Should a Moulding Mill Bring Sawmill Operations In-House?

      Here's a long, detailed, and authoritative examination of a moulding mill owner's proposal to invest in his own sawmill operation. April 20, 2011

We traditionally purchase FAS lumber only to produce our product. I have outlets for lower grade as well but the majority of what we manufacture is long length red oak mouldings. We've been considering the purchase of a bandmill in order to reduce cost but other mill owners have cautioned me as to the availability of logs. If I offered a premium for butt logs only, would I get predominately FAS material? I will only need to saw around 2,000 bdft. per day.

Forum Responses
(Sawing and Drying Forum)
From contributor A:
How much product do you need a day? If you saw 2,000 bdft you may at best get only 1,000 bdft of product. And part of that may not be best for your application. If you bought a 20" 12' veneer log you may produce 100 bdft of fas lumber and some of it will be 12" wide. You will have a 64 bdft core of 2C or worst and some 1C. But you will pay $1.50 to $2.00 bdft for the log. A few logs of this type may produce 150 bdft of FAS but with sawing cost included you would have $2.25 per bdft in green product. Now the problem will be the 75 bdft or so of low grade that you also have $2.25 bdft which is selling for less then $600 mbdft right now.

Here you can buy good butt cuts that do not go veneer for $600 to $800 mbdft and get 40% high end product. But if you needed to buy just them logs the cost would go up because they would get less for the rest of the log since you have taken the cream of the load. Other mills need them as well.

So if you are getting 40% product and need 2 mbdft a day then you will have to saw and move 5,000 bdft a day to reach your goal (about 30 tons of logs). Can you stand to lose $0.55 or so per bdft on the other 3,000 bdft to make what you want? Now the dollars will vary by region but for the most part the rest will remain very close to form.

From the original questioner:
Exactly the kind of response I'm looking for. The log you mentioned is 192 bdft, according to the Doyle scale. Would I not have any over run in this scenario if I use a bandmill? Also, my end product is not very wide (3/4" to be exact). I'm thinking I could stretch the over-run by sawing more for my end product than grade specs. Also, aren't there markets for the center squares?

From Gene Wengert, forum technical advisor:
The 192 BF log scale Doyle is for 20" x 12' logs. Your actual yield with a band saw is around 240 BF. I expect 50.5% of the lumber produced to be Selects, F1F and FAS, 28.6% to be No.1 Common and the rest lower grade. However, these are the yields for green lumber. You can expect 3 to 10% quality loss in drying plus about 6% shrinkage.

Your idea of making a tie (oftentimes 7"x9") is a good way to avoid lower grade lumber, in part, but the centers of a tie must be solid and some butt logs may fail in this regard. As our U.S. energy crisis continues, we will see rail transportation grow and this means increased demand for wood ties with increasing prices as well.

(Note: Most of the No.1 Common will yield very well for your moldings. In fact, I would encourage you to check the yields when buying No.1 Common from a good lumber company as your yields might drop 11 percentage points but the price will drop 40% or more, compared to FAS. You need a good lumber company, as you want to make sure that the best No.1 Common is not pulled out and sold to someone else, so you only get the lower grade No.1 Common. There is also the "net" and "gross" BF issue for some mills).

Nevertheless, you will find that sawing your own lumber, if you have a good market for all grades, will be attractive financially. However, the management and operation of a sawmill is quite a bit different from managing and running a molding operation. For example: Loggers like to get paid promptly (not 30 days), employees may not appear every morning, bad weather can limit production, breakdowns can occur even with good maintenance, the sawing operation is fairly "dirty" with about 40% of the log volume being sawdust and bark, and green lumber cannot be stored for more than a few days before quality loss can occur in warm weather. All in all, it is rare to see a hardwood sawing operation tied in closely to a secondary manufacturing operation.

From the original questioner:
We've tried 1C for our product and it's pretty much a wash. The 6' minimum length of my product pushes more of my raw materials into the hog line using 1C. The 40% savings is consumed by waste and added labor. Predominant long lengths give me a competitive edge in the market. Also, I would like to cut my boards 5/8" thick. What effect will this have on over run? Should I be looking to purchase butt logs or veneer quality?

