Productivity, Cost, and Technical Efficiency Evaluation of Southeastern U.S. Logging Contractors
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Indicators of the overall economic health of the southeastern U.S. logging industry was determined by measuring technical efficiency, and by analyzing the demographic, organizational, business, productivity and cost information with a variety of quality control tools. Data Envelopment Analysis, a non-parametric statistical tool, was used to measure the technical efficiency associated with each logger year.
Demographic information, including age, experience, and education, appeared to have only minimal impacts on contractor efficiency, indicating that business, operational, and environmental factors have greater influence on efficiency.
Groups of observations with low proportions of total cost relating to equipment and consumables tended to have the highest median efficiency scores. Observations with lower median efficiency tended to have higher proportions of their costs associated with equipment and/or consumables. These trends indicate that efficiency, or operating in the area of least costs, is not necessarily in the best interest of the logging contractors or the wood supply system as a whole. These contractors are not in the process of building equity, which is important in order to maintain a productive supplier force.
There was an upward trend in yearly production and costs during the period. Production and cost levels generally increased from 1990 through 1995, before dropping off in 1996.
Yearly efficiency was cyclical, but appeared to be in a general state of decline for the period. The Wilcoxon signed rank test ruled that 1996 was statistically lower than the previous 6 years at the 90% confidence level. The efficiency decline was due in part to the inability of productivity increases to keep pace with inflation throughout the 1990's, influence of fixed costs, and the period of pulp an paper market oversupply in the mid 1990's.
The relationship between efficiency and profitability was examined using marginal cost and revenue analysis. Profits were not collected as part of this study, therefore an arbitrary rate of $12 per ton was assumed. These analyses served to point out the approximate scale size associated with maximum efficiency and revenue. Efficiency is an important prerequisite of profitability, but when green tons of wood is considered the output of the process, the point of maximum efficiency is not always where efficiency is maximized.
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