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Blog

Performance Benchmarks Drive Profitability When it Matters Most

May 20, 2020
Author: Pete Coutu

You might know the price at which you buy and sell timber, but how do you know whether that price is good or bad unless you know what the market is doing? Could you be making more? Paying less? In periods of extreme uncertainty, constant attention to the pulse of the market is imperative.

Forest2Market Delivered Price Benchmarks provide buyers and sellers of wood raw materials with the market intelligence they need to increase performance and profit margins. The sole source of transaction-based data available in the marketplace, buyers and sellers of wood raw materials use the Delivered Price Benchmark service to negotiate wood raw material and residual prices, secure and stabilize supply and off-take agreements, compare pricing and performance to the market, optimize their supply chains and much more.

 

How Delivered Wood Price Benchmarks Can Improve Performance

In a manufacturing process where over 75% of the finished product cost can be attributed to raw material costs, efficiently procuring those raw materials is key to maximizing profitability. For a modern wood products manufacturer, this raw material cost comes in the form of harvested timber that has been transported to the mill facility. Since these deliveries keep the mill’s equipment busy—while representing an enormous investment—procurement and supply chain operations can make or break a facility’s profitability.

Forest2Market’s Delivered Price Benchmark tool, available on the SilvaStat360 digital platform, provides an interactive full-spectrum view of millions of historical, actual timber transactions and the individual delivered price components that comprise them. To account for differences in the market, there are two separate sections designed specifically for subscriber needs: 1) Delivered Fiber 360, which includes total fiber data regardless of product type (chips, roundwood, particles), and 2) Delivered Logs 360, which details log data only.

Subscribers can compare their prices to the larger market in order to initiate better decision-making and planning, improve performance and drive profitability. Subscribers use the Benchmark service to:

  • Track price changes and identify trends in dynamic markets
  • Negotiate raw material and residual price changes
    • Determine specific pricing for preferred raw materials
    • Gain efficiency in raw material sales or acquisitions
  • Secure and stabilize supply agreements
    • Meet growing demand for emerging technologies
    • Improve vendor loyalty and relationships
  • Compare pricing to the market at large
    • Quantify raw material revenues/procurement costs by component
    • Measure results against the broader market
    • Identify performance improvement opportunities
    • Establish facility and individual performance objectives
  • Optimize the supply chain
  • Determine intra-company transfer prices

 

Dashboard

The product’s online dashboard view provides interactive charts and tables that help users visualize geographies and the data that correspond to their mill facilities, including historical data on product, price and volume. All of this data can then be viewed on a monthly, quarterly or annual basis.

FOB_1

 

Users can select a region, sub-region and market area, then drill down to analyze specific products and performance over time. The charts are also interactive so users can easily add/remove products from the display area and then sort and export the data based on their own individual needs. They can also include/exclude their individual mill facilities and even change the filter criteria based on delivered price basis, unit of measure, roundwood form, currency and more.

 

Mill to Mill Analysis

The Mill to Mill analysis tab allows users to further drill down into the data and compare their performance directly to individual competitors in their market(s). Using the same filter criteria, subscribers can analyze their delivered cost components by area and product, including fiber cost, freight cost and “other” associated costs. The charts are interactive and can be filtered and displayed by price component.

FOB_2

 

The Delivered Price Components by Mill chart displays individual mill performance, which allows subscribers to directly compare their cost components and delivered prices to their peers. The chart is also interactive and can be filtered and displayed by price component. The highest performing mills achieving the lowest delivered costs are included on the far left of the chart.

FOB_3

 

Consumption

The Consumption tab is a feature that is unique to the US South, which allows subscribers to see their individual delivered price components by consumption volume compared to the market. Like the Mill to Mill analysis chart, the delivered price by mill chart at the bottom of the page shows individual mill performance compared to the market as well as price components for each mill that are sortable by consumption volume. Also, like the Mill to Mill chart, the highest performing mills achieving the lowest delivered costs are included on the far left of the chart.

FOB_4

 

Inventory

The Inventory tab allows subscribers in participating regions to see their onsite and offsite inventories, as well as price, compared to the market. Users can view this data by month and can also select and deselect the data and trend lines they want to see displayed in the chart.

FOB_5

 

All of this data can be analyzed in methods that are most beneficial to each individual user, who can then save search filters, download the datasets and customized images, or print charts right from their screens. When used in conjunction with the other analytics available on SilvaStat360, the Delivered Price Benchmark provides access to the only true market data available to the forest supply chain.

It is a daunting prospect to plan for the future in the current environment, yet visionary industry leaders are looking beyond the uncertainty and well ahead of the temporary downturn we find ourselves in. As consulting firm McKinsey & Company wrote in the wake of the Great Recession, “Manufacturers should view today’s environment as an opportunity. Now they can make changes—renegotiating contracts, consolidating manufacturing and distribution networks, launching aggressive productivity programs—that might not have been feasible earlier and may soon be difficult again.”

Forest2Market’s Delivered Price Benchmarks can be used at the corporate, facility and management levels to demonstrate performance, drive informed decision-making in uncertain conditions, and improve profitability accurately and objectively.

delivered price benchmarks

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