still focused on the Japanese market. However, the proportion of the production volume shipped from these two distinctive areas to their preferred markets has increased. This increased reliance on a single market for each region could be considered specialization and may represent an over reliance on a single market. 107  Although, U S shipments were responsible for 58% of total production of surveyed mills in 1995, they were expected to decline because of the U S lumber import quota for Canadian provinces. Meanwhile Japan shipments were expected to increase since more than 73% of respondents expected to increase sales to Japan in the next three years.  Products manufactured in Western Canadian sawmills were mainly Dimension Lumber and Special Metric Size. More than 96% of total production of Dimension Lumber came from the North American group, and Dimension Lumber was responsible for 64% of this group's  total  production. Approximate 89% of the total production of Special Metric Size's came from the overseas group, and Special Metric Size's were responsible for 63%  of this group's total  production. It is clear that Special Metric Size is a preferred product for overseas markets, particularly in Japan, while Dimension Lumber, as a traditional construction product, dominates the North American market.  Major products produced by different marketing groups have not changed very much since the 1991  survey. Dimension Lumber was still the main product for interior sawmills, although its  proportion dropped about  15%  from  1991  to 1995.  Special Metric Lumber was the most  important product manufactured by coastal mills in 1995, and its proportion of production has increased.  108  Study results also showed that the North American group produced more kiln dried and planed products than the overseas group in 1995, and there was more kiln dried and planed lumber shipped to North American market than to overseas market. This has resulted from North American customers' preference for finished products, and also, the large size of products in overseas group caused drying and planing to be more difficult and more expensive.  There has been much interest in Q C activities in the sawmills industry. Both marketing groups ranked Value Recovery as the first important factor for Q C , Volume Recovery as the second, and Dimension Uniformity as third. However, results indicated that Value Recovery was ranked higher by the overseas group than by the North American group, while Dimension Uniformity was ranked higher by the North American group than by the overseas group. Comparison between the 1991 and 1995 surveys indicated that the coastal B C mills had increased the ranking for Cost Reduction while interior B C mills had increased the rankings for Volume Recovery and Dimension Uniformity. More expensive raw material supply for coastal B C mills may have required mills in the overseas group (the majority were from the B C coast) to focus more on Value Recovery and Cost Reduction to offset the higher cost of logs, and the demand for large volumes of dimension lumber in the North American market may have caused mills in the North American group (mainly composed of B C interior and Alberta mills) to focus more on Volume Recovery and Dimension Uniformity.  Computerized size control has been applied in the Western Canadian sawmills with 73% of survey mills installed computer software to control size data. S I C A M and L-size were the most popular software used by sawmills. Study results show that more mills in the overseas group 109  used S I C A M , while more mills in the North American group used L-size. 'Easy of Use' is the main reason to choose software in the North American group, while 'Power of Program' was regarded as the main reason in the overseas group.  The overall process technology in Western Canadian Sawmills is at a higher level than ever before. The majority of mills upgraded their facilities in the last five years. Both marketing groups indicated that 'to increase fiber recovery' and 'to improve quality' were the major reasons for their  facilities' upgrading.  The overseas group also considered 'to reduce the cost' as an  important reason to upgrade their production lines, while the North American group considered 'to increase production' as a major reason. This difference was consistent with different products, Q C factors, and important work centers for Q C , between the two marketing groups.  Machinery used by the overseas group were newer than those used by the North American group. This may be because products change more frequently in the overseas markets than in the North American market.  