Turning for Profit

Small forest industries must keep abreast of developments in modern management tools to stay economical and competitive with larger, more efficient wood industries and non-wood products. The use of linear programming to provide management with the facts needed to make the best possible economic decisions is demonstrated. The present study is an initial step in an attempt to: 1) mechanize the collection and analysis of data relevant to major decisions; 2) provide management with this data, freeing him from the need to guess; 2) place modern analytical tools at his disposal without requiring that he understand how they work; 4) provide him with a dynamic and continuing supply of answers to current production and economic problems confronting the firm; and 5) do this at low cost. The program is demonstrated for a small wood-turning plant doing contract work for a broad range of customers. Linear programming is an analysis whereby an objective, here maximization of net revenue, is obtained mathematically by solving a series of linear equations. Data were collected on: 1) lathe productivity; 2) cost of labor and materials; and 3) bid price for the 21 orders studied. Product mix and machine allocation were mathematically charted to produce maximum profits. The program also gave accurate guidelines for competitive bidding and told which orders to reject in favor of others to produce greatest net profits.

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