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Case Study Option 3

Treetop Forest Productions (p. 495 textbook)


Steven L. McShane, The University of Western Australia, and David Lebeter

Treetop Forest Products Ltd is a sawmill operation in British Columbia, Canada, that is owned by a major forest products company but operates independently of headquarters. It was built thirty years ago and was completely updated with new machinery five years ago. Treetop receives raw logs from the area for cutting and planing into building-grade timber, mostly 2-by-4 and 2-by-6 pieces of standard lengths. Higher grade logs leave Treetop’s sawmill department in finished form and are sent directly to the packaging department. The remaining 40 per cent of sawmill output is made up of cuts from lower grade logs, requiring further work by the planing department.

   Treetop has one general manager, 16 supervisors and support staff, and 180 unionised employees. The unionised employees are paid an hourly rate specified in the collective agreement, whereas management and support staff are paid a monthly salary. The mill is divided into six operating departments: boom, sawmill, planer, packaging, shipping and maintenance. The sawmill, boom and packaging departments operate a morning shift starting at 6 am and an afternoon shift starting at 2 pm. Employees in these departments rotate shifts every two weeks. The planer and shipping departments operate only morning shifts. Maintenance employees work the night shift (starting at 10 pm).

   Each department, except for packaging, has a supervisor on every work shift. The planer supervisor is responsible for the packaging department on the morning shift and the sawmill supervisor is responsible for the packaging department on the afternoon shift. However, the packaging operation is housed in a separate building from the other departments, so supervisors seldom visit the packaging department. This is particularly true for the afternoon shift, because the sawmill supervisor is the furthest distance from the packaging building.

Packaging Quality

Ninety per cent of Treetop’s product is sold on the international market through Westboard Co., a large marketing agency. Westboard represents all forest-products mills owned by Treetop’s parent company as well as several other clients in the region. The market for buildinggrade timber is very price-competitive, because there are numerous mills selling a relatively undifferentiated product. However, some differentiation does occur in product packaging and presentation. Buyers will look closely at the packaging when deciding whether to buy from Treetop or another mill.

   To encourage its clients to package their products better, Westboard sponsors a monthly package quality award. The marketing agency samples and rates its clients’ packages daily, and the sawmill with the highest score at the end of the month is awarded a plaque. Package quality is a combination of how the timber is piled (e.g. defects turned in), where the bands and dunnage (packing material) are placed, how neatly the stencil and seal are applied, the stencil’s accuracy, and how neatly and tightly the plastic wrap is attached.

   Treetop Forest Products has won Westboard’s packaging quality award several times over the past five years, and received high ratings in the months that it didn’t win. However, the mill’s ratings have started to decline over the past year or two, and several clients have complained about the appearance of the finished product. A few large customers switched to competitors’ timber, saying that the decision was based on the substandard appearance of Treetop’s packaging when it arrived in their yards.

Bottleneck in Packaging

The planing and sawmilling departments have significantly increased productivity over the past couple of years. The sawmill operation recently set a new productivity record on a single day. The planer operation has increased productivity to the point where last year it reduced operations to just one (rather than two) shifts per day. These productivity improvements are due to better operator training, fewer machine breakdowns and better selection of raw logs. (Sawmill cuts from high-quality logs usually do not require planing work.)

   Productivity levels in the boom, shipping and maintenance departments have remained constant. However, the packaging department has recorded decreasing productivity over the past couple of years, with the result that a large backlog of finished product is typically stockpiled outside the packaging building. The morning shift of the packaging department is unable to keep up with the combined production of the sawmill and planer departments, so the unpackaged output is left for the afternoon shift. Unfortunately, the afternoon shift packages even less product than the morning shift, so the backlog continues to build. The backlog adds to Treetop’s inventory costs and increases the risk of damaged stock.

   Treetop has added Saturday overtime shifts as well as extra hours before and after the regular shifts for the packaging department employees to process this backlog. Last month, the packaging department employed 10 per cent of the workforce but accounted for 85 per cent of the overtime. This is frustrating to Treetop’s management, because time and motion studies recently confirmed that the packaging department is capable of processing all of the daily sawmill and planer production without overtime. Moreover, with employees earning one and a half or two times their regular pay on overtime, Treetop’s cost competitiveness suffers.

   Employees and supervisors at Treetop are aware that people in the packaging department tend to extend lunch by ten minutes and coffee breaks by five minutes. They also typically leave work a few minutes before the end of shift. This abuse has worsened recently, particularly on the afternoon shift. Employees who are temporarily assigned to the packaging department also seem to participate in this time-loss pattern after a few days. Although they are punctual and productive in other departments, these temporary employees soon adopt the packaging crew’s informal schedule when assigned to that department.

  

Discussion Questions

1.

  

What symptom(s) in this case suggest that something has gone wrong?

2.

  

What are the main causes of these symptoms?

3.

  

What actions should Treetop Forest Products executives take to correct these problems?



© Copyright 1995 Steven L. McShane and David Lebeter. This case is based on actual events, but names and some characteristics have been changed to maintain anonymity.


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