From contributor A:
The best advice I can give is for you to go to a sawmill operation like mine and look at sawing up close. The other thing is you may be able to find a mill and kiln operation that can make a better product and cut your waste. You may pay a bit more per piece but save on machining and waste.

I have a customer who makes ash rocking chairs. For a long time he was buying ash 2x sawn through and through log run for $500 mbdft. One day he showed up to get a load and had a flat tire on the trailer and we had to wait while it was fixed before loading. So we got to talking. He was taking the 2x stock and ripping it down on a band resaw so that he could produce 5/4 qsawn boards for the rockers of the chairs. The rest he used for the backs and seats. Some loads he said that he did not get enough rocker stock from the logs. After our talk he buys 7/8" thick flat sawn and 5/4 qsawn and even though he pays $200 mbdft more he makes more chairs for the same money. Never hurts to ask.

From the original questioner:
It's not as simple as something like rocking chairs. We produced over 14 million lineal ft. of one profile last year. We are extremely efficient at producing this product. I believe it's time to start cutting cost by getting closer to the tree so to speak. I just need to know if it's possible to purchase logs that will produce mostly FAS, 1F, Select and some 1C. I need to stay away from low grade as much as possible. We have our own kilns.

From Gene Wengert, forum technical advisor:
Your yield of upper grade lumber will increase with veneer logs, aqs they are clearer and they are larger than 20" most of the time. The idea of contracting with a sawmill is indeed good. You might purchase the logs yourself too. The usefulness and economic return for the low grade lumber will be the key, as the price of veneer logs is quite high, so the FAS lumber alone would not pay for operation very well.

If you do get a sawmill, make sure you run it under a different company than your molding company. Have considered a lower grade product, such as kiln stickers for your lower grade pieces? The yield tables are for 1-1/8 green thickness. Thinner lumber will have lower overrun as there is more sawdust. I would guess that overrun would drop by 12% for 5/8 thickness.

From the original questioner:
I was told that over run would be higher since one could obtain more cuts. For example, isn't over run percentages higher for 4/4 than 8/4?

From contributor A:
If you are willing to pay veneer log prices to produce your product then you can afford to offer better prices for the raw lumber and not have the cost of setting up a sawmill. I mean here if you offered $1,000 mbdft for red oak FAS you would get plenty and not have to saw at all. But the log is going to cost you atleast $1,500 mbdft for veneer stock. No you do not really get more over run cutting 4/4 instead of 8/4. When you saw with a band mill you take out about 1/8th of an inch and a circle mill will take out about 3/8th of an inch. (You do not count the slab cut as the opening face should be the same).

Yes you may gain a board or two in the process but on most logs it will be in the low grade area of the log. Over run is a very miss stated term. Like with a 12" 8' log it scales 32 bdft and even with a circle mill I can get 50 bdft. With my band mill I can squeeze out 55 or maybe even 60 bdft, but the FAS count will be the same either way. Yes you may produce a bit more then scale and a bit more than a circle mill if you get more then 5 cuts on a face. But it will be in the lower grades of the log when dealing with hardwoods. In SYP you get about the same price so it does not hurt when you gain that board in the middle of the log.

From Gene Wengert, forum technical advisor:
You were told incorrectly. As nominal lumber thickness goes down, over run drops and sawdust increases. For example, a 7 x 9 x 8' tie is 40 bf. If you saw it into 4/4 lumber, you will get if you are lucky, six pieces that are 4/4 x 9 x 8' or 36 bf. Now, if you count the 5/8" piece as 1" nominal, then your yield would go up.

From the original questioner:
It seems I always get conflicting numbers when I consult sawmills about over run. I'm beginning to wander if we're all on the same page. For example, a sawmill just down the road from me said he gets 125 % over run on a regular basis. He stated he would get 175% if he sawed 5/8" instead of 1 1/8". Perhaps I'm calculating over run wrong. I would say 175 % over run means if I purchase a 100 bdft. Doyle scale log, it would yield 275 bdft. Am I correct or does 175% mean I would get 175 bdft. from the log? If I got 275 bdft. then it doesn't matter if I'm paying 1500.00 mbdft. as the over run would drive my cost per bdft. down and I would get mostly high grade material.

