Metsäntutkimuslaitos Skogsforskningsinstitutet Finnish Forest Research Institute www.metla.fi

DevelopingDeveloping seedlingseedling logisticslogistics and and organizationorganization of of plantingplanting workwork ––

costcost--efficiencyefficiency perspectiveperspective

NORDIC NURSERY CONFERENCE 2007Juho Rantala, FFRI / Suonenjoki

20.9.2007 2

ContentContent of of presentationpresentation

I.I. BackgroundBackground –– whywhy logisticslogistics is is importantimportant??II.II. LogisticalLogistical characteristicscharacteristics in Finlandin FinlandIII.III. CostsCosts and and developmentdevelopment possibilitiespossibilities of of

seedlingseedling transportationtransportationIV.IV. ReRe--organizationorganization possibilitiespossibilities of of plantingplanting workworkV.V. SomeSome conclusionsconclusions

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ChangesChanges in in operationaloperational environmentenvironmentI.I. Privatization of Finnish nursery companies in 1990sPrivatization of Finnish nursery companies in 1990s

A A stepstep towardstowards marketmarket competitioncompetitionImportanceImportance of of costcost--efficiencyefficiency and and customercustomer--drivendriven wayway of of thinkingthinking in in seedlingseedling productionproduction increasedincreased

II.II. Decreased number of nursery unitsDecreased number of nursery unitsDecreasedDecreased totaltotal numbernumber of of seedlingsseedlings producedproducedEconomiesEconomies of of scalescale in in seedlingseedling productionproduction

III.III. MechanizedMechanized plantingplanting and and plantingplanting throughoutthroughout the the growthgrowth periodperiod

IV.IV. IncreasedIncreased sizesize of of ForestForest Owner’sOwner’s AssociationsAssociations and and otherother serviceservice providersproviders

V.V. ThreatsThreats and and possibilitiespossibilities of international of international competitioncompetition

AltogetherAltogether, the , the importanceimportance of of logisticslogistics in in forestforestregenerationregeneration hashas increasedincreased

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SupplySupply chainchain of of seedlingsseedlingsNursery companies

FOAs etc.

Forest ownersSeed suppliers etc.

Transportation companies

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LogisticalLogisticalenvironmentenvironment of a of a nurserynursery companycompany

Nursery companies Nursery companies have typically about 50 have typically about 50 major customers that major customers that operate as middlemen operate as middlemen in supply chain of in supply chain of seedlingsseedlings

About 90 % of About 90 % of seedlings is delivered seedlings is delivered via these middlemenvia these middlemen

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DemandDemand structurestructure

0

5

10

15

20

25

1.0-2.9 3.0-4.9 5.0-6.9 7.0-8.9 9.0 or more

Seedlings (100000) per order

Fre

quen

cySeedling demand (Seedling demand (orderorder) per ) per customer customer variedvaried betweenbetween 100,000 and 100,000 and 1,200,000 seedlings, the average being 1,200,000 seedlings, the average being approxapprox. 500,000 . 500,000 seedlingsseedlings

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ChoosingChoosing transportationtransportation vehiclevehicle

0 50 100 150 200Transportation distance (km)

Tran

spor

tatio

n un

it co

st in

dex tractor

passengercar

deliveryvan

pick-uptruck

truck w itha trailer

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EconomiesEconomies of of scalescale in in transportationtransportation

The number of transported vehicle loads per transportation route

Tran

spor

tatio

n un

it co

st

Transportation unit cost function forfractional vehicle loads

Full-load transportation unit cost

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PossibilitiesPossibilities of of transportationtransportation optimizationoptimization

0

20

40

60

80

100

120

140

160C

ost i

ndex

External transp. Internal transp.

5 13

(i)

(i)(i)(ii)

(ii)

(ii)

The relative improvement in costThe relative improvement in cost--efficiency caused by the centralized efficiency caused by the centralized transportation planning system (i) compared to the current transportation planning system (i) compared to the current decentralized system (ii) varied from 13.0% to 36.5%decentralized system (ii) varied from 13.0% to 36.5%

Number of nursery units

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CostCost--effectseffects of of dividingdividing transportationtransportationinto into periodsperiods

80

90

100

110

120

130

140

150

160

170

0 4 8 12 16 20 24

Number of seedlings (millions) transported during a certain transportation period

Tran

port

atio

n un

it co

st in

dex

Dividing transportation into 3 periods increased transportation Dividing transportation into 3 periods increased transportation costs about 10% and into 5 periods about 20%costs about 10% and into 5 periods about 20%

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An An exampleexample of of rere--organizationorganization of of plantingplanting workwork

FOA’s old operation modelGreat variety of workings within the sameorganization

Part of seedlings were delivered straight to planting sites, some to foremen’s intermediate stores and the rest to FOA’s common seedling store

Seedling delivery was mostly done by foremenForest workers used to work aloneThe need for re-organization was caused by, for instance, insufficiency of foremen’s working hoursand high travelling expenses during the plantingperiod. Also the quality of regeneration wasdeteriorated because of fuzzy practices.

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New operation model

+ Centralizedseedlingorders

+ Qualitycontrol basedon follow-upsystemmeasured byplantinggroups

Nurserycompany

Delivery terminal managed by a middleman organizationApplicable number of terminalsNamed forest worker in chargeEquipment to load and unload seedlingsIrrigation equipmentPossibility for roofed storagePick-up service for forest owners with own initiativeBook keepingFIFO (first-in-first-out) principle

- Transportation company deliversseedlings to delivery terminalsaccording to the contract

Planting site 1

- Planting groups (2−4 forest workers / group) take care of the delivery of seedlings to planting sites

- Workers take remainder seedlings to the next planting site

Planting site 1 Planting site 2

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Some results of re-organization

0 , 5

0 , 6

0 , 7

0 , 8

0 , 9

1, 0

1, 1

1, 2

1, 3

1, 4

1, 5

X X+1 X+2

Inde

x (X

=1)

T o t al numb er o f seed ling sd elivered

T o t al amo unt o f wo rkingho urs used b y f o remenF o remen's t ravell ingexp enses

+ Both forest workers and foremen were satisfied to the changes

+ Better regeneration quality

20.9.2007 14

SomeSome conclusionsconclusions

Costs of wellCosts of well--organized transportation are not an organized transportation are not an obstacle for focusing seedling production into obstacle for focusing seedling production into fewer largefewer large--scale nursery units scale nursery units

This is important because most of the nurseries in Finland are This is important because most of the nurseries in Finland are still too small to gain a real advantage from largestill too small to gain a real advantage from large--scale scale productionproduction

ClearClear rulesrules and and liabilityliability distributiondistribution togethertogether withwithcostcost calculationcalculation and and basicbasic biologicalbiological knowledgeknowledgeareare the the mostmost importantimportant toolstools for for successfulsuccessfulorganizationorganization of of plantingplanting workwork

MoreMore responsibilityresponsibility to to plantersplanters, , usageusage of of plantingplanting groupsgroups, , exploitingexploiting plantersplanters in in qualityquality controlcontrol and and informationinformationcollectioncollection……