Utilization of optimization on production lines was higher in the North  American group than in the overseas group. Optimization systems can help the mills to increase productivity and volume recovery, the key needs of the North American group. The lower rate of optimization in the overseas group may have resulted from special quality requirements  of  products in overseas market, in terms of appearance characteristics such color and grain direction that current scanners and optimization system are not yet capable of optimizing.  110  Utilization of optimization in B C sawmills has increased since the 1991 survey. This increase means that some conclusions from the 1991  survey no longer apply. For example, "sawmills  serving overseas markets used more optimization at the bucking center than mills serving North American market" is no longer true. Results of this study showed that there was no significant difference between the two marketing groups based on optimization at the bucking stations in 1995. This change was caused by the dramatic increase of optimized bucking centers in the mills serving the North American market in 1995. Changes also occurred in the edging station. Results from 1991 survey indicated that "difference of operation technology on edging was minor based on market served". However, this difference was statistically significant for the 1995 data. This indicates that mills serving the North American market used more optimization technology at the edger than mills serving the overseas market. This is also a result of increasing optimization in edging in the North American group.  7.2 CONCLUSION This empirical research gives a relatively complete picture about the current situation of the Western Canadian sawmilling industry. Results of this study will help the sawmilling industry, government agencies, research and education professionals to identify the opportunities for using appropriate technology, marketing strategies, and quality control techniques to maximize the quality and value of products from limited timber resources.  Ill  8. REFERENCES 1  Anonymous. 1996. Key B C Forest Industry Statistical Reference Tables 1986-1995. Markets/Trade Division, C O F I .  2  Anonymous. 1997. Selected Forestry Statistics Canada. Unpublished Document. Industry, Economics and Programs Branch of Natural Resources Canada - Canadian Forest Service.  3  Anonymous, 1995. The N e w Marketing Imperatives Roundtable, Preparing for a Pointto-Point World. Marketing Management, Spring 1995, vol. 3, no. 4:30-40  4  Assael, Henry and Keon, John, 1982. Nonsampling vs. Sampling Error in Survey Research. Journal of Marketing. V o l . 46 (Spring 1982), pp. 114-123.  5  Blenkhorn, David and Noori, Hamid, 1990. Advancing the Art of Products Design: Synchronizing the Customer's needs with Manufacturing Capacities. In Proceedings of A M A Marketing Education Workshop, December 3-5, 1989. Linking Marketing and Technology Strategies, American Marketing Association, pp. 11-14.  6  Brownile, Douglas T . , 1987. The Strategic Management of Technology: a new wave of market-led pragmatism or a return to product orientation. European Journal o f Marketing 21 (9): 45-65.  7  Cohen, David H . and Ainsworth, D . Michael, 1994. Matching Innovative Panel Processing Technologies with Japanese Market Requirement. Working Paper, Canada-British Columbia Partnership Agreement on Forest Resources Development: FRDAII  8  Cowling, Keith, 1994. Human Resources and Industry Development: new social roles. International Journal of Technology Management, vol. 9 1994(3/4):287-296.  9  Deming, W . Edwards, 1953. Statistical Techniques and International Trade. The Journal of Marketing. April, 1953 vol. 17:428-433  10  Dimsdale, Parks B . and Cox, John Lew, 1990. The Marketing of Technology and the Technology of Marketing: two sides of the coin. In Proceedings of A M A Marketing Education Workshop, December 3-5, 1989. Linking Marketing and Technology Strategies. American Marketing Association, pp. 1-3.  11  Goldsmith, Maurice, 1969. Technological Innovation and the Economy. A Science Foundation Symposium on Technological Innovation and the Growth of the Economy. England, April 11-13, 1969. Wiley-Interscience. 281 pages. Article 1 - Technological Innovation and the Economy Article 15 - R & D Policy and Economic Growth Article 16 - Technological Innovation and Added-Value Article 17 - A Management V i e w of Innovation 112  12  Heeler, Roger M . , 1990. Integrating Technology push and Market Concept in the development of Export System. In Proceedings of American Marketing Association ; Marketing Education Workshop, December 3-5, 1989. Linking Marketing and Technology Strategies. American Marketing Association.  