It was just before Christmas 2008 and the markets were going mad. Every day, the news being reported was negative and destabilising. In the equally volatile world of timber, tough decisions were being taken daily in order to safeguard stocks for the UK Merchant channel.
As one of the most experienced players in the business, Finnforest was in the thick of things. At the tail end of 2008, timber prices were static and volumes were down some 15% on average. In response to a reduction in demand, the company had taken the strategic decision to review its sawmilling facilities in Finland and reduce production capacity accordingly, whilst maintaining stocks of material for customers in the UK and across Europe.
In January, Russia’s scheduled Log Export Tax was due to be increased from 25% to 80%, effectively reducing log exports out of Russia, disrupting global forest product trade flows and creating a major supply shortage throughout Asia. Undoubtedly, the result of this hike in taxation would also have made Russian logs expensive and created a supply shortage for Russia’s main customers in Finland, Japan, China, South Korea and the Baltic States. The flip side of the projected reduction in Russian log production and exports, in combination with higher log export costs, might provide opportunities for those log and lumber exporters that can create a competitive fit with China, especially during a global market downturn. As a result of the pending tax and log shortages, Finnforest, along with other major wood product companies in Finland and the Baltics, began to announce permanent capacity closures in sawmills, plywood mills and their often associated paper and pulp mills. According to John Tong, Finnforest’s Senior Vice President of Upgrading and Distribution:
“The UK consumes over seven million cubic metres of timber a year. Our timber products will still be used for finishing, but in economic downturns, large ticket item sales will reduce. That’s why we reviewed our stocks early on in 2008.”
“A critical factor in addition to maintaining supply is the quality of the product. Much of the Canadian stocks can be full of staples, which can cause damage to expensive machinery and result in costly repairs. In Russia, believe it or not, bullets are often found in logs and cause machining problems. Embedded in the timber (some dating from 1945) they can cause fires in the mill when high-speed saws come into contact with them. Finnforest prides itself on supplying in the main, premium Nordic softwood from a variety of owned and managed forests from around Finland and our network of strategically positioned sawmills ensure a robust supply chain, all the way from felling to selling”. Mr Tong adds.
The timber industry is certainly no place for beginners. You have to eat, sleep and breathe the business.
So, despite turbulent markets and looming taxes, Finnforest strives on in order to continue to provide UK merchants with one of the widest portfolio of products in the industry, from professional grade joinery to premium quality mouldings, decking products and various panel products including structural plywoods.
“We have our supply tied up with our sawmill customers,” says Mr Tong. “Those merchants who commit to us will be assured of a consistent and reliable supply.” No longer a local matter, timber has become a global commodity. “It is unlikely to ever return to its pre-2006 state, says Rod Allan, Finnforest UK’s managing director. Finnforest, owned by a cooperative of some 130,000 land owner-shareholders would attest to that.”
“From a tree farmer’s perspective, on average a tree will be harvested every 60 years and each year the tree grows, it yields a greater volume of timber. It’s common for farmers to weigh up the market price regularly and decide whether to harvest that same year or leave and review prices the next. With its unique forestry ownership, supply of raw material is managed effectively and the UK through Finnforest is assured of consistent quality and supply,” continued Mr Allan. The company’s carefully researched and detailed marketing materials are also a boon for merchants who want to add value to what is already a quality range of products.
Says Mr Tong: “We create the demand in order to create pull for the merchant. In such a competitive environment, everything we do has to be accountable, even down to the requests for product literature. We analyse and cross reference all our home delivered products such as log cabins and deck kits against actual sales orders and work out the sales conversion rate.” It’s all part of parent company, the Metsäliitto Group’s corporate values: reliability, co-operation, renewal and of course, responsible profitability.
In order to be able to sell such an array of products effectively, product knowledge is key to sales success and Finnforest, like many other leading manufacturers, has invested over the years to provide training for both its staff and importantly its customers. Finnforest’s has two purpose -built timber academies, one in Boston, Lincolnshire and one in Grangemouth near Edinburgh. Both facilities offer a broad package of timber education opportunities.
With its lecture and syndicate rooms and the utilisation of the latest audio/visual technology, the Timber Academy – which ran its first courses in 2001 – was created to develop a centre of excellence within the timber industry and to offer Finnforest customers the opportunity to develop the skills and knowledge of their staff through relevant training programmes.
Finnforest has trained some 1,500 people through its academy over the last decade. “Having staff that know about the products they are promoting really pays off,” says Mr Allan. “And, if our customers are knowledgeable, they can provide a better quality of service and generate additional sales for their company.”
“The training we provide creates loyalty,” adds Mr Allan. “And, today’s counter staff will be tomorrow’s branch managers. Investment in people is key to a long term and sustainable future for us all working in the industry.”
Independently audited, the Academy is run using a successful ‘tried and tested’ approach. The students arrive from a variety of backgrounds and with varying levels of knowledge. Training consists of a two day course with a preliminary entry exam. The course is aimed at customer staff who have little or no knowledge of timber and covers topics such as; types of timber; grading; machined timber; panel products; putting products to use; preservation; measuring timber; the ways to sell more timber and timber and the environment.
The training is conducted by experienced Finnforest personnel and the workshop format, together with the site tour of Europe's leading timber manufacturing facilities and use of hands-on materials such as cut-away logs and product samples, enables trainees to develop their knowledge and understanding of timber to a higher level.
Courses for larger merchants can accommodate up to 20 individuals. “We want to develop a bond with our customers,” Mr Tong explains. “Better preparation in-store means an improved service and more profitable sales. We teach those attending the course about presentation, too. Research has indicated, products that are presented well are, more likely to sell, improving stock turn and boosting the bottom line.” Mr Tong is also an exponent of electronic trading and technology that helps to expedite a sale. “The biggest irritant to a customer is wasting time. A builder spending money is paid by the hour. He wants to get his purchases completed quickly and with minimal hassle. With a barcode, the product has to be simply ‘zapped’ and this is a successful concept in use throughout retailing and a handful of our merchant customers have invested in this technology and are reaping the rewards”.
Finnforest has the ability to supply bar-coding on the product and packaging, providing merchants with the competitive advantage of being able to monitor sales, stock and purchasing instantly. “Merchants are hugely important to our business” says Mr Tong. “Our chief route to market is the merchant to the end-user and we as a business endeavour to support our merchant customer base with the highest quality in value added service through our robust supply chain, to training, merchandising and marketing support.”Internally, the company is also constantly evolving. Finnforest recently launched a business improvement scheme, where processes and procedures along with costs are analysed and scrutinised to identify ways to increase efficiencies. The techniques used can be applied universally and aim to benefit the company and in the long term its customer.
“Businesses have to be careful not to disable themselves through cost-cutting,” Mr Allan warns.
“Whereas many companies could be perceived reacting to the economic downturn with ‘knee jerk’ decisions, Finnforest is flexible enough to react to market changes, we can adapt our technology and make investments where necessary to strengthen our service,” says Mr Allan. He believes that if you plan well, especially through difficult times, the business will succeed over the long term.
“Besides, you don’t get to be one of the most reliable and experienced players in the business without being good at what you do. Our company is well established and we believe we’re in a good position to take advantage of what opportunities become available to us in such a challenging environment.”
Let’s face it, the timber business is no job for beginners.