Raw Material Procurement in Sawmills' Business Level Strategy - A Contingency Perspective
Authors
Rolf Björheden
Abstract
The sawmilling industry is facing serious challenges; intensified competition, increasing substitution of wood for new materials and powerful customers posing extensive new demands.
Obstacles for a change towards a more competitive configuration of the sawmilling industry are context and contingency related. Corporate strategy building must be based on an analysis of such factors. A contingency analysis of the sector reveals an array of factors that underpin severe fragmentation. Thus, sawmills have limited possibilities to exert power within the sawn wood supply chain. To break free from the ties of sector fragmentation, business level strategy may be based on
- cost advantages based on scale, production technology and productivity, a competitive strategy traditional to the sawmilling industry.
- market domination through new/superior products and unique offers to customers. The development of new products, such as EWP, and closer co-operation with customers such as power retailers are examples of the second type of strategy.
- optimisation of raw material flows based on market information. Control and management of raw material flows is important for the sawmilling industry, as well as for other industries with similar production.
A sawmill with superior control of the inbound sawlogs will always have the upper hand on competition because it may produce and sell its products with high efficiency. In spite of their importance, these areas have received only limited attention. Controlled procurement, flexible management of forest operations and communication of short-term needs to the suppliers are vital issues for the purchasing sawmills, yet to be explored.
