Managing timber procurement in Nordic purchasing sawmills

Abstract

Procurement of sawlogs to purchasing sawmills represents a basic strategic business process. The properties of inbound sawlogs are decisive for the output of sawn products and the cost of raw material contributes substantially to the cost of the final product. Increasing customer orientation and new demands from powerful customers in the building and retail sectors entail new or accentuated demands on management of procurement. Managing raw material procurement and communicating needs to suppliers and logging machine operators are vital issues for sawmills in order to be competitive. The purpose of the thesis is to explore how purchasing sawmills manage procurement of sawlogs. The results are based on 46 in-depth interviews with people involved in the procurement process at seven softwood sawmills in Denmark, Finland and Sweden. The thesis identifies various types of supply uncertainties as well as process improvement and buffer activities that reduce uncertainties. However, the major obstacle in the procurement process is the power/dependence balance in the relationships with suppliers. Beyond doubt, it restricts the manageability of procurement and particularly bucking. The results suggest that there are a number of ways to improve management of procurement, which are currently not fully employed. The thesis provides four key strategic dimensions of the procurement process and suggests a general conceptual model of wood procurement to purchasing sawmills. Further research within the subject can usefully explore the link between procurement management and procurement strategy as well as the relation to other functions' strategies and the corporate strategy. The importance of the identified strategic dimensions of the procurement process needs to be quantified in order to provide normative suggestions.

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