Russian Forestry and Wood Supply Operations Analysis
38
WOODWORKING
management at the mill will not allow the
business model to fly. One example here
is when a wood based panel producer is
trying to enter the furniture production
business: depending on the furniture type
and price segment, the boards constitute
about 15-25 per cent of the total cost of
the furniture item, with the bulk of the
value created in design and services - and
the mill is almost never ready to switch
its working practices from "everything for
capacity utilization" to "everything for the
customer". Of course, there are products
which are much safer than furniture from
this perspective: laminate flooring, wall
panels but here the customers are DIY
stores, wholesalers, and specialist stores,
they do all converting from a product
business to a product-and-service business.
To complete the picture: a move in the
opposite direction (e.g. when a furniture
producer goes upstream to enter wood-
based panel production) almost never fails.
Of course, in this case the main reason for
the move is not the margin but the safety
of supply and control over the panel design.
If the strategy of focusing on creating value/profit
in downstream operations is questionable, what
is the best alternative? How to switch the mill
to the continuous improvement of the margin,
how to make the best out of existing assets with
no additional CAPEX downstream, upstream
or elsewhere? And how to do it with personnel
accustomed to looking at CAPEX as "the ultimate
pill" for any profitability issue?
The answer might lie in the introduction of
the best-available management practices.
The range of measures here might vary from
performance improvement seminars for managers
(e.g. to support ongoing internal performance
improvement programs) to the full-scale 12-18
month long implementation of projects lead
by an external consulting company. The latter
brings faster, more certain and lasting results
- providing that the consultants are dedicated
and experienced (see Fig. 5 and 6).
How do those projects work? What is the
difference between "how it is" and "how it
should be" in everyday management practices?
The simple answer on the strategic level is:
the goal is to switch from the "sporadic
improvements" to a continuous performance
improvement at the mill. Among the tactic goals
there would be:
Shifting the management focus from
emergency actions (firefighting) to the
•
identification and removal of root causes
of performance gaps;
Narrowing focus to what is controllable and
can be improved at the site - not on markets
or in variability of raw materials; increasing
accountability and ownership of performance
at the supervisor and operator levels;
Making the performance improvement process
sustainable. This means simplifying efforts
to identify and remove the root causes of
performance gaps while making it more
difficult to use obstacles as excuses.
In 2014, the wood based panel industry in Russia
entered a period in which cost competitiveness
and the best management practices are of the
utmost importance to the overall survival of
individual mills. The shift means that "how you
operate existing assets" attains a bigger role
than "how well you are able to catch market
opportunities". It is a paradigm shift for the top
management of many mills in Russia, and the
paradigm shift is happening now - whether we
like it or not.
Alexey BESCHASTNOV,
Senior Consultant at
Pöyry Management Consulting
Fig. 6: Performance improvement projects in a nutshell: the management system
should be based on performance indicators and formalized action plans
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depends on
Profit
Profit = (Price
- Cost) x Volume
depends on
depends on
In production of panels price is
largely driven by quality and the cost
by consumption coefficients
Local performance Indicators (LPI)
reflect efficiency at each production stage and are
controlled by respective departments
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May 11-15, 2015
Hall 27 Booth G18
depends on
depends on
Issue identification: what are the obstacles on the way to
achieving the targets? Action plan development: what
causes the obstacles and how to eliminate the root causes?
Continuous formalized efforts to be taken to transform "culture of punishment
and resistance" into "culture of continuous improvement". All employees, all
departments, all performance indicators and all success factors are to be involved
berndorf
BAND
Berndorf Band GmbH
Phone: +43 2672 800 0
[email protected]
#6 (2015) RUSSIAN
FORESTRY
www.berndorf-band.at
www.berndorfband-group.comView entire presentation