From the original questioner:
Gene, I can see where one would yield more footage if we're talking about re-sawing squares but common logic tells me one would obtain more bd ft. of 4/4 lumber from a log than bd ft. of 8 x 8 squares as the majority of the log wouldn't produce 8 x 8's. Am I completely off base here?

From contributor A:
You have two kinds of over run. One is the scale. On the Doyle scale it is short on small logs so you get an over run even with a circle mill. This was done to discourage loggers from bringing in small logs and helped with the added cost to the mill for handling them. Then there is the overrun of a band mill vs. a circle mill. While a band mill takes out less kerf it takes longer to do it. So you may gain a board or two but take longer to do it. There is a point when the cost of production outweighs the cost of material (yes we should save all we can of a resource).

Most of the time the over run between a circle mill and a band mill cutting all 18 inch 8' logs will be at 20% given both have good sawyers. But a band mill given the same log will produce 25% to maybe even 30% over Doyle scale. Given that size log I most often produce 95 bdft on a circle mill taking a 7x9 tie out. With the bandmill I will not be happy with anything less the 120 bdft from the same log. So I make at least 22 bdft above the scale and 25 bdft above the circle mill. There is no way to take a 100 bdft log and saw out 200 bdft of lumber which is to say you have a 100% over run. All mills should beat the Doyle scale by at least 5 to 10% average and a band can add another 10 to 15% to that. After that things should be called into question.

From Gene Wengert, forum technical advisor:
Here is the reason for conflicting results. A piece that is 1" thick x 12" x 12' is 12 bf. a piece that is 5/8 x 12 x 12' is also 12 bf, Because the 5/8" is counted as 4/4. So, it appears that overrun is increased with pieces thinner than 1". But if you go back to my example of a tie, I hope you understand that sawing the tie into lumber creates sawdust and so overrun will drop. The same with 5/8"; you will create more sawdust and less volume of lumber except for the funny way we measure bf. Again, we seldom will get much more than 50-60% of the lumber being FAS. So, to get 1000 bf of FAS, you will have to saw about 1750 to 1800 bf Doyle.

Perhaps you are aware that Select and FAS1Face is really No.1 common lumber that is sold at FAS prices. That is, the worst side of the lumber grades No.1 Common for Select, FAS-1 Face and No.1 Common. So, for many products, the yields of product from Select and FAS 1-Face are the same or very close to Yields from No.1 common. It is very common for mills to put FAS and Selects and FAS 1-Face together.

From Gene Wengert, forum technical advisor:
If you are going to try this, my suggestion is to use someone else's equipment first to see if and how it will work. If it has a problem, such as too much low grade, then you will not lose money because of the capital expense, employee training expense, sawmill building expense, and so on.

From Gene Wengert, forum technical advisor:
Here is the reason for conflicting results. A piece that is 1" thick x 12" x 12' is 12 bf. a piece that is 5/8 x 12 x 12' is also 12 bf, Because the 5/8" is counted as 4/4. So, it appears that overrun is increased with pieces thinner than 1". But if you go back to my example of a tie, I hope you understand that sawing the tie into lumber creates sawdust and so overrun will drop. The same with 5/8"; you will create more sawdust and less volume of lumber except for the funny way we measure bf. Again, we seldom will get much more than 50-60% of the lumber being FAS. So, to get 1000 bf of FAS, you will have to saw about 1750 to 1800 bf Doyle.

Perhaps you are aware that Select and FAS1Face is really No.1 common lumber that is sold at FAS prices. That is, the worst side of the lumber grades No.1 Common for Select, FAS-1 Face and No.1 Common. So, for many products, the yields of product from Select and FAS 1-Face are the same or very close to yields from No.1 common. It is very common for mills to put FAS and Selects and FAS 1-Face together.

From Gene Wengert, forum technical advisor:
Is there a chance that some of your production can use finger-jointed pieces? If so, then I do believe that buying a finger jointing machine (after you first check it out using someone else's equipment) is more attractive than buying a sawmill. Note that if you color match prior to finger-jointing, the joint will not be too obvious.

From contributor S:
There are many factors that contribute to over run or under run. I used to saw mostly cherry, the local market dictated that we use international scale and on small logs we would under run the scale after trimming the lumber for best grade. If you buy big logs and saw 2 x 12 framing lumber you are probably going to over run the scale especially if you used the Doyle rule. As far as your plan to buy logs and saw out your own molding blanks, I agree with the advice to start by getting the work done by someone else.