13  H i l l , Christopher T . and Utterback, James M . , 1979. Technological Innovation for A Dynamic Economy. Pergamon Press. 337 page. Chapter 1 - Technological Innovation: Agent o f Growth and Change Chapter 2 - The Dynamic of Product and Process Innovation in Industry Chapter 4 - Technological Innovation and the Dynamic of U S Comparative Advantage in International Trade Chapter 9 - Summary and Policy Implication  14  Kiel, Geoffrey, 1984. Technology and Marketing: The magic mix. Business Horizon, 1984 (May/June): 7-14.  15  Karmel Y . S . and Malti Jain, 1987. Comparison of Purposive and Random Sampling Schemes for Estimating Capital Expenditure. Journal of the American Statistical Association, 82(397): 52-57.  16  ; Maisseu, Andre P., 1995. Managing Technological Flows into Corporate Strategy. International Journal of Technology Management, vol. 10 1995(l):3-20.  17  Maness, T . and Cohen, D . , 1993. Quality Control in British Columbia Sawmills: The State of Art. Working Paper. Faculty of Forestry, University o f British Columbia. October, 1993  18  Maness, T . C , Cohen, D . H . , and Smith R.. 1994. A n Assessment of Quality Control in British Columbia Sawmills: Production, Employment, Trends and Priorities. Forest Products Journal, V o l . 44:3 27-33  19  Mendenhall, William, Ott, Lyman and Scheaffer, Richard L . , Elementary Survey Sampling. Wadsworth Publishing Company, Inc.. 246 pages.  20  Meredith, Jack R. and McTavish, Ronald, 1990. Marketing's N e w Role in the Technological Marketplace. In Proceedings of American Marketing Association , Marketing Education Workshop, December 3-5, 1989. Linking Marketing and Technology Strategies. American Marketing Association, pp. 8-10.  21  j Morris, Michael H . , 1988. Industrial and Organizational Marketing. Merrill Publishing Company. 658 pages.  22  Prabhaker, Paul R. and Golehar, Joel D . , 1994. Marketing Implication of Flexible ' Manufacturing System. American Marketing Association / Winter 1994.  113  Schuler, Albert T . and M e i l , Jamie K . , 1990. Market, Products and Technology in the 21st Century - A Canadian solid wood products perspective. The Forest Chronicle, December, 1990 v.66(6):567-571. Shanklin, William L . and Ryans, Jr. John K.,1990. Key Organization and Staffing Issues Impacting Marketing, Technology, and Corporate Strategy. In Proceedings of American Marketing Association Marketing Education Workshop, December 3-5,1989. Linking Marketing and Technology Strategies. American Marketing Association, pp. 4-7. Sinclair, Steven A . and Cohen, David D . , 1992. Adoption of Continuous Processing Technologies: its importance in standardized industrial products-market. Journal of Business Research, 1992(24):209-224 Topfer, Armin. New Products - Cutting the Time to Market. Long Range Planing, vol. 28 1995(2):61-78. Tull, Donald S. and Hawkins, Del I. 1993. Marketing Research - Measurement and Method, Six Edition. Maxwell Macmillan Canada, Inc. 863 pages. West, Alan. 1992. Innovation Strategy. Prentice Hall. 208 pages. Williston, E D M . , 1985. Computer Control Systems for L o g Processing and Lumber Manufacturing. Miller Freeman Publication. 414 pages.  114  9. APPENDIX I SCIENTIFIC A N D C O M M O N N A M E S U S E D IN T H E S T U D Y  Common Name  Scientific Name  lodgepole Pine  Pinus contorta  true fir (alpine / amabilis / balsam)  Abies lasiocarpa /Abies amabilis /Abies balsamea  spruce (engelmann spruce / sitka spruce)  Picea engelmannii / Picea sitchensis  Douglas-fir  Pseudotsuga menziesii  hemlock (western hemlock)  Tsuga heterophylla  cedar (western red cedar)  Thuja plicata  larch (western larch)  Larix occidentalis  cypress (yellow cedar)  Chamaecyparis nootkatensis  Sources: Nielson, R . W . , Dobie J., and Wright, D . M . , 1985. Convention Factors for the Forest Products Industry in Western Canada. Forintek Canada Corp. 92 pages.  115  10. APPENDIX II  QUESTIONNAIRE OF S U R V E Y -  116  1995  University of British Columbia /Industry Canada Survey of Sawmill Technology, Markets & Products  1  Please complete the following identifying information. Name:  Job Title:  Company:  .  Address (optional):  :  Sawmill Location: Coastal BC  Interior BC  Total Production (MMBF):  Alberta Total Employees:  Species (%): Lodgepole Pine: Cedar:  ——  Fir: Larch:  Spruce: Others (specify):  D-fir:  Hemlock:  ,  .  PLEASE ANSWER ALL QUESTIONS FOR 1995. , The following questions concern the use of quality control in sawmills. 