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Equipment Allies

The BC Forestry giant Canfor has entered into a unique equipment alliance and initiated sweeping changes with its millyard machines.

anadian Forest Products Ltd (Canfor) has initiated a radically new approach to owning and operating mobile equipment used in the company's lumber and log yards in northern BC and Alberta sawmills, in partnership with Cat dealer Finning. Referred to as "Power by the Hour", the sweeping program to date has seen 37 aging yard machines retired at nine of the company's mills. 

And a further 120 machines are potential targets for turnout at these and other Canfor operations. "All told, in the foreseeable future we are looking at replacing about 160 machines at these mills and at the five Northwood plants we acquired as part of the purchase of the company last year," reports Mik Ball, Canfor manager of fleet services. "That done, we ultimately plan to expand the program company wide." 

All 37 machines retired to date were replaced with Cat wheel loaders (928G through 980G), track log loaders (330B, 350), Wagner log stackers (L4130C), and Cat and Taylor lift trucks in varying sizes. Most were acquired via operating leases and all are enrolled in a customized Finning maintenance plan, tailored to individual mill requirements. Operating costs and operating availability are guaranteed by Finning-a key requirement with the Power by the Hour program, says Ball. 

All of the machines will be turned out at the end of the leases, with the residual buyback guaranteed by Finning in advance. "In essence, Power by the Hour is the first stage of a 'strategic alliance' between Canfor and Finning, in which we co manage the operation of the machines. Our goal with the program is to incorporate Finning's expertise with our own to lower operating costs, increase uptime and add efficiencies wherever possible-not only in the yard operations but also in the mills. 

With this program we hope we are leaving behind, for good, the operating grief and high cost involved in running high labour machines in key production roles." For Canfor-ranked as Canada's top lumber producer by Logging and Sawmilling Journal in its annual Top 30 Lumber Producers list-Power by the Hour is at once a major initiative and a radical departure from past operating modes. Ball observes that while similar strategic alliances have become increasingly common in the mining sector, that hasn't been the case in forestry.

Mill equipment ranging from wheel loaders and log stackers to lift trucks were involved in a new equipment partnership between Canfor and equipment dealer Finning. The program sees equipment operating costs and availability guaranteed by Finning. 

"To my knowledge, this is a first for a forestry company in Canada." In the planning stages for several years, Power by the Hour was initiated on a trial basis at Canfor's Isle Pierre mill complex west of Prince George in early1998. At the time, the mill was running six yard machines - some as old as 17 years - and was dogged by soaring repair and maintenance costs, excessive log breakage and costly inefficiencies that were impacting severely on the rest of the operation. 

"Isle Pierre was in a particularly difficult position at the time. In fact the mill faced possible closure unless something drastic could be done to make the entire operation more efficient. And quickly." Ball notes that while key operating factors including log volumes and fibre diet had changed considerably at Isle Pierre over the years, the yard fleet hadn't kept pace with the change. "That ultimately produced a situation where, among other things, the wrong machines were doing the wrong jobs. 

Wheel loaders initially acquired to feed the mill were unloading trucks and building inventory decks-jobs that properly a log stacker should have been doing." Fibre damage was costing the mill money. "We were sending round wood from the cutoff saw straight to the burner because of excessive damage during handling in the yard. We were also seeing severe fall down in mill production because the yard simply couldn't give it the lengths it needed.'' While the solution at Isle Pierre was evident to all involved, finding the necessary capital to replace the old machines was another problem. 

Ball notes that scenarios similar to this are common. "In this industry, decisions on capital equipment are driven by the cyclical markets. When the market is down, expenditures for new mobile machines aren't a priority. When things turn around, the mills, which might need those machines badly, face built-up and competing demands from within the company for the capital that is available. If you are flush with cash, you might see new mobile machines. If you aren't, you usually don't. 

This is pretty typical in the industry." Appraising the situation at Isle Pierre, a Canfor review team invited equipment suppliers, including Finning, to make recommendations on new equipment and a streamlined log handling system. Finning made the observation at the time that the cost of fibre damage alone would easily pay for the new log stacker that would solve much of the problem. They also suggested that the supplier/customer strategic alliances they were seeing in the mining sector could be adapted to the forest industry. By the spring of 1998, Isle Pierre's six-yard machines had been replaced with three Finning supplied machines; including a Wagner L4130 log stacker. 

After trying out the new equipment program at one of its mills, Canfor decided to go ahead full steam with the program. To date, 37 machines have been retired and replaced with new equipment at mill operations in northern BC and Alberta.

The new look yard included a rationalized log handling system that quickly reduced fibre loss. All three machines were acquired via a tailored "supply and support" agreement that included all of the elements of the now formalized Power by the Hour program: lease as opposed to purchase in order to reduce the initial capital outlay; a Finning maintenance program designed to increase uptime, including optional planned component replacement schedules for major components; guaranteed machine operating costs through the lease term, stabilizing the budgeting process; and guaranteed buyback at the end of the lease term, ensuring a 'no surprise' passage to new units. Based on the positive Isle Pierre results, by the end of 1998 the company decided to expand the program to the eight other mills in the northern BC/Alberta operating group. 

Swinging quickly into high gear, a Canfor supply/management team issued a request for proposal to three major equipment suppliers for a support/management program in line with the Power by the Hour concept. Supplier recommendations were reviewed by the team and ultimately Finning's proposal was chosen. "With a supplier in place, we entered the first phase of the program by asking the mills to target the machines that were approaching death's doorstep and to work with Finning to determine what was needed to replace them. The list named 37 machines, mainly the oldest or most trouble prone. 

Orders were placed quickly so that the replacements could be delivered before costly repairs were required." Next came the process of negotiating the details of the maintenance plan for each machine. "Finning at this point met with the mills and presented their recommendations for the maintenance schedules they felt were necessary to run the machines at the high level of availability required," says Ball. "Because the mills run different operations and have different needs, it was left to them to decide how much of the maintenance schedule they would do themselves, and how much Finning would do, with each machine." 

The flexible support plans developed for the machines vary widely, depending on the mill and the machine. Regardless of the maintenance schedule devised, at the end of the process each machine is operated through the lease term at a guaranteed fixed cost based on operating hours. "All of the elements in the Power by the Hour program-leasing or owning, operating and risk management- are reduced to a single fixed cost, based on operating hours. Hence the name of the program." 

Ball says that, for Canfor, the benefit of Power by the Hour goes beyond running new equipment. This includes the enhanced ability to gain related efficiencies in other operating areas at the mills. "The big economies don't strictly involve the machines. What we have done with Power by the Hour is to use it as a vehicle to effect not just technological change, but also process change. At Isle Pierre the new log stacker enabled us to improve the way we receive, inventory and deliver the logs to the mill. A new 325 log loader is part of a redesigned sorting system that makes the mill more efficient. 

That same reevaluation process has been part of this process at the other mills." "As part of this program," he adds, "we have also asked our people to rethink the way they do their jobs-to assume new or different responsibilities. We want our maintenance people to move past being machine mechanics to being machine managers." 

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