Keep records of each log and what the yield is and you will soon find out if this is a worthwhile and profitable idea. My hunch is that all the hassle of getting good logs, owning and running a mill and then selling off the low grade will be more of a headache that a profit center for you. Note that what species of log you are sawing has a big difference on yield. Not all prime butt logs are going to open up the same. A nice northern red oak butt log will saw out plenty of clear material, but do you know what to look for concerning mineral in the logs? Cherry is far less reliable, and white oak is extremely variable. If you are making poplar moldings you are way more ahead buying the lumber already sawed.

From the original questioner:
98% of our sales are Appalachian red oak. I understand the hassle of owning a mill but one must also consider that I already possess most of the equipment associated with owning a mill. I already have dust collection, 2 forklifts, a skid steer, waste management equipment and the facility. The only necessary item I don't have is the mill itself. I also own a Brewco 16" wide resaw. One mill owner told me the over run is what he made in profit. I've already purchased green red oak from the mill at 1050.00 mbdft . The same material cost me 1640.00 mbdft kd FAS.

In some aspects, it seems like a sawmill makes more sense for my operation since I already have the market. I don't have to sit on material and guess where it's going to go. It's anybody's guess as to what's going to happen to our economy within the next couple of years. I feel more comfortable gearing up in such a way that it doesn't necessarily take large (low margin) volume to stay in business. The only way to accomplish this is to reduce material cost as much as possible by controlling every process from log to finished product.

I can run all of the low grade into flooring. A state of the art fingerjoint system is very expensive and the older Industrial finger joint lines are too labor intensive to consider. I still think 5/8" boards will yield more over run even though more cuts are being made. Yes there will be more sawdust but there will also be more possible cuts. My product width is only 3/4" so any board wider than 1 1/2" will work as long as it's knot free. I wouldn't be sawing for grade so I wouldn't be counting my 5/8" board as 4/4 material. I'm speaking of actual board footage.

From Gene Wengert, forum technical advisor:
It is extremely rare for a sawmill to have a dust collector. The dust is too heavy for a standard collector - about eight times heavier particles or more. You should probably produce and dry this material un-edged. What about a trim saw? What about a debarker?

What will you do with the non-lumber waste: about 11% of the log volume is coarse sawdust (too large and too heavy for a normal dust collector); about 8% is bark; about 25% or more is waste wood pieces that are not lumber? What about 40% to 60% of the lumber that is not FAS?

Regarding overrun: If you produce more sawdust, then you cannot have higher overrun (all else staying the same). Overrun is lumber volume (BF) divided by log scale (BF). With more sawdust, there has to be less lumber.

Overrun examples: For a 16" x 12' round log we will produce 99 BF of lumber (9 pieces, 1-3/32" x 11" x 12'), plus a few pieces from the slabs if we saw 4/4. If you saw 5/8", you will produce 14 pieces 5/8" x 11" x 12' which is 154 BF on the 4/4 basis or 96 BF using 5/8" thickness. This is 3% less overrun. If you saw 5/4, you will get 7 pieces of 5/4 (and one piece of 5/8). That is 107 BF. If you saw 8/4, you will get 5 pieces of 8/4 and each is 22 BF for a total of 110 BF.

Do you pay workers comp? What about sawmill insurance - accident, liability, and hazard? Will you need another truck to haul away the below FAS grade material? Will you need another employee, in addition to mill employees to market your below FAS grade lumber? What about storing logs and a sprinkler? What about storing green lumber?

From Gene Wengert, forum technical advisor:
Will you be able to purchase red oak veneer logs in your area? At what price? Although many sawmills do make a profit, close to half of the mills we had in 2006 are out of business today. Sawmills do not make a lot of money sawing lumber. Most of the selling cost of lumber (75%) is log cost and the other 25% is operating costs. Although you are trying to control raw material costs, you will find that sawing profits are small and so you will not be able to control costs by sawing logs yourself. I assume that your sawmill will have to be a profit center.

We might sometimes control costs by buying timber at a low cost, but because you say you need veneer quality logs to maximize FAS, you will have to buy logs on the open market. This will be tough, so you will end up paying a premium price for such logs; this will blow your material cost sky high and defeat your efforts.

