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Demonstration of new business models, WP4.2 summary (D10)

Quality Wood project – EIE/06/178/SI2.444403

Dietmar Hagauer, Austrian Energy Agency Claudia Pasteiner, Austrian Energy Agency

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Dietmar Hagauer, Claudia Pasteiner. Demonstration of new business models, Quality Wood Project

Report 7/2007, Project EIE/06/178/SI2.444403. Vienna, October 2008, 34 pages.

Keywords firewood, production, trade, supply chain, marketing, storage, new business models.

Abstract

The firewood market is a very traditional market. Nevertheless it is necessary to

establish new business models to improve the quality of firewood especially when

trading larger volumes and to make sure that there is enough flexibility to react on

customers preferences.

In EU many of the merchants start to sell to neighbours and relatives, so the network of

customers is usually built through personal contacts, which is very important for the

reliability and permanence of the business. The marketing for bigger producers takes

place via advertising in local newspapers, internet or through branch magazines. Today

there are different ways of production in all participating countries depending on the

produced and traded firewood volume. In traditional firewood production the producers

attach little importance to the common machine usage, because the forestry basis

equipment is usually existent at the undertakings. In these days it is one of the most

important basic rules of marketing to meet customers‟ preferences. Effective business

requires professional marketing and customer service. The firewood market is a buyer‟s

market and therefore the producer has to adapt to maximise profit.

The most important factor affecting the quality of firewood is the moisture content

which is decreased through drying the wood. The most common method of drying wood

is by natural drying. However, the method is too slow for commercial chopped firewood

production and increases costs: the quality fluctuates and production is seasonal.

Artificial drying of chopped firewood has been adapted to an increasing extent in

professional firewood production.

In general the principle of new business models is to produce firewood in a more

efficient way. This is done by producing larger volumes, using better equipment

because the investment pays off and in most cases the operators benefit from common

supply and corporate use of machines. Therefore larger volumes can be handled and the

utilisation ratio of the equipment is very high.

For the future development the construction of central terminals seems to be

indispensable in case of large volumes. At these terminals all types of wood for energy

recovery are provided. But it is also their goal to appear as energy service provider.

http://dict.leo.org/ende?lp=ende&p=thMx..&search=importance

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The basic ideas for new business models are the “virtual chopped firewood factory”,

where firewood production is spread out in small units near forest in the countryside,

the firewood pickup terminal, where the idea of ordinary supermarkets is applied and E-

trading with the special advantage to support the contact of customers and producers

over a single contact point.

Key benefit of the e-trading for the customers is definitely a market that is much more

transparent than an informal market. It offers a better overview of the different prices

and the whole firewood market. For firewood producer purposes the e-trading affords a

relatively cheap form of advertisement and direct selling.

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Preface

This report is a WP4 summary report of Quality Wood – Increased deployment of

firewood by improving fuel quality and low emission combustion – project

(EIE/06/178/SI2.444403) carried out during 2006 – 2009.

Each partner has gathered information on new business models and has made national

reports with the same content but focus on what is important for their country. After that

the summary report should show, how new business models are implemented in the

participating countries.

The main objective of the Quality wood project is to enhance a significant increase of

the actual energy produced from firewood in the EU by promoting better fuel quality

management, to improve firewood production and supply chains and to promote the use

of more efficient combustion appliances with less environmental impacts.

Dietmar Hagauer is program leader of the climate protection initiative program “timber

for energetic use” launched by the Austrian Federal Ministry of Environment at the

Austrian Energy Agency. He has been working on this topic since 2001 and at the

Energy Economics & Policy Group of the Austrian Energy Agency since 2007. As one

result of the work there is a rising awareness, how important it is to improve firewood

quality and that this is also a main contribution for improving energy efficiency.

Claudia Pasteiner is employed at the Austrian Energy Agency as research assistant since

2008 with the main focus on timber in the Energy Economics & Policy Group.

The sole responsibility for the content of this report lies with the authors. It does not

necessarily reflect the opinion of the European Communities. The European

Commission is not responsible for any use that may be made of the information

contained therein.

The content is based on the current state of knowledge and information, and has been

compiled to the best of the author‟s knowledge and experience. However, the authors

accept no liability whatsoever for errors, omissions or misreading.

October 2008

Dietmar Hagauer

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Contents

Abstract .............................................................................................................................. 2

Preface ............................................................................................................................... 4

1. Introduction .................................................................................................................. 6

2. Current firewood producers ......................................................................................... 9

3. Current production and supply chain ......................................................................... 12

4. New business models ................................................................................................. 19

4.1 Introduction ...................................................................................................... 19

4.2 Workshop ......................................................................................................... 20

4.3 The best new business models .......................................................................... 22

5. Summary .................................................................................................................... 31

References ....................................................................................................................... 35

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1. Introduction

Timber plays an important role in the energy sector. Especially firewood shows up a

very long tradition. Thus almost all foresters do have long experience in firewood

production. Looking at the structure of forest owners in Europe it can be stated that the

traditional way of producing firewood will go on in the future as it is approved for

small-scale production.

But as there are „new“consumers especially in the urban area and the surrounding of

cities new business models have to be established.

Focus of this task therefore is an analysis of the new business models in the

participating countries. Nevertheless a short summary of the traditional business models

will be given as it is for sure that these models will continue and play an important role

in the future as well.

The trend to new business models seems to be obvious, but nobody can say at the

moment, if these new models are really competitive on the market.

The trends shown in the following seem to be quite successful and should help to

optimise actual existing business models in the participating countries.

The current trend is that the use of clean burning stoves is increasing because their

efficiency is getting better and they also cause fewer emissions.

Particularly in international firewood trading, the high quality of the product is very

important. It has t meet the customer‟s requirements and has to be produced in a cost-

effective way.

All over the world the firewood production account for an enormous number (1.772

million m³), by comparison the international trade makes up only a small share (see

table 1).

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Table 1: Global biomass production and trade – an overview

Source: Heinimö 2006a&b

Having a look at the countries participating the qualitywood project (see table 2), we

can see that the average forest area in Austria, Finland and Norway is clearly higher

than in France and Slovenia. Norway stands again out of the crowd with its average 50

ha forest of one owner. However, roughly speaking all countries show a similar

allocation of private and public property.

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Table 2: General details on timber in the participating countries (2008).

Source: QW-Partners

Austria Finland France Norway Slovenia Spain

Energy

consumption

(TJ)

1.092.767

(2006)

1.492.000

(2006

6.779.700

(2006)

0,124

(2007)

5.907.900

(2004)

Import

quota

72 % 52 % 50 % 53,3 %

(2007)

80 %

Forested

area (km²)

39.600

(47 %)

220.000

(67 %)

155.000 125.000

(38 %)

13.380,18

(66 %

2005)

260.000

(52 %)

Privat

property

72 % 62 % 75 %

(11 million

ha)

80 % 71 % 80 %

Forest

owners

170.548 450.000

(>2 ha)

3.800.000 314.000

Average

forest of one

owner

19,1 ha 24 ha 3 ha 50 ha 3 ha

Wood

production

21,32 Mio

Efm *)

(2007)

74 Mio m³

(2007)

103 Mio m³

(2005)

7-