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Four Lessons from Wood Pallets on Strategy and Competition

When Mr. Market speaks, it’s not personal. Your business and investments either generate cash and earn profits, or they don’t. In timber and the forest products industry, the efficiency of how this message gets delivered varies up and down the supply chain, scaled in part by relative risk and insulated (in the case of forests) by time. Consider the position of the wood pallet sector.

Wood pallet manufacturers use a lot of lumber. They account for about 1 out of every 2 hardwood lumber boards consumed in the U.S. and about 1 in 10 for softwood lumber. However, the economics of the industry require clear priorities and an extreme level of operational dexterity relative to other forest industry sectors.

Over the past two years, we conducted research with PalletOne, the largest new wood pallet manufacturer in the U.S., that highlighted realities and insights about running forest industry operations in competitive environments. Here are four lessons relevant to business strategy generally, and to those focused on the profitability and sustainability of the entire forest industry.

  1. Know your economic place in the forest industry “universe” over time, especially with respect to the ability-to-pay for wood.
  2. Invest to maximize advantages that enhance margins or market share or both.
  3. Have a people strategy that goes beyond hiring and recognizes the retention potential and return on investment from professional development and stretch assignments.
  4. Develop a mental model for how things work to organize and share your thinking with others.

Markets can allocate resources, given the incentives in place. However, markets are agnostic when it comes to setting priorities and clarifying values. The lessons in this Note drive home the strategic value of clear metrics, maintaining a framework and context for making decisions, and investing head space and resources into your teams.

Click here to read and download the complete Q4 2018 Forisk Strategy Note on this research.

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