Economics of Plywood Production in the Southern Pine Region

A linear programming model was developed for a southern pine plywood plant. An objective function was defined to maximize the net revenue of the plant when supplied operating activities and constraints. Twenty-three variables, 2 inequality constraints, and 52 equality constraints were outlined. Bolts delivered to the plant were divided into 32 classes, by size, grade, and grain. Each bolt size was given a lathe time required to process Mbf Doyle to yield B, C, and D veneers and cores for conversion into chips. The solutions of the objective function when supplied varying activities and constraints revealed the importance of combining plywood and lumber manufacture. These solutions ranged quite widely for a mill designed to process 50 Mbf Doyle per 8-hour shift. Given nominal activities and constraints, net revenue was found to be $417.76/hour when cores were sold as chips. Ripping cores to 2 by 4 studs raised net revenue to $440.26/hour. Fluctuations in veneer prices did not change the classes of bolts to peel, so intake patterns remained the same. When constraints on D veneer production are placed at 40 percent, restrictions on timber supply idle the lathe for 65 percent of the time, and net revenue plunges to $331.39/hour. Operating with a D restriction of 50 percent enables the lathe to, operate to capacity. If the sawmill is supplied logs of 20 inches in diameter and larger, the veneer mill will generate 58 percent D and a net revenue of $421.29/hour, $18.77/hour less than when no bolt restriction is imposed. If the logs are allocated to sawmill and veneer mill by a marginal value computation (not given) which responds to the competitive picture, net revenue goes to $473.30/hour without affecting the sawmill return. Plugging and patching of D veneer will raise this figure to $507.28/hour. In many areas of the South, the bulk of bolts would fall into the 10- and 12-inch sizes, in which case net revenue declines to $266.75/hour. Buying logs more selectively at a higher price reduced net revenue even more.

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