Sawtimber valuation and sawlog allocation through simulation of temple-inland sawmills

The cost of delivered sawlogs to a sawmill may account for 70 to 80 percent of all operating costs. Therefore, accurate valuation of standing sawtimber and proper allocation of sawlogs are critical to a sawmill’s long-term profitability. Sawmills differ, including the four southern-pine sawmills operated by Temple-Inland Forest Products in east Texas and southwest Louisiana. As a result, one sawmill may process a certain group of sawlogs more efficiently and obtain a higher value from those sawlogs more efficiently and obtain a higher value from those sawlogs than another group. To determine sawtimber value and to allocate sawlogs to sawmills, Temple-Inland Forest Products has employed a simulation program since 1991. During 1994, Temple-Inland Forest Products sawmills processed sawtimber worth $154 million, and analysis showed an approximate 3.3 percent ($5 million) improvement in profit margin through improved valuation of sawtimber and better allocation of sawlogs. Temple-Inland’s investment in simulation has amounted to two full-time employees and approximately $95,000 each year.