by Professor Eugene Wengert
When looking for value added, remember that you need a market for all manufactured products from the mill. But with sawdust being only 1/100 of the value of lumber, do not put emphasis on the low valued products.
Yield is the biggest factor controlling profitability.
Consider purchasing another mill's production to help develop enough product to satisfy the demand.
Consider the proper use of a broker and wholesaler - very good idea when first starting. Watch cash flow, especially when using a broker. Do some direct selling yourself whenever possible, as this is usually more profitable, as the product line matures. Don't forget niche markets - small and local, most often - very profitable.
Test a new market by using someone else's equipment at first. For example, rent kiln space first before buying a kiln. This allows you to test the market and also discover the true needs of the customer.
Many of the value-added markets are developing a JIT attitude, which means they are not carrying an inventory. So, the inventory will shift more and more to the primary producer or to the wholesaler.
Consider a retail outlet to move low grade material. The customers include contractors, builders, hardware stores, towns, counties, marinas, hobbyists, do-it-yourselfers, schools, sign shops, etc. Do not grade this lumber. Sell short wood, narrow wood, thin wood, low grade wood, planer defects, trim pieces, etc.
Do you have bark? Do not call it bark - call it landscape mulch and weed inhibitor. Do you have wood particles? Have you stained them so they look aged and ready to enhance property values when used as mulch? What will the retail market pay for landscape timbers that are reject ties? Do you have No.3 Common lumber? If so, call it industrial lumber instead.
With all the emphasis on the customer, don't forget yourself and your employees. Don't forget community goodwill.
Remember that profit is the objective, not production.
More value-added means
more care,
more perfection,
more accuracy, and
more marketing/sales effort.