Your main option for controlling costs is to increase the yield of product from the lumber you currently buy. As mentioned, this means no FAS 1-Face or Select, as these yields will be very close to No.1 Common yields. It also means quality drying is critical. It also means that finding markets for products that do not meet you primary product requirements (pieces shorter than 72", for example) is essential.

Costs can be controlled using No.1 Common instead of FAS. For your product, FAS will yield 55% 6' long pieces and No.1 Common will yield 43% (at about half the cost). If you were able to include 24" pieces and finger joint or make a different product with these shorts, yields would be 72% from FAS and 68% from No.1. In short, you lower the cost of your primary product by using No.1 Common lumber AND also at the same time finding a market for the shorter length pieces and other pieces that are not in the primary product.

You will also find that yield increases perhaps 20% if you use un-edged lumber (but have it graded and pay for it as though it actually were edged). With narrow pieces that you use, thin kerf saws are another option. I think you have heard from several very respected experts in our industry (myself not included even though I agree with them) that have serious doubts that your idea is profitable and workable. There are also some suggestions on how to get some actual numbers for your idea without a capital investment so you can prove to yourself that it will not work.

From the original questioner:
The bandmills I've seen have a de-barker that cuts away a path in the bark prior to the band blade. The sawmill just down the road from me uses dust collectors that look just like the ones I have only smaller units. I have two good sized wood waste hogs that will turn the slabs into mulch (another marketable product). I'm already paying workers comp insurance and I already have the space available for storage and processing.

Gene, your illustration about how more of the log is consumed by sawdust when sawing thinner boards leaves a lot to the imagination. Would thicker boards not put more marketable wood into the waste slab as opposed to a thinner cut? At what point does the loss in kerf out way valuable 5/8" wood ending up in waste slabs? Thinner boards also mean less loss at the edger. As stated before, flooring will consume the lower grades. We have an ultimizer upcut trim saw with crayon sensing cameras.

From the original questioner:
Gene, using 1C for my product is not feasible for a number a reasons. 75% of my market is 9-12' long which works out fine sawing FAS. The long strips next to defects in 1C causes all kinds of breakage problems in the moulder on smaller profiles. It also causes tearout because of the extreme grain variation. There is no possible way for me to obtain anymore yield than I'm already getting using kd FAS material. The sawblades we're using are very thin kerf.

To be honest, I'm not certain about the availability of logs and I'm not sure that veneer quality logs are the best option. I agree about most of the sawmills closing down because of lack of profit. What they do and what I'm considering are two totally different scenarios.. I would be sawing strictly for my end product. If Louisville slugger made all their bats from outsourced graded 12/4 rw rl kd material, competition would eat them alive! I'm sure you get my point.

From contributor S:
If you aren't certain about your log supply then getting your own mill will be a bad move. So why not go out and look for the logs you need now? Find a mill that will saw them up to your specifications and get started that way. Once you establish a relationship with your suppliers, you can then take the next step and get your own mill. You may be better off buying green lumber and putting in your own K/D setup.

From the original questioner:
I've purchased logs and had a portable bandmill saw them to my specs with very good results. We already have kilns, material handling, storage, added processing equipment and markets ect. What I'm uncertain about is the availability of continuous supply. I've been told that loggers aren't logging and getting logs is a problem even for dedicated sawmill owners. I'll most likely hold off on buying a mill for the time being. It's anybody's guess what's going to happen with the US economy for the next couple of years. I always try to research and ask as many questions as I can think of before making any kind of investments.

The comments below were added after this Forum discussion was archived as a Knowledge Base article (add your comment).

Comment from contributor E:
Based on the situation you're describing, I would pursue two angles before making the transition to sawmill. Place accumulation orders with multiple sawmills for 4/4 select only red oak KD (random width x 6-7' as well as 3-5" x random length). You'll pay somewhere between #1C and FAS. In my experience, 95% of your boards will be clear 2 face. Your gang rip operator may gripe a little but for a 5/8" net size, you should pick up some noticeable margin. The second thing is to find a sawmill or concentration yard that will cut to 5/8" for you. If you can commit to some volume, it should be easy to find a company to work with. You should be able to reap added margins through negotiating for KD inventory. I'd exhaust those avenues before going the sawmill route.

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