December January 2002 2003 - Logging and Sawmilling Journal -

Having a marine operations arm allows BC coastal contractor the Olsen Group to get the most out of its logging and road building equipment.

The advantage of having a marine operations arm was really brought home in a simple way to Olsen Group president Tom Olsen when it came to getting a Hitachi backhoe moved down the west coast a while back. The Olsen Group, based in Campbell River, operates contract logging and forest industry-related construction companies on the coast in British Columbia, and had the opportunity to do some contract construction work with the backhoe.

Essentially, the machine could start as soon as the company got it on site. Rather than using one of their own 150-foot barges and diesel tugs to do this relatively small moving job, they thought it would be more cost effective to use one of the commercial marine carriers who ply the coast. “We expected to have the backhoe up there and working in a week,” recounts Olsen. “It took three and a half weeks. It turned out they were making stops in Prince Rupert and the Queen Charlottes, and were dropping our backhoe off at the worksite on the way back.”

This well-intentioned effort to save money didn’t work out as planned, but it did reinforce the integral role the company’s marine operations play in getting the maximum efficiency out of Olsen’s equipment fleet. Getting the most out of your equipment is key to any logging/construction operation due to the large amount of capital contractors have invested in their iron. But the Olsen Group has taken a bit of a different cut at achieving this, with the combination of three different activities—logging, roadbuilding and the tug and barge operation—under one umbrella. While the Olsen family—former logging truck driver Tom, brother Keith and father Irvin—go back a long way in coastal BC logging, the current structure of the Olsen Group dates to the mid-1990s.

At the time, the Olsens purchased a contract logging company in Campbell River, Greenstone Creek Logging. Greenstone was doing about 180,000 cubic metres a year for MacMillan Bloedel, now part of Weyerhaeuser, at the company’s Menzies Bay and Stillwater operations. “When we took over Greenstone, we did a major consolidation with the Olsen Group becoming the umbrella company for the three operating entities,” says Tom.

Greenstone does contract logging on the north Island, continuing its work for Weyerhaeuser, and is part of the company operations which do a total of about 300,000 cubic metres of logging a year. Tsibass Construction does logging and construction work on the north coast, and the Westcoast Tug and Barge operation is the link between the two. The marine arm allows the Olsen Group to take advantage of one-off opportunities, such as contract work, and keep control of the movement of equipment in-house.

Doing so keeps those revenues within the company, but just as importantly allows for shared use of equipment that could be used in both logging and construction operations. Tom points out that the tug and barge operation is run in a straightforward business fashion. “The barge services are sold at retail to our own companies,” he explains. “That’s the only way we can properly look at the company and see how it is doing financially.”

He adds that the benefits can be significant in having that kind of transportation control on the BC coast. “We can and do control all facets of our isolated operations. We can change our minds and go in a different direction business-wise if there are benefits in doing that. We can respond to needs in the market very quickly.” Time is money when it comes to equipment use. In terms of its own operation, Tom cites the example of an all-out equipment move from Hole In the Wall on King Island to South Bentick Arm on the mid coast of BC. It consisted of a total 120 kilometre move—10 kilometres on land from where the equipment was and 30 kilometres on land to where it was to start work, and an 80 kilometre water move in between.

While in other situations, some operators might be waiting at water’s edge for the contract barge to pick them up, “we used our own barge and did the entire move in one day.” “Co-ordination is very critical for us, and we’ve become very effective planners,” says Tom. “We probably own less heavy equipment than a company our size doing the same amount of work. The reason we can do the work with less equipment is that we are able to get better utilization.” Lost production time is minimized with the co-ordination and planning that the company is able to do. It’s a simple formula—if equipment is not working, it’s costing the company money, rather than earning them money, so the goal is to keep the equipment in use.

The Olsen Group made a change earlier this year with some of its equipment. In recent years, they had been working with a Timbco carrier with a Keto head to process second growth timber. Looking for more production, and better overall utilization, they switched to a Waratah 624 processing head on a Link-Belt 4300 carrier to do falling and processing at the stump. This equipment also gives them the option of using the machine for roadside processing in areas where hand falling is required. “Our goal is to get higher productivity from our hand fallers by their not having to do the processing, such as delimbing, out in the bush,” Tom explains. And when it is converted to a loader, the reach is longer, 46 feet for the Link-Belt versus 25 feet for the Timbco. “It’s able to reach pretty much everything,” says Tom. While the Timbco/Keto combo had worked fine, the new equipment brings added flexibility and drives down overall equipment ownership costs for such a unit.

The Link-Belt/Waratah combo is still new to the operation, but they also expect to achieve further efficiencies with the machine in other areas of the operation. At the end of the day, the Link-Belt/Waratah delivers better per cubic metre pricing. “When we take an operator and put them in the Link-Belt and Waratah, with its computer measuring system, its accuracy is 100 per cent.” There is increasingly greater opportunity to do mechanized logging on the coast in the north Island area.

Although the area is known for its massive timber, second growth timber accounts for up to 30 per cent of the cut for Olsen on northern Vancouver Island. “The opportunity to do more second growth is going to grow and that is something we want to be involved in for the future.” There are a number of different factors—including environmental constraints—that could play into exactly how quickly the move into more second growth happens. “I’d like us to be prepared for whatever happens,” says Tom.

