Dealing with change
IT WAS only seven years ago that the Australian plantation forest industry was booming off the back of Managed Investment Schemes. Money seemed to be quite literally growing on trees for fund managers, contractors and service providers. Today paints a different picture when the cost of labour is severely damaging our ability to compete competitively in global markets and plantation owners are investment fund managers with a focus on steady reliable returns.
The change in forest ownership has changed the way forestry businesses are run. Foreign ownership has brought some stability and confidence back into the industry, but it is not all smooth sailing as many are realising.
With the squeeze put on estate managers by land owners due to their failure to command prices that are favourable to yield good margins, they in turn are fighting to provide their clients a return on investment due to countries such as China, India and Asia producing wood products for roughly a third of the price because of the simple fact they have at their disposal cheap labour and lots of it.
So, when contractors and service providers are being forced to work with low profit margins, rising superannuation, (as of 1 July 2014 super payable is now at 9.5% up from 9% in 2012) and increasing employment levies making for challenging times as a business owner.
OH&S increasing dominance in the forestry landscape
To add to the already firm noose of compliance in the forestry industry, but for the right reasons, Occupational, Health & Safety regulations are being increasingly scrutinised. Not to any fault of our own, but as machinery advances and technology becomes more accessible, especially in the online sphere, there is an expectation for small companies to carry systems similar to that of their larger parent counterparts. Although this is good for the forest industry, as it promotes a safer working environment and minimises bad publicity, it still carries with it a financial burden to SMEs that have to spend large sums of money and incur ongoing costs to maintain their systems.
Many business professionals outside the forestry industry looking in are asking how these structures can be sustainable. We have already seen two rounds of demises in the last two decades. A notable way forward for many is thinking outside the square; owners have to be smart, innovate, spread their risk, scale business accordingly and collaborate.
These words may sound familiar but will work if followed through and professional advice engaged in.
By way of many, the shift in the nature of what land managers and owners want can be beneficial to service providers who are prepared to step up and take on some risk, increase their capacity, comply with stringent OH&S measures and upskill, especially in the digital field. Believe it or not in most cases these days technology will enhance efficiency, impress clients and save money in the long term.
What does the future look like?
We all ask ourselves this from time to time and to be honest I can’t give an accurate answer, probably not many people can, but this I can tell you, in order to compete in a global market and to ensure the Australian forestry sector stays afloat and then continues to grow, technology is the most obvious answer, both by investing in and using physical products and online, using the internet. These are the questions we need to be asking -- does my business have a website, use social media, and have available to me publications that keep me informed and up to date when new technology becomes available? Am I investing in the right advice and am I applying it to the right areas of my/our business.
Although there are many myths out there that with the advancement of technology the world population will be using less paper and related forest products, here are some statistics to prove that this in fact is not true.
The table refers to statistics from the United Nations Population Fund, where growth today increases at around 1.7% • 1800 - 1 billion • 1927 - 2 billion • 1960 - 3 billion • 1974 - 4 billion • 1987 - 5 billion • 1999 - 6 billion • 2011 - 7 billion* • 2025 - 8 billion • 2043 - 9 billion • 2083 - 10 billion
With global population growth comes demand for products, especially paper and structural timber. In fact, we are now using more paper than we ever have. Thirty years ago the rise of computers was hailed as the beginning of the ‘paperless office’ and business and people alike were urged to reduce the flow of paper, ultimately aiming to abolish it to increase productivity. Since these bold statements, according to The Economist, global paper consumption has increased by half.