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FRP Chainsaw Logging Marketing Study.

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Title: FRP Chainsaw Logging Marketing Study.


1
FRP Chainsaw Logging Marketing Study.
  • Andrew Mendes BA, MA

2
What is Marketing
  • Marketing today is an holistic, all inclusive
    concept covering every aspect of forestry from
    forest to final market.

3
The 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.
4
The 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.

5
Porters 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.

6
Guyanas 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.

7
Consequences!!
  • 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.

8
Consequences contd!
  • Poor or marginal performance of large, capital
    intensive forest operations, leading to many of
    them reverting to the expediency of commodity log
    exports.

9
Chainsaw logging costs of production
  • Between US80 130 m3 delivered Georgetown.

10
Why 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.

11
Benefits.
  • 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.

12
Forest 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)
13
Revenues to GFC from large and small concessions.
Figure 1. Revenue earned from large versus small
concessions ( of total revenue earned)- GFC
2003b
 
14
Production 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  
15
Concentration 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.

16
Lack 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.

17
Lack 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.

18
Competitiveness 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.

19
Lack 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.

20
Rise in Purpleheart and hardwood prices 1999 -
2006
21
Missed opportunities.
  • Because of the lack of communication, potential
    buyers cannot find sawn lumber and sellers get
    lower prices for their product.

22
The 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.

23
Lumber recovery rates cutting 1 and 2 inch
material.
Table 1            Summary recovery rates for
SITE 3. measuring recovery from heartwood of log
MYC 19.
 
24
Benefits 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.

25
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27
The 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.

28
Consolidation 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.

29
Conclusions.
  • 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.

30
Conclusions.
  • 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!

31
Conclusions.
  • 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.
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