Aside from the Link-Belt/Waratah, there has not been much in the way of new equipment for the Olsen Group over the last several years. There has been a gradual shift into standardizing equipment, with a tendency towards Link-Belt and Hitachi models. They have also opted for slightly smaller machine sizes that in turn provide more flexibility, says Tom. A computerized maintenance system keeps track of the 50-odd pieces of equipment doing logging and road construction. Major maintenance is done in a shop in Campbell River, but routine maintenance is carried out in the bush. “We have a fairly sophisticated system where all of the hours are entered daily into the computer, and the computer generates service reports. It’s all generated by the employee time cards.”

The computerized maintenance system has been in place for about three years. When asked if there were any problems with the system at first, Tom answers—bluntly—“lots.” They are long past that, however. They are now able to enjoy the benefits of a system that, while it requires more planning, also delivers significant cost benefits. The computer flags a piece of equipment that is due for maintenance and also issues a purchase order for the items required for the maintenance. This system helps to reduce inventory for the operation. “Our philosophy is that we want to be paying for the items after they’ve already been used,” says Tom.

While this may not be possible for major parts, such as a transmission, this approach can certainly be applied to everyday items. When they receive a 30 day invoice on an oil filter, for example, the oil filter has already been used and replaced. They work closely with local suppliers to achieve this and other efficiencies. “I’d say it’s more of a business relationship approach than the traditional customer/client relationship,” he says. (See sidebar story on page 13)

Olsen Group looks at growing its marine operations, rewarding employees to stay competitive.

Olsen may expand its marine operations on the BC coast to include handling general freight.

The business continues to evolve at the Olsen Group as company management looks at how the different operating areas might work better. In addition to the advantages, Tom Olsen admits there can be drawbacks to having three separate operations under one umbrella company. “It can sometimes be hard to keep a strong focus on the core business. Greenstone and Tsibass, the logging and construction operations, are so closely related—that’s our core business.”

The one company that struggles most, he says, is probably the marine side. “It can be a slave to the logging and construction side.” One option is to grow the marine business further by entering into a joint venture with another marine carrier and getting involved in handling general freight on the BC coast. On the logging side, the Olsen Group is moving ahead with certification, despite the lack of a dominant system emerging in the forest industry.

ISO certification has been the preferred method for Weyerhaeuser, and the Olsen Group has followed that lead. Tom Olsen suspects that Forest Stewardship Council (FSC) may emerge as the industry standard. “ISO doesn’t really give us the bullets we need with our northern operations,” he said, noting it is the FSC system that has a First Nations component. “The scary thing about going down any of these certification paths, though, is that regional guidelines have yet to be established,” he says, especially in areas of high concern, such as First Nations involvement.

The company is also looking at putting a bonus system in place for Olsen Group employees, as part of an overall effort to better manage labour costs. High labour costs in the strongly unionized coastal industry are seen as a problem area for major forest companies and logging contractors.

Tom notes that with companies in some industries—such as steel manufacturing—bonus or profit sharing systems can result in total pay packages exceeding the standard union compensation, while achieving the overall goal of a more efficient operation. “We have to stay cost effective,” he notes. “We are trying to find a way to drive our business by bonusing our employees based on a return on capital. “I am trying to get every person in the organization to be as concerned with the results as I am. And to be able to do that, I have to involve everybody in the business, and have them understand how we get results.”

Purchase of forest licence in contentious logging area represented “a great opportunity”

The withdrawal of West Fraser from coastal logging meant an opportunity for Olsen Management.

With the huge controversy over old growth logging on the BC coast, the Olsen Management Group seemed to be jumping from the frying pan directly into the fire, so to speak, with the purchase of a forest licence in this area from West Fraser Timber two years ago.

West Fraser, which is often cited as BC’s top performing forest company financially, primarily operates in the BC Interior. “The BC coast is a different environment from the interior,” says Tom Olsen. “The coastal licence was such a small piece of their business and it wasn’t their prime focus, but it was a great opportunity for us.” The licence was for 160,000 cubic metres, which represented a very small portion—about three per cent—of West Fraser’s cutting rights.

The move allowed West Fraser to exit from a coastal operation that had been fraught with environmental protests. The most recent was the Great Bear Rainforest campaign Greenpeace and other environmental groups launched in the central coast area. Tom Olsen is diplomatic when commenting on the Great Bear Rainforest, essentially an invention of the environmental groups. “It’s strategic business for those groups, they use a catchy title such as the Great Bear Rainforest to build an emotional context to leverage off of.” And it almost seems irrelevant whether environmental groups create these causes for public relations purposes—as they did in the case of the Great Bear Rainforest—or if there is any factual foundation to their claims. “I’m not sure if it matters if what they say is true or not, as long as it’s successful in driving their agenda,” says Tom.

The campaign was successful, with the major forest companies operating on the coast agreeing to change their forest practices. Olsen’s approach has been to build alliances with First Nations groups in all the areas where they operate. “The common comment I hear is that First Nations rights and title have not been resolved yet. I encourage my people to build relationships with the First Nations that benefit both parties. Once we have relations with these groups, we try and move opportunities forward with them. It takes one issue off the table that government has been slow in dealing with. “It’s a very slow process building those alliances,” he adds. “In some communities, we have had pretty good success and with others, we haven’t.”

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