Fixing the Lumbering Lumber Supply Chain
My contractor Monte had good reason to be stressed, having spent much of the current lumber crisis wondering if he could scrape together the right materials to keep his projects moving and his construction business viable without frustrating too many customers along the way. And that meant Monte had little reason to discuss the nuances of the lumber supply chain with me, the oddly inquisitive client who had hired him to build a deck.
The same could be said of Monte’s supplier, Mike, a lumber wholesaler who was contending with similar issues: a confounding lack of timely insight into his supply chain, difficulty providing his customers with clarity around product availability, and as a result, an uncomfortable degree of business uncertainty.
Yet both Monte and Mike were kind enough to answer my questions and feed my supply chain fascination by providing a candid inside perspective on the lumber shortage’s impact on their business, its likely causes and potential pathways for avoiding similar squeezes in the future. It was in the latter area that I could share a bit of insight with them, based on my knowledge of the building materials industry, the workings of its supply chain, and the digital tools that can help resolve issues like these.
To be clear, there is no silver bullet — no single, unilateral solution to the lumber shortage. There are, however, steps that the various segments of the supply chain can take multilaterally, and to some extent collaboratively, to relieve the current bottleneck, reduce the risk of recurring shortages, give people like Mike and Monte more business certainty, and with it, hopefully (and admittedly somewhat selfishly), the materials to finish my stalled deck project.
- Network the entire lumber supply chain. “I am extremely pleased with our first quarter results, as our businesses delivered Weyerhaeuser’s highest quarterly Adjusted EBITDA on record despite severe winter weather and supply chain disruptions,” Devin W. Stockfish, Weyerhaeuser’s president and chief executive officer, said this spring in announcing the company’s first-quarter 2021 earnings.
When the very market conditions that prompt upstream lumber suppliers to rejoice cause major disruptions downstream, that’s a clear sign that the supply chain needs retooling. Rather than begrudging lumber mills their record profits, how about instead learning from the current shortage and taking steps to head off the next one by digitally networking the supply chain, so everyone is synched to the same, shared data in real time? Doing so would essentially embed the various parties into one another’s supply chains, giving them much-needed visibility into supply, demand and logistics information, which they can use to strengthen their planning, decision-making and communications with customers.
The networked approach would make the lumber supply chain more resilient and responsive by providing greater visibility into alternative supply and logistics pathways, and even alternative products. So, for example, Mike could learn from his suppliers exactly how much of which lumber products will be available, when, then plan customer allocations accordingly, while also making that information available to Monte and other customers. What’s more, Monte could use the network to access alternative lumber suppliers in his area and, when lumber is unavailable, suppliers of alternative materials like steel or cement.
Likewise, mill operators would gain deeper downstream insight, so instead of idling capacity, as some did at the start of the pandemic in response to a temporary dip in sales, they could have maintained or even increased mill production, based on information indicating they would soon need that supply to meet pent-up demand.
The benefits of this heightened visibility across the supply network eventually ripple down to end customers like me, in the form of more accurate project bids and timelines, as well as fewer delays and change orders.
Ultimately, as part of a connected business network, the various parties within the network gain a common platform for collaborative problem-solving, risk-sharing and better-aligned business interests.
- Improve intelligence and efficiency inside the mill. At the root of the current lumber shortage is a lack of capacity to turn timber into lumber. Though most U.S. sawmills are running at or near capacity, the shortage persists, with mill owners apparently loath to outlay huge sums of capital to build new lumber production facilities.
Another practical option for increasing output, at least marginally, is to optimize mill production assets and operations. A connected manufacturing approach, whereby assets within the mill are sensor-equipped and IoT (Internet of things)-networked, enables a mill operator to increase equipment uptime by moving away from a time-based maintenance model, to a predictive maintenance model, where the data streaming from a hydraulic press, for example, would indicate when that press likely will need a critical part replaced, so they can plan accordingly, minimizing disruption on the shop floor. With this level of asset intelligence, mill operators can minimize changeover time and scrappage, and be more responsive with their production scheduling, allowing them to shift from a fixed to a flexible schedule, so based on downstream demand data they’re receiving in real time, as well as information about shortages of materials like the adhesive required to make OSB, for example, they can sequence short-term production of different products. Not only do their planning cycles become shorter and better informed by current data, their overall lumber output could well tick up a point or two as a result.
- Enable seamless communication between Mike, Monte and the mill. One thing Mike told me he’s been frustrated by during the lumber shortage is the lack of real-time communication across the supply chain, which has left him largely in the dark about the products coming from his suppliers, and the products his customers want. As a result, not only has he been reluctant to take on excess inventory for fear it will go unsold, he also struggles to provide even his best customers with information about product availability.
What if Mike was privy to real-time information about exactly what’s coming from his suppliers and when, could make customer allocations accordingly, and, with a mobile app, URL or by text notification, promptly convey (or at least make accessible) information about product availability to his customers? What if mills provided real-time visibility into product availability and logistics to distributor customers like Mike, who in turn provided a similar level of visibility to his customers. What if Mike and his customers could then place orders digitally, in the moment, based on that insight? Not only would that help to resolve Mike’s concerns about carrying excess inventory, it could save customers like Monte time-wasting trips to multiple lumberyards in search of the right trusses to finish my deck.
Due largely to Monte’s and Mike’s persistence in overcoming numerous supply chain issues — and despite stretching the budget, timeline and occasionally, our patience — that project is finally complete.
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This article originally appeared in Building Products Digest and is reposted here with permission.