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How forestry companies can remain competitive

Re-examine your business model and plan around long-term strategies

One of the great concerns currently preoccupying leaders in the forestry industry is the continued strength of the Canadian dollar versus the U.S. greenback. Over the past few months, the value of the dollar has steadied, forcing manufacturers to plan their long-term strategies around a dollar that appears to be staying strong.

This issue was widely discussed in the context of the forestry industry at the recent PaperWeek International conference, a gathering of industry professionals under the auspices of the   Pulp and Paper Technical Association of Canada  and the   Forest Products Association of Canada . Deloitte had a large presence at the conference and organized a two-day panel to focus on business issues related to the forestry industry.

The competitiveness imperative
In short, the strength of the Canadian dollar has forced all Canadian manufacturers — those in forestry included — to make their businesses more competitive. With weakness in the U.S. economy and demand for Canadian resources from Asian markets showing no signs of abatement, the competitiveness imperative becomes all the more urgent. Businesses are re-examining their models with a careful look at products, suppliers, procurement practices, diversification strategies and supply chain costs.

Deloitte’s   Forest Products  practice ― which has benefited from the recent addition of Doug Wilkes, former CFO at Canfor, Slocan and Tolko ― has identified five specific areas forestry companies can focus on. Here are five ways forest industry players can increase their competitiveness in the short term:

1. Explore M&A opportunities
Forestry companies must find new ways to add value for their customers and to differentiate their products and services from those of their competition. At the same time, Canadian companies should take advantage of currency strength to examine merger and acquisition opportunities. As well as providing a cleared path to new markets, a merger or acquisition can help a company realize important cost synergies and even thrust a company into the global market.

2. Think globally
Globalization is not merely a matter of selling products and services internationally. Long-term success requires a holistic approach to optimize the global platform by connecting common practices relevant to production, research and development facilities.

3. Reduce costs
Even without a merger or acquisition in the works, companies should consider cost reduction. Many structural costs, such as business configuration, organizational design, corporate structure, regulatory compliance, supply chain complexity and talent management are controllable and can be managed to help increase a forestry company’s cost competitiveness.

4. Make finance matter
One of the keys to cost reduction is finance transformation. To increase their competitiveness, forestry companies must rethink the finance function within their organizations. It must be a strategic partner that actively contributes to business performance and adds shareholder value. Finance organizations are in a unique position to suggest short-term cost reduction. In the long term, the finance function can be key to providing insights for macro-level cost reduction, top-line growth, the pursuit of global opportunities and talent management. Only by working in tandem with finance can manufacturers hope to understand the interconnections between their business operations, cost structures and profitability.

5. Focus on talent
Finally, talent management is as important as ever, only more so. The talent shortage in manufacturing has been an ongoing issue for several years. Retaining key employees requires special effort and clear channels of communication so that employees know exactly what is expected of their role in ensuring the success of the business. After all, if a company loses a key member of their team, chances are good that he or she will find work at a competitor; as a result, any advantage that employee gave to the first organization is wiped out completely.

There is no single solution for helping forestry companies deal with the business realities of a strong Canadian dollar. But by making improvements across the business, the impact can be minimized. 

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