2  The following 7 factors can each be modified by quality control (QC) activities. Please rank three factors that you consider to be most important to your operation. (Rank from 1 to 3 , with 1 being the most important factor) dimensional uniformity ______ '  surface finish volume recovery value recovery productivity (i.e. piece counts, etc.) cost reduction stable process flow  3  Based on the objectives stated in Question 2, which are the three most important work centres? (Rank from 1 to 3, with 1 being the most important work center) stem bucking/slashing _______  primary breakdown edging/resawing  ______ •  lumber trimming planing kiln drying  Page 1 of 13  Department of Wood Science, Faculty of Forestry, UBC #389 - 2757 Main Mall, Vancouver, BC V6T1Z4 Tel: (604) 822-2685 Fax: (604) 922-9104  U*7  University of British Columbia /Industry Canada Survey of Sawmill Technology, Markets & Products  4  How many employees (full time equivalents, FTE) spend more than 50% of their time grading lumber in your sawmill.  5  salaried:  FTE  hourly:  FTE  Indicate if your mill uses the following: •  Planer  •  Chipper  •  Dry Kiln  What proportion of your lumber production is planed and what proportion is kiln dried? % planed  6  % kiln dried  Please indicate the number of employees who spend some time in quality control activities in your sawmill number of employees time spent on QC activities  salaried  hourly  > 25% 26-50% 51-75% < 76%  7  Please categorise your QC employees by their highest level of educational and work experience. (Fill in the appropriate number of employees in each box)  work experience (years) education  ^1  2-5  6-10  11 +  partial high school high school grad. technical diploma university degree unknown  Department of Wood Science, Faculty of Forestry, #389 - 2757 Main Mail, Vancouver, BC V6T1Z4  Tel: (604) 822-2685  Fax: (604) 922-9104  UBC  Page 2 of 13  University of British Columbia /Industry Canada Survey of Sawmill Technology, Markets & Products  8  9  How much did you spend on outside training in QC (excluding grading) for your employees in 1995? •  Less than $1,000  •  $1,001 to $5,000  •  $5,001 to $10,000  •  More than $10,000  How do you expect your staffing levels in QC to change from 1996 to 1998 Increase  Decrease  Stay the same  10 What are the most important training programs for you operation? (Rank from 1 to 3, with 1 being the most important training program) machine maintenance machine operation machine calibration lumber grading quality control size control computer programming computer skills in machine operation communication cross-training other, (please specify):  Department of Wood Science, Faculty of Forestry, #389 - 2757 Main Mall, Vancouver, BC V6T1Z4 Tel: (604)822-2685 Fax: (604)922-9104  :  UBC  Page 3 of 13  University of British Columbia /Industry Canada Survey of Sawmill Technology, Markets & Products  The following questions concern the use of size control in sawmills.  11 Does your mill use a size control program?  Ul Yes  •  No  If "NO" please qo to Question 16 12 Which measuring devices do you use for size control? (Check all that apply) electronic calipers mechanical calipers tape measure other, (please specify): 13 Do you use software to analyze size data  Q  Yes  If YES, please indicate which software you use:  Ul No  ;  14 Please indicate the why you use the software indicated in Question 13. (Check all that apply) Ui  power of program ease of use  Q  cost availability  Q  bundled with equipment  Ul  other, (please specify):  15 Please indicate how frequently the following machine centres are checked for size control: (Leave blank if not applicable) machine centre  frequency quarterly  monthly;  weekly;  daily;  bucking  every shift only if problem occurs  never  head rig edger trimming planing  Department of Wood Science, Faculty of Forestry, #389 - 2757 Main Mall, Vancouver, BC V6T1Z4  Tel: (604) 822-2685  Page  UBC  Fax: (604) 922-9104  (ZO  4  of 13  University of British Columbia /Industry Canada Survey of Sawmill Technology, Markets & Products  The following questions concern kiln drying at your mill site. If you have no kiln please go to Question 19  16 What is your kiln capacity?  MMBF  How many kilns do you operate?  Kilns  17 How often do you update drying schedules. •  each quarter each month  _  each week  O  every load  _  whenever a problem occurs  _  other, (please specify):  18 When drying, do you ... (Check all that apply) _  pre-sort by moisture content  _  pre-sort by species  •  obtain MC distribution b e f o r e drying by what method? _ _  in-line moisture sensor manual moisture meter  G obtain MC distribution after drying by what method? _ in-line moisture sensor _  manual moisture meter  Department of Wood Science, Faculty of Forestry, #389 - 2757 Main Mall, Vancouver, BC V6T1Z4 Tel: (604) 822-2685 Fax: (604) 922-9104  UBC  Page 5 of 13  University of British Columbia /Industry Canada Survey of Sawmill Technology, Markets & Products  The following questions concern communication about product quality within your mill site.  19 For the machine centres in Question 15, please indicate who performs the machine checks and who receives this information. (Leave blank if no checks occur) machine centre  information? 