Evaluation of a direct processing system for converting no. 3 grade red oak logs into rough dimension parts

The primary objective of this study was to assess the economic feasibility and profitability of the direct processing system for converting No.3 grade red oak logs into rough dimension parts. In the first part of this study, the cutting yields of green dimension parts and dollar value recovery from No.3 grade red oak logs by the direct processing system were estimated. A combination method of actual log sawing and simulated cutting was used to obtain the dimension yields. Two sawing patterns (live-sawing and five-part-sawing) and two cutting sequences (rip-first and crosscut-first) were tested for their effects on dimension yields, cutting lengths, and dollar value recovery. It was found that live-sawing resulted in significantly higher dimension yield than five-part-sawing. If followed by rip-first, live-sawing also resulted in higher dollar value recovery than five-part-sawing. Rip-first and crosscut-first has no significant differences in dimension yield, however, rip-first can recover more dollar value than crosscut-first if longer cuttings have higher value. The results of this study indicated that the combination of live-sawing and rip-first has the highest dimension yield and dollar value recovery if longer cuttings have higher value.

In the second part of this study, the mill designs of the direct processing system for the various sawing patterns and cutting sequences were developed. The computer simulation/animation models for these designs were built using SIMAN IV/CINEMA. These models were used to predict the dynamic performances and production rates of the various mill designs. Based on simulation results, the direct processing system with one headrig saw can process from 17.8 to 20.5 MBF No.3 grade red oak logs and turn out 11 to 14.3 MBF Clear-two-face, 4/4 random width green dimension parts per shift.

In the third part of this study, a financial analysis using discounted cash flow methods was conducted over a ten year planning horizon to determine the economic feasibility of the direct processing system that processes No.3 grade red oak logs directly into rough dimension parts. Under the assumptions of this study, measured by both Net Present Value (NPV) and Internal Rate of Return (IRR), all of the six designs evaluated are economically acceptable. With the highest NPV of $4,193,700 and the highest IRR of 29.6 percent, the design that uses live-sawing and rip-first with manual chop saws was found to be the most economically attractive selection. The profitability of the direct processing system, measured in ROS (Return on Sales), was estimated and compared with the reported profitability for the hardwood dimension and flooring industry. The results indicated that the direct processing system are more profitable than the conventional processing system for making dimension parts.

The sensitivities of NPV and ROS to the changes in dimension part price, log price, labor cost, overhead cost, capital investment, weighting factor for part lengths, green cutting yield and drying and remanufacturing loss were analyzed. Dimension part price, green cutting yield and drying and remanufacturing loss were found to be the most important factors that affect the economic feasibility and profitability of the direct processing system.