Title: FRP Chainsaw Logging Marketing Study.
1FRP Chainsaw Logging Marketing Study.
2What is Marketing
- Marketing today is an holistic, all inclusive
concept covering every aspect of forestry from
forest to final market.
3The Marketing Value Chain.
Table 1.
The Marketing Value Chain PRIMARY
ACTIVITIES
TECHNOLOGY DEVELOPMENT
SUPPORT ACTIVITIES Source Porter, M.
E.(1985) Competitive Advantage. New York Free
Press.
4The concept of matching resources.
- In the context of forestry in Guyana, this means
matching what is essentially a niche volume
resource, through appropriate technology, value
added techniques and appropriately sized
enterprises, to a market either existing or
created. - The concept of value rather than volume.
5Porters Generic Marketing Model.
- Micheal Porter, a well known marketing Guru,
stated that you either compete on price, quality
or in niche markets. In addition you need to
concentrate on your chosen path and not try to
compete in differing market segments.
6Guyanas Forest Resource Base.
- Low volume, high defect and high species
diversity forest. - GFC Code of Practice allows a maximum coupe rate
of 20 m3/ha over a 60 year cutting cycle.
Compared to Brasil which allows 40 m3/ha over a
25 year cycle. - Actual coupe rate for the 18 active large
concessions is 5.02 m3/ha.
7Consequences!!
- High log extraction costs and lumber production
costs. - Landell-Mills in a 1995 study of 7 large
concessions in the Essequibo Region put the cost
to extract 1 m3 of log to the sawmill gate at
US85 M3. - Coupled with recovery rates of lt 40 this gives
lumber production costs of US250 450 M3.
8Consequences contd!
- Poor or marginal performance of large, capital
intensive forest operations, leading to many of
them reverting to the expediency of commodity log
exports.
9Chainsaw logging costs of production
- Between US80 130 m3 delivered Georgetown.
10Why so low?
- Takes the means of conversion to the stump no
transportation of waste. - Minimal capitalisation utilises contracted in,
dual use equipment. - Minimal bureaucratic and management overheads
appropriately sized enterprises. - Illegal aspect of the operations represents less
than 10 of the costs of production.
11Benefits.
- Pays ½ the revenues of the GFC on ¼ the allocated
forested lands. - Employs 75 of the people in the forest sector.
- Provides 60 of the local lumber.
- Poverty alleviation retains 50 75 of the net
value of the product in the source community.
12Forest Allocation
Figure 2. Forest allocation of State Forests by
SMFEs and Large concessions (SMFE State Forest
Permissions and Wood Cutting Leases / LARGE
Timber Sales Agreements) Note that the two
main components of revenue earning are the
payments of acreage fees and royalties (GFC
2003b)
13Revenues to GFC from large and small concessions.
Figure 1. Revenue earned from large versus small
concessions ( of total revenue earned)- GFC
2003b
14Production vs Marketing orientation.
Table 2. Production orientation vs marketing
orientation. Production orientation the
produce to sell cycle. Production capabilities
?produce product ? sell ? customers. Marketing
orientation Customer needs ? Potential market
opportunities ? market products ? customers
15Concentration on producing volume and not value.
- Driven by the arbitrary grading standards of the
local retail lumber sector that promotes volume
over value. - Perception that volume equals value due to poor
understanding of costs eg. Preference to
produce Mora sleepers rather than flooring or
decking. - Because of this attract commodity pricing for
their product.
16Lack of planning.
- No inventory is done so concessionaires have no
capacity to secure markets before they produce a
product. - Makes supplies unreliable and more expensive.
- Increases cost of extraction due to increased
road density. - Reduced recovery due to missed timber.
- Cost of doing an inventory is just G2 per bd.ft.
17Lack of building code.
- Non standard housing, door and window dimensions
leading to necessity for custom sizes in lumber
and a cut to order scenario that reduces
recovery rates. Also the prevalence of long
lengths. - No grading of wood for structural integrity
purposes leads to arbitrary grading standards
in the local market that discourages cutting to
get the highest grade.
18Competitiveness and specialisation.
- Lower production cost of chainsaw operations
leads to a more competitive value added sector. - Lower production cost and higher profitability of
chainsaw operations allows specialisation of
operators as encouraged by the 2003 ITTO
Diagnostic Mission.
19Lack of synergies and links between suppliers and
buyers.
- There are no formal links between chainsaw
operators and lumberyards results in lower
prices paid for lumber in what is essentially a
suppliers market. - Because of this lumber prices only started to
increase in 2004 -5 due to the shortage of sawn
lumber locally.
20Rise in Purpleheart and hardwood prices 1999 -
2006
21Missed opportunities.
- Because of the lack of communication, potential
buyers cannot find sawn lumber and sellers get
lower prices for their product.
22The chainsaw as a prime saw.
- Lumberyards insist that chainsaw operators
deliver a majority of 1 inch thick material as
they have no resaw capability. - Costs more to produce for chainsaw operators
double the number of cuts, labour and fuel
compared to cutting two inch material. - Lower recovery rate.
23Lumber recovery rates cutting 1 and 2 inch
material.
Table 1 Summary recovery rates for
SITE 3. measuring recovery from heartwood of log
MYC 19.
24Benefits of resawing.
- The lumber yard ends up with a much better
finished product. - No hit and missing in 1 inch material.
- Potentially higher volume availability.
- Potential recovery rates in the 50 60 range
with chainsaws.
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27The Consolidation yard concept
- Establish a concentration/consolidation yard to
be logistical/infrastructural nexus between the
producers and better paying export market for
lumber. - Provide price incentives to cut for grade and
for quality. - Provide value added services to maximise value
creation in the sector. - Provide training in sawing, tooling maintenance
to improve grade lumber recovery.
28Consolidation yard.
- Provide financing to improve equipment and
practices in the sector ie. Portable mills. - Provide training and markets for those operators
that want to venture into value added products.
29Conclusions.
- The sector is poorly organised such that it
limits the pricing accessible by operators
needs at a minimum basic networking, synergies
and communication between suppliers and buyers. - Some form of central database of who is producing
what and where and who is looking for what.
30Conclusions.
- Though not what could be considered best
practice chainsaws recovery rates are at least
comparable to traditional stationary mills and
can be improved greatly by adoption of a resaw
culture. - To improve quality and value creation in the
sector needs a concerted, holistic approach to
the sectors development the concentration yard
concept perhaps!
31Conclusions.
- The sector developed spontaneously out of a need
to support depressed interior communities without
support into a significant contributor to rural
livelihoods and the Forestry Commission. - The sector therefore begs to be viewed in a
positive, developmental light as it deserves. It
begs for support to redress the negative aspects
of the sector. From our experience, given the
support they are willing to improve their
practices and their contribution to the nation as
a whole.