1 = operator  who performs checks?  who receive  debarking  2 = millwright/electrician  bucking  3 = manager/superintendent  head rig  4 = QC personnel  edger  5 = sawfilers  trimming  6 = other  drying planing  20 What types of QC information are presented to mill employees? (Check all that apply) productivity information recovery information: grade recovery volume recovery control charts sales information profit information other, (please specify):  salaried  hourly  • • • • • • •  • • • • • • •  21 How often are problems with product quality discussed among foreman or supervisors? (Check one) •  each quarter  Ql  each month each week  • •  every day whenever a problem occurs  Department of Wood Science, Faculty of Forestry, #389 - 2757 Main Mall, Vancouver, BC VST 1Z4 Tel: (604) 822-2685 Fax: (604) 922-9104  UBC  Page 6 of 13  University of British Columbia /Industry Canada Survey of Sawmill Technology, Markets & Products  22 How do you obtain feedback from customers about product quality? (Check all that apply) _  no feedback obtained  _  customer tours of your facilities  •  tours of your customer's facilities  •  surveys  _  sales department look at number of claims  •  when initiated by customer  — other, (please specify):  23 How is this information communicated to line employees? (Check all that apply) _  newsletter updates  _  informal communication with supervisors  Q  regular meetings with supervisors  _  informal discussions with QC staff regular meetings with QC staff  •  chalkboard/bulletin board  _ , other, (please specify):  Department of Wood Science, Faculty of Forestry, UBC #389 - 2757 Main Mall, Vancouver, BC V6T124 Tel: (604) 822-2685 Fax: (604) 922-9104  Page 7 of 13  University of British Columbia /Industry Canada Survey of Sawmill Technology, Markets & Products  The following questions concern your mill's products and markets in 1995.  24 a) , Estimate the proportion of VOLUME shipped to the following in 1995. (Total should add up to 100%). b)  Please indicate whether you think the following markets will grow (note with a "+"), decline (note with a"-"), or remain the same (note with a "0") in the next 3 years. a) % of volume shipped  b) market change  Canada USA Europe Japan Other Asia Middle East Other  • 100%  25 a) What proportions of your North American and Overseas lumber shipments are kiln dried? North America b)  %  Overseas  %  What proportions of your North American and Overseas lumber shipments are planed / surfaced? North America  %  Overseas  %  26 For each of the products listed below please indicate the proportion of VOLUME that your facility produced in 1995. dimension lumber studs boards '  •  MSR siding timbers clears specialty metric sizes fingerjoint lumber other, (please specify)  100%  Department of Wood Science, Faculty of Forestry, #389 • 2757 Main Mall, Vancouver, BC V6T1Z4 Tel: (604) 822-2685 Fax: (604) 922-9104  Page 8  UBC  4  Of  13  University of British Columbia /Industry Canada Survey of Sawmill Technology, Markets & Products  27  For each of the following distribution channels, please indicate the proportion of volume that your facility shipped in 1995. office wholesaler (takes no ownership) agent/distributor (takes ownership) direct to industrial users or retailers other, (please specify)  :  100%  The following questions concern information about your processing facilities  28  Has your operation upgraded its production line in last five years?  •  Yes  •  No  If YES, what are the reasons for upgrading? (Check all that apply) changing raw material Ol  to increase production  Q  to increase fibre recovery  Q  to improve quality to control/reduce cost to change/add new products  •  29  other, (please specify)  Please indicate the type and age of equipment used in the following manufacturing centres. (If there is more than one machine in the centre, give the range of the machine ages). STEM BUCKING  age of equipment  cutoff saw system multiple saw system Q  manual bucking in woods  •  other  Department of Wood Science, Faculty of Forestry, UBC #389 • 2757 Main Mall, Vancouver, BC V6T1Z4 Tel: (604) 822-2685 Fax: (604) 922-9104  Page 9 of 13  University of British Columbia/Industry Canada