By specifying alternative log supplies, it is possible to determine the profitabilities of alternative log supplies, or mixes of supplies, and the breakeven values and return-to-log values for each.
The most profitable product mix and the effect of sales constraints can be identified. The extent to which it would be beneficial to change product prices in order to sell a more profitable mix can be determined.
Normally the cash flow associated with the operations being modeled is many millions of dollars per year. Even if the benefits resulting from use of the model are relatively small on a percentage basis, the impact on profitability may still be very large. However, sometimes, the changes are quite large, with a corresponding impact on profit.
When the model is being used for evaluating timber purchases or trades, in competitive bidding situations, the benefits of accurate evaluations that consider all the variables can be substantial.
Management may implement optimized plans directly, to maximize immediate profits, or choose between alternatives that satisfy longer-term objectives. With these choices, management always retains control.
A model can vastly improve communications between departments. Many changes, particularly in harvesting operations, have effects that are far-reaching. When all concerned can view the results of model runs, it becomes easier for everyone to work towards a common goal.
The validation process itself often uncovers problems with the current operations that are easily corrected. The component models, such as WOODSIM™ and SAWSIM®, are configured to model the operation's processes as they are understood to operate. These models are sufficiently detailed, with all important operating variables taken into account, and so the departures from the models that occur in practice should be quite small. Sometimes, however, these departures are not small, and the validation process reveals operating situations, such as inappropriate machine settings, that can be easily corrected.
Planning and forecasting becomes much easier, once the model has been validated and accepted. Many more alternative operating strategies and potential capital expenditures can be evaluated, and potential operating problems avoided. Often the main operating variables for each case are pre-determined. The model then takes care of the "number crunching" details and the reporting.
Once a HALCO model has been set up and calibrated, it is less work to prepare realistic plans that are consistent between woodlands and manufacturing departments. So the effects of changes in woodlands and manufacturing operations and product sales can be quantified. Manufacturing operations can become more predictable, making improved sales planning and greater sales realizations possible.
Cooperation between woodlands, manufacturing and sales departments is much easier with HALCO models. Realistic, fully detailed plans can be developed, which all three departments have contributed to and can relate to. When these departments work together, much is achieved.
When the log mix and the operating constraints, and their effect on profitability, can be predicted in advance, management is better placed to take action to relieve bottlenecks. The impact of doing this, and the new bottlenecks that will then arise, can be determined in advance.
When there are multiple mills, the optimum allocation of fibre between the mills can be determined.
Optimizing wood supply and manufacturing operations will typically improve profitability by several percent of the total value of sales. For a typical large sawmill or plywood mill the total value of sales might be 100 million dollars per year. In such a case each percentage point would be worth 1 million dollars per year in increased profits, more than enough to justify the required investment of money and effort. The issue should be not the cost, but the certainty of the effort being successful.
HALCO has a track record of delivering the benefits.