A recently published report, a product of the FOBIA project’s work on business models, presents a comprehensive mapping of the current state of forestry service contractors in Finland, Scotland, Ireland and Sweden. Including descriptions of services offered by the contractors, types of machines and staffing resources, types of customers, and development needs for the future. In addition, the report also covers the contractor financial sustainability.
Researchers and industry professionals from the four partner countries combined efforts to collect and compile data to produce the report. Thomas Kronholm, a postdoctoral researcher at the Swedish University of Agricultural Sciences (SLU), has been coordinating the work. He and his co-worker Euan Bowditch, a researcher at the Inverness College – University of the Highlands and Islands, were asked a few questions about the work process and what they found out.
Euan Bowditch and Thomas Kronholm
What does the report reveal?
TK: Results show that although the forest industry is significantly larger in Sweden and Finland compared to Ireland and Scotland, the differences between contractors in the different countries are not so varied when aggregated. There are of course differences, such as the type of services provided, and how services are sold and priced. Even between Finland and Sweden, two countries with very similar forestry practices, there is a clear difference between contractors’ business size. Finnish enterprises were found to be both larger and more profitable than the Swedish contractors. Concerning future development needs there was a large consensus in all countries that the low profitability of the business and the lack of skilled and motivated operators are significant barriers for business development.
EB: There is also the difficulty of attracting a younger workforce or to sustain people within the industry. Also the expense and risk of setting-up business is prohibitive to many and require significant financing, however there is a lack of funding to support this area of forestry.
How can this knowledge be used?
TK: The report provides a deeper understanding of the characteristics and perspectives of forestry service contractors who are operating in the market today. It presents insights into development needs, obstacles or challenges they experience in developing their own business or within the business environment of the forestry service sector in general.
EB: In Scotland some of the cultural and institutional factors block contractor growth such as the procurement system that enforces a ‘race to the bottom’ mentality of price undercutting without much quality control. Also the way in which contractors are paid, tonnage in Scotland whereas in Finland Sweden they are paid by volume cut. This puts the contractors in Scotland at a severe disadvantage where they can lose significant profit within a week or month of timber sitting by the roadside.
TK: In the next phase, this knowledge can be used in developing new management tools and training programs that can help the entrepreneurs to sustain and innovate their businesses practices. For example the FOBIA Boost site has been designed to specifically address our findings.
What was the biggest challenge you have faced in this study?
TK: That has been to collect comparable data on the characteristics of forestry service contractors in the different countries. This work has been challenging due to both cultural and formal differences concerning openness and transparency concerning, for example, information about contractors’ finances and their willingness to disclose business information. Related to this the researchers have also had different practical circumstances to consider, which implied that different methods had to be used in each country to collect similar data. For some types of data this has worked without any issue, but in some cases it was not possible to obtain the same type or format of data in all countries. Therefore, it has been difficult to compare all aspects of the contractors’ business models as thoroughly as we initially intended.
EB: The contracting world is very unique in both Scotland and Ireland, there is no central database to track the same information that was present in Sweden and Finland. Even make contact and gaining the trust of contractors was difficult, especially around the sensitivity of specific company financial data, which is available in the public domain but in a limited restricted fashion. As with life one encounters a range of personalities, which can both hinder and enhance the process – there is still much to learn!
Read the full report here:
State of the art and development needs of forestry service enterprises in the NPA region
Text: Thomas Kronholm, SLU