Survey of Sawmill Technology, Markets & Products  PRIMARY BREAKDOWN  age of equipment  circular head rig chipping canter chip n saw single band head rig _  multi band reducing head rig scrag saw  •  other  ;  EDGING _  horizontal arbour gang edger  •  vertical arbour gang edger single band resaw  _I multiple band resaw _I board edger (not optimized) optimized board edger •  other  TRIMMING _  multisaw trimmer  •  other  •  DRYING _  no drying; green only air drying  •  dehumidifier kiln drying conventional kiln drying  •  other  Department of Wood Science, Faculty of Forestry, UBC #389 - 2757 Main Mall, Vancouver, BC V6T1Z4 Tel: (604) 822-2685 Fax: (604) 922-9104  Page 10 of 13  University of British Columbia /Industry Canada Survey of Sawmill Technology, Markets & Products 30 Indicate how each of the following machine centres operate. , M = manually (no electronics) 0 = using optimization (computer simulation chooses optimal cutting/drying pattern) M  0  • • • • •  bucking primary breakdown edging trimming drying  don't know  • • • • •  • • • •  31 Indicate how frequently machines are calibrated and recovery studies are performed. 1 = quarterly; 2 = monthly; 3 = weekly; 4 = daily; 5 = every shift; 6 = only if problem occurs machine calibration  recovery studies  bucking primary breakdown edging  _ _ _ _  trimming drying 32 How often are value tables updated in machine centres that use optimization? (Leave blank if optimization is not used in machine centre)  1 = quarterly  frequency  2 = monthly  bucking  4 = daily  edging  3 = weekly  5 = every shift 6 = only if problem occurs  primary breakdown trimming drying  33 How many engineers are employed at your mill?  engineers  Page 11  Department of Wood Science, Faculty of Forestry, UBC #389 - 2757 Main Mall, Vancouver, BC V6T1Z4  Tel: (604) 822-2685  Fax: (604) 922-9104  ^11  Of  13  University of British Columbia /Industry Canada Survey of Sawmill Technology, Markets & Products 34 Compared to other sawmills in this region, how do you rate your facilities in term of technology? (1 - you are using the least advanced technology of sawmills in your region; 10 - you are using the most advanced technology of sawmills in your region) 1  2  3  4  5  6  7  8  9  10  35 What types of technological information would be most valuable to you? (Rank from 1 to 3, with 1 being the most important information) general technology trends benchmarking for primary processing benchmarking for secondary processing logistics and material handling information on specific machine centres  The following questions concern information for a joint European Study..  36 Please indicate the type of electronic databases you use in market planning, product planning or customer services. Database for:  Do you have database? (Y=yes)  Used for market planning  Used for product planning  Used for customer service  Describe contents  products  customers  competitors  operations efficiency  Department of Wood Science, Faculty of Forestry, UBC  #389 - 2757 Main Mall, Vancouver, BC  Tel: (604) 822-2685  V6T1Z4  Fax: (604) 922-9104  Page 12 of 13  University of British Columbia /Industry Canada Survey of Sawmill Technology, Markets & Products  37 Please answer the following items about your firm's electronic data information systems (EDI). Do you have an information strategy system?  YES  NO  Is it in written form?  YES  NO  YES  NO  Which year was the strategy first created?  ;  How often is it revised? Is it planned jointly with your marketing strategy? Who attends information strategy planning meetings? 38 Indicate what the relative importance of your electronic information systems (in terms of a percentage out of 100%) for each of the following objectives: %  improving production efficiency  %  improving customer service based on product and/or customer data bases  %  customising specific products for specific customers  %  other  '  100% 39 Please indicate how the each of the following strategies can best be described for your mill (each total should equal 100%): Product Strategy competitive commodity products  %  specialty products  %  custom made products  % 100%  Customer Strategy as many customers as possible  .%  few well-defined end use segments known end use customers Market Area as many countries/regions as possible few well defined countries/regions  % 100%  % % %  100%  THANK YOU FOR TOUR CO OPERATION!!! Please indicate if you would like a summary of the results  Department of Wood Science, Faculty of Forestry, #389 - 2757 Main Mall, Vancouver, BC V6T1Z4 Tel: (604) 822-2685 Fax: (604) 922-9104  UBC  Yes  No  Page 13of13  

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