The Forest Products Industry

Published Date: 02 Nov 2017

Introduction to the Forest Products Industry

One of the great advantages of living in the United States of America is that of free enterprise. Regardless of age, ethnicity, and upbringing, virtually anyone is capable of succeeding in developing their own business. The forest products industry offers a host of opportunities for small business practices. To better understand the opportunities offered in this industry, take a moment to look around yourself; there is a good chance that you are currently being impacted by some sort of forest product. These products can be anything from the floor you’re standing on, the chair you’re sitting in, the desk you’re working at, or even the home you reside. Forest products play a critical role in our everyday living and comfort. The majority of homes, offices, schools, and recreational facilities are built out of, and use, a variety of forest products.

The forest products industry is connected to virtually all businesses in the world. It can be connected through the pallet that the material is loaded on, the product’s wood packaging, or even the paper used to print reports. This industry offers many unique opportunities for the small to medium size businesses. While you may not start your company in the large, capital intensive firms, such as pulp, paper, and engineered wood products, you may become a supplier or local distributor of important everyday forest products.

Because you are reading this book, you have shown interest in starting your own forest products business; and reaping the fulfillment that comes from personal success and profit. It is important to remember that knowledge and practice is the key to any business success (Strauss, 2005). This book will serve to guide you as you begin your own forest products business.

In chapter one, we will discuss the history, products, markets, customers, and challenges in working in the forest products industry. Each chapter contains a glossary of terms that require further defining. These words have been marked throughout book with a * in the upper right corner of the defined word.

Brief History of the Forest Products Industry

Wood has been used by man as long as written or pictorial history has been recorded. From the dawn of the caveman to modern society, wood has been used for tools, protection, and warmth. There has been significant evidence throughout ancient history of wood used as tool handles, building components, weapons, and fuel for fire. In essence, forest products have been one of the key sources to the success and development of the human race. Try to imagine history without the use and forest products. Today, the uses of various wood products have adapted to the changes in technology, but the fundamental need for wood still remains.

One of the most common and fundamental products known to the forest products industry is lumber. Lumber is defined as, "A wood product manufactured from logs by sawing, resawing and, usually, planing, with all four sides sawn" (Random lengths 2000). Lumber has been used and manufactured for many centuries. Before the use of steam and electric saws, early lumber manufacturing had to be done through pit sawing. Pit sawing required a two person team in which one individual would be on top of the log while the other would be below the log in the "pit". They would hold a large saw and repeated the push-pull process till they were able to saw one side of the log. This process was laborious and it was common for a two man team to saw only 200 board feet* of lumber a day (Sinclair, 1992). To make an adequate comparison, today’s technology allows a softwood sawmill to cut between 200,000 and 800,000 board feet of lumber in a single day (Bowyer 2003).

During the 1800’s, steam powered saws were introduced into the United States. It was recorded that in 1909, due to excessive demand, the United States hit an all time peak in lumber output of 45 billion board feet (Sinclair 1992). In 2009, the U.S lumber production totaled 20.853 billion board feet (Random Lengths 2011). Advances in technology have allowed the forest products industry to produce many products at a much quicker rate than in the past…

(This area will be left for now. If additional information on the history of the industry is requested, it can be placed in this section of the manual.)

Products and Markets

There are literally thousands of different products, marketed to millions of people worldwide that are produced and manufactured in the forest products industry. To better understand the types and variety of products in this industry, it is critical to understand the difference between the softwood and hardwood markets.

Softwood Products and Markets

Most forest products come from one of two types of trees: either a softwood (Coniferous) tree, or a hardwood (Angiosperm) tree. Have you ever noticed how in a forest, during the winter, there always seems to be a group of trees that maintain their green needlelike lush; and yet some trees are completely void of any leaves. The trees that remain green even during the cold months are normally of a softwood species and are also known as "evergreens", because they remain green year round. Softwood species will also bare scaly cones as part of their reproductive system. These cones, and manner of reproduction, are what classify this group of species as softwoods (Bowyer2007). Common names of softwood species that you might be familiar with are pines, spruces, and firs.

Other characteristics of softwood trees are their distinct cone-like shape and their ability to grow quickly. Due to this fast growth and the nature of the trees, the lumber that comes from softwood species are normally full of knots and are easily distinguishable from hardwood species. There are many products that come from softwood trees. To better understand the types of products derived from the softwood species, we will classify the various products into two categories: structural and non-structural.

Figure : Product Diagram for both Structural and Non-Structural Softwood Products

(I made some adjustments to the original diagram I created. I feel that this covers the products from softwoods much better than before. Let me know if there are any additional products that you would like me to add, describe, or have as part of the manual)

Structural

Structural softwood products are products that are made to bear a weight, as typically used in construction. These products are normally very specialized and require a large investment to compete in the market. The majority of small to medium size businesses do not produce products that fit in this market. However, having a better understanding of all the products available in this industry will help you to determine the type of business you will want to start.

Structural Softwood Lumber

Logs of a certain value can be sawn into structural lumber. As stated earlier, lumber is one of the most fundamental materials manufactured in the forest products industry. Softwood lumber is normally used as a structural wood. Structural wood, otherwise known as dimension lumber, is lumber that been certified to bear a significant weight. Structural grade lumber is what you commonly see in a retailer, or wholesaler, such as Home Depot and Lowes. The standard 2x4, 2x6, 2x8, 2x10, and 2x12 dimension lumber is used for this purpose. This lumber is what you would typically see being used on a construction site.

Engineered Wood Products

There are many different engineered wood products available in the forest products industry. An engineered wood product involves breaking down a larger piece of wood into smaller pieces and then reassembling them together using strong glues. This helps to distribute the strength properties of the product and can allow better utilization of the material. Listed below are a few examples of commonly known engineered wood products available on the market:

Plywood: Plywood is a structural panel composed of veneered*pieces wood held together and laminated in alternating layers. Plywood is normally made into sheets of a standardize 4ft by 8ft by ¾ inch thick (Bowyer 2007). Plywood is commonly used in flooring, roofing and side panels for both residential and nonresidential housing in construction.

OSB: OSB stands for "Oriented Strandboard". This product is made by taking a softwood log, cut to a specified length, and flaking it to small strands. These strands are then glued in alternating layers and then hot pressed and glued into place. Similar to plywood in dimensions and purpose, OSB are also mostly used at construction sites.

LVL: LVL stands for "Laminated Veneer Lumber" and is composed of veneered sheets that are face laminate and pressed. LVL differs from plywood in that it is normally much thicker and the veneer layers do not alternate orientation between layers (Bowyer 2007). LVL beams can be constructed to customer specifications.

Engineered I-Joist: An engineer I-Joist uses a combination of two engineered wood products. The I-Joist has its unique name because of the "I" shape of the joist member, similar in shape to a commonly seen steel beam. The joist is composed of a flange and web stock joined together to form a structural joist. Typically the web stock is made of OSB and the flange is made from LVL. When combined and glued in this shape, these two products form a structurally sound joist used for construction (Bowyer 2007).

Glulam: Glulam is short name for "Glue-laminated timber". This engineered wood product is produced by face-laminating lumber to form large and incredibly strong beams (Bowyer 2007). Glulam products are typically used in structures such as field houses, sports arenas, bridges, churches, and residential and commercial buildings (Bowyer 2007).

(There are many more engineered wood products such as PSL, particle board, OSL, LSL… Would you like me to list all of them, or do you think that this gives the reader the general idea?)

Non-Structural

Non-structural wood products are products that will not necessarily carry a weight or bear a load. They are normally created for aesthetic or everyday purposes. Below is a list of the various forms of non-structural forest products found in the market today.

Logs

A log is simply a tree that has been felled and then cut to a specified length. Depending on the size, quality, and machinery available for transportation, a softwood log can be taken down several different manufacturing processes. It can be turned into firewood, lumber, paper, or an engineered wood product.

Anyone is capable to making logs. All that is required is the necessary machinery investment and standing timbers. For larger companies, the land and the logs are already owned, but for the man who can’t afford the acreage, you can always rent and clear areas. The logs can then be sold or sawn at local mills.

Firewood

Softwood lumber can make great starter wood for fires. The wood that comes from softwood species tend to have a lesser heat value than wood that comes from hardwoods, and subsequently burn at a much faster rate. Smaller logs can be chopped and sold in small or large quantities. There are many small local businesses that cut the softwood logs and chop the wood to be sold for burning.

This is always a great way to begin a business. It requires minimal machinery expenses and determined worker. You can make a profit by clearing small softwood logs and producing them into quick burn firewood.

Pulp & Paper

Pulp & Paper manufacturers require heavy capital* and large investments. There are many expensive processes involved in turning a log into pulp, and then using the pulp to make paper. Larger corporations normally invest in the necessary capital to make this aspect of the business competitive.

Pulp and paper manufacturing is a difficult industry to enter without spending excessive amounts of money on the needed machinery.

Secondary Wood Products

Secondary wood products are products that are produced from primary products. Just about any of these secondary wood products can be produced by the small to medium size businesses. All that is required is the necessary machinery, creativity, and ambition to produce and sale these products.

Furniture: Although hardwood lumber typically makes up the majority of material used in furniture manufacturing, there is some furniture that uses softwood lumber. There are markets that require softwood furniture for either the price or appearance.

Moulding: Moulding is the material that is used to trim a home or building. It is the product that surrounds most windows, doorways, and areas that require the joints to be hidden (Random Length 2000).

Misc. Commodities: Miscellaneous commodities cover a wide range of other objects used from softwood lumber. This can be anything from pencils, clocks, to coasters. Any common and mass produced product made from softwood lumber can fall under this category.

Hardwood Markets and Products

In contrast to softwood trees, have you ever found yourself spending countless hours cleaning up leaves that have fallen in your yard? The trees that drop their broad-leaf leaves before winter normally come from a hardwood species. These trees characteristically take longer to grow and mature, have a broad shaped leaf, change color through the seasons, and produce seeds within pods, acorns, or other fruits (Bowyer 2007). Hardwood trees tend to make durable and high valued products. One of the crowning peaks of hardwoods is the diverse color and grain the wood they produce. Unlike softwood trees, there are many varieties of the wood that comes from the many difference hardwood species. An oak, maple, walnut, cherry, just to name a few, all have unique color and grain patterns that make them distinguishable to the naked eye.

Below is a diagram which demonstrates the areas of products available from hardwood species. To better break down the various products that come from hardwood species, we will first look at the products that come from hardwood lumber. Then we will look at the other various products that come from a hardwood log.

Figure : Product diagram for products that come from a hardwood tree.

(This may be a little cluttered but I am trying to figure out if there is any better way to diagram the hierarchy of products that come from hardwood lumber. Let me know of any suggestions you might have on any diagram improvements.)

Products from Hardwood Lumber

There are two classifications of wood products; primary and secondary wood products. Primary wood products are defined as, "Logs, cants, and commodity grades of lumber. Also, commodity grades of plywood, oriented strand board and similar panels" (Random Lengths 2000). Secondary wood products can be defined as, "Primary wood products that have been physically altered by changing their dimensions, shape, chemical composition, appearance, or other properties. Remanufactured products" (Random Lengths 2000). We will look at some of the secondary products that come from hardwood lumber.

Furniture

As explained previously within the section of softwood furniture, hardwood furniture is typically more expensive. While it is becoming increasingly difficult to find solid hardwood furniture, it is still manufactured by large and small businesses alike. There are many factors that contribute to household furniture sales; primarily a household’s disposable income (Sinclair 1992).

The potential is great for anyone to start their own personal furniture manufacturing company. All you need is the proper tools, a good plan, and creativity. Local markets are normally available for the taking to anyone who is willing to commit to the business.

Flooring

Hardwood floors have become very popular not only in the United States but among other countries world-wide. American hardwood flooring can normally be associated with status and financial stability. Today, there are many different kinds of hardwood flooring available on the market. Companies that buy the lumber for hardwood flooring typically buy a lower grade lumber.

While it is possible to make your own hardwood flooring, to produce at a competitive level requires expensive capital. This part of the industry is normally reserved for the large company competitors and firms.

Millwork

The millwork industry is primarily concerned with the production of windows, window parts, doors, door parts, and wood moldings. This area of the industry normally buys high grade lumber. This is due to the fact that most of the hardwood used in millwork will be seen. However, there are some millwork wood products that will be painted over and therefore the grade of lumber plays less of a role. In the past, hardwood millwork dominated the market. Today, the competition with softwood products and composite materials, have become the biggest threat to this part of the hardwood industry (Sinclair 1992).

Hardwood Millwork, along with hardwood flooring, is a product that can be made by the small to medium size business. However, to compete against the dominant companies of these products would require significant equipment investment. There is almost always a local market share that the small to medium size business could target.

Cabinets

The hardwood kitchen cabinet industry has been around for many years. Throughout the decades large and small kitchen cabinet manufactures have flourished as the building of homes has increased. The kitchen cabinet industry is greatly affected by what the housing market is doing. If there are a lot of homes being built, sold, or renovated, there is a high demand for cabinet builders. The same is true for the reverse economic scenario.

This is also a great opportunity for the small to medium size business; so long as the housing and remodeling markets are strong. Anyone with the right tools and determination can succeed in this part of the industry.

Products Directly from Logs

Firewood

Hardwood firewood can have a high market potential depending on where you live and what the main source of heat energy is. Unlike softwood firewood, hardwood firewood has a much higher energy level and is desired for their hot and sustained release of energy. In areas where wood stoves are commonly used, this source of fuel can become a very lucrative business.

As with softwood firewood, it is easy to start a hardwood firewood business. With the right marketing plan, and simple tools, you can find it ways for your small business to flourish.

(I have firewood under "Products Directly from Logs". Would this product truly fall within this category? Is it okay, or do you want me to have another placement for this section?)

Railroad Ties

In 2009, the United States had over 160,000 miles of railroad with the line haul freight railroad operating revenue of approximately 378 million dollars (Association of American Railroads, 2010). In 2009, the total purchases of class 1 railroad ties came to roughly 19.6 million ties (Railway Tie Association, 2010). A significant portion of these ties were made of wood. Railroads could not be successful without their tracks laid on supports such as railroad ties. With a recent governmental push, the railroad system in the United States will expand and become more sophisticated.

As seen in the statistics listed above, there is a high demand for railroad ties. Many of these ties are made of wood and require specific dimensions and treatment processes. There appears to be a market potential for anyone interested in supplying the desired dimensioned hardwood ties. All one would need is a small sawmill and log supply for cutting the ties. These ties can then be sold to companies that use chemical treatments for durability and resistance to decay.

Hardwood Lumber

Hardwood lumber can be used for a variety of purposes. As demonstrated through our previous section, there are many products that are derived from hardwood lumber. It can be cut to random lengths and widths; but normally customer preferences require a uniformed thickness and depth.

This is one of the many opportunities for small to medium businesses within the forest products industry. While competition is strict for softwood products, and special grading is required by law, hardwood lumber extends to many markets. The versatility of this product makes it very attractive to small to medium size businesses. As with railroad ties, one would need a small sawmill and a supply of hardwood logs to begin a business.

Pulp

Hardwood pulp is required for certain kinds of paper. In a similar fashion to softwood pulping, hardwood pulping is a highly capital intensive business. In order to enter this industry and compete will require a large amount of financial investment. Normally competitions of pulp producers happen between larger firms.

Veneer

Hardwood veneer comes from slicing a hardwood log in similar fashion to how you would peel an apple. The veneer sheets then become products that can be used for a variety of purposes. For example, hardwood veneer can be found in many furniture products. It can also be seen in doors and cabinets.

To be capable of turning a log into veneer requires a significant amount of initial investment. One part of the hardwood veneering industry that a small to medium size company can be involved with is the supplying veneer logs. Veneer logs are particularly high quality logs that bring a much higher price than other standard logs. Determining the log value and being a supplier to companies that have veneering capabilities can become a very lucrative business.

Hardwood Lumber Grades

The majority of hardwood lumber that is sold both domestically and internationally is given a grade associated with the quality of that material. Lumber comes from a living organism and thereby is susceptible to defects and imperfections. Various defects that can be noticeable in hardwood boards may be knots, stain, cracks, rot, wane, and so forth. The lumber grading rules were developed and established by the National Hardwood Lumber Association or also known as the "NHLA" (Sinclair 208). The grades are based upon the percentage of the total face-area of the board that is clear of any defects (Bowyer 2007). A sample of the NHLA grading standards can be seen in the figure shown below.

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Figure : Taken from the 2008 "NHLA Grading Rules for North American Hardwoods" Document (NHLA 2008)

To the untrained eye, this chart may appear to be confusing and complex. The top row lists the quality of the wood. Below is listed the names of the quality of the lumber from highest to lowest. All of the following definitions are based from the document, "The Illustrated Guide to American Hardwood Lumber Grades" produced by AHEC.

FAS – Stands for "First and Seconds". Lumber that is given this grade is the highest quality lumber that comes from the NHLA grading rules. Boards labeled as FAS will provide long clear cuttings that extend to both faces of the board. These boards are suitable for high quality furniture, interior joinery, and solid wood mouldings.

F1F – This grade of lumber is similar to FAS. The difference is that there is only one face that is required to meet FAS specifications. The other face must meet all the requirements of making a Number 1 Common grade.

SEL – Stands for "Selects". This grade is very similar to F1F. The primary difference is that lumber which falls into this grade allows a minimum board width of 4" and a length of 6’.

1Com – Stands for "Number 1 Common". It can also be referred to as "Cabinet grade". This grade requires a lower quality than all previously listed grades. Number 1 Common grade lumber is commonly used in the manufacturing of furniture and cabinet parts.

2ACom – Stands for "Number 2A Common". It can also be referred to as the "Economy" grade. This is due to its lower price point. 2ACom lumber makes a variety of furniture parts.

3ACom – Stands for "Number 3A Common". This is one of the lowest grades that can be assigned to lumber. It will have a very low price point and will have to be reworked intensively for furniture parts.

The far left column provides information in regards to the way each grade is established. The first listed row is titled "Minimum Board". This in reference to the minimum board width and length associated with each grade. The next row is titled, "Minimum Size Cuttings". This refers to the minimum size of the cuttings a person will make to get a perfectly clear piece of wood from that board. The following row is listed as "% Clear". This becomes more complicated by listing a surface measure (SM) equations to figure out the amount, in percentage, of clear face that needs to be showing. The last row then lists "# Clear Cuttings". This is the minimum number of clear cuttings that can be taken from a board and is figured by taking the surface measure and dividing it by the respected number per grade.

While individual companies may use additional grades to their lumber, the NHLA grading rules for hardwood lumber has become the national language for understanding the quality of the lumber being sold. Many companies use this grading rule as a point to begin price negotiation.

There are several resources that can help give you an idea of the going price of the various grades of hardwood lumber. One of the most common sources is known as the "Hardwood Market Report". This small booklet is produced weekly to show the average price of lumber, along with associated grades, sold among hardwood lumber companies in the United States. The prices listed in this booklet pertain to lumber that is sold by the 1000 board feet (MBF).

Even though this form of grading rules is used among most of the common hardwood lumber species, special species, such as walnut, normally requires a tailored grading system. This is because these species are used in special ways, and the defects may be desirable for the customer.

Production Statistics & Critical Numbers

Softwood Production Statistics

Hardwood Production Statistics

(What would you like me to research in terms of statistics and critical numbers? I had the idea of putting additional statistics in this section to better express the financial and market opportunity available within the industry. Perhaps numbers based on the total revenue of the industry…)

Sample Glossary

Board Feet

"The basic unit of measurement for lumber. One board foot is equal to a 1-inch board 12 inches in width and 1 foot in length. Thus, a 10-foot long, 12-inch wide, and one inch thick piece would contain 10 board feet" (Random Lengths 2000)

Capital

Capital is another word for the money, property, or goods that are needed to be invested into a business to generate a profit.

(I will leave this open for now, I will have some individuals read this section and see if there are any words or terms that they are unfamiliar with. Then I will write the definitions here. Sometimes it is hard to know what people are and are not familiar with, especially when I have been studying this for four years now. )

Chapter One Citations

Association of American Railroads. (2010). Association of American Railroads. Retrieved

February 11, 2011, from http://www.aar.org/StatisticsAndPublications.aspx

Bowyer J. L., Shmulsky R., Haygreen J. G. (2007). Forest Products & Wood Science

An introduction. Ames, Iowa. Blackwell Publishing. pp 4, 185, 321, 347, 383, 422, 429

430.

National Hardwood Lumber Association. (2008). NHLA. Retrieved February 25, 2011, from

http://www.intermountainwood.com/NHLA2008_rules%20card.pdf

Railway Tie Association. (2010). Railway Tie Association. Retrieved February 11, 2011, from

http://www.rta.org/Default.aspx?tabid=143

Random Lengths. (2000). Terms of the Trade. Random Lengths Publishing, Inc. pp 37, 205, 259,

293.

Random Lengths. (2010). Woodwire. Retrieved January 29, 2011 from

http://www.rlpi.com/base.asp?s1=Daily_WoodWire&s2=Other_Industry_News&s3=Production&pub=list).

Sinclair, S. A. (1992). Forest Products Marketing. McGraw-Hill, Inc. pp 7-8, 212, 208, 223.

Strauss, S. D. (2005). The Small Business Bible. Hoboken, New Jersey. John Wiley & Sons, Inc. pp

3, pp 9-10,19.