Components of logging costs
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Twenty-four independent logging businesses in the Southeastern United States were analyzed in a general systems approach to document the components of logging costs for mechanized operations, assess the sensitivity of these components to external stimuli, and to identify and describe the business management techniques adopted by contractors to insure survival and profitability.
The contractors' cost records for 1988 and 1989 were analyzed to meet the study's first two objectives and interviews with each participant facilitated identification of survival and profitability strategies. The general interviews and on-site observations of the harvesting systems provided background information for evaluating the costs and identifying business management techniques.
The contractors' records were summarized into six cost components: 1) consumable supplies, 2) labor, 3) equipment,4) insurance. 5) contract hauling, and 6) administrative overhead. Contractors were stratified by trucking strategy, ranging from those who hauled all of their own wood to contractors relying exclusively on contract truckers. Consumable supplies, labor, and equipment accounted for approximately 75% of total costs for the average contractor in 1988 and 1989.
The concept of excess logging capacity was evaluated. Analyses indicate that excess capacity exists in many areas of the Southeastern U.S., and excess capacity influences cost structures and survival strategies. Discussion with most contractors and evaluation of direct costs of excess capacity indicated that contractors are unable to achieve marginal efficiencies due to the large number of suppliers in some areas.
Four major business survival strategies were identified during the study. Equity dissolution and diversification were the prevalent strategies, suggesting that the late 1980s and early 1990s favor harvesting systems that are downwardly elastic in terms of production.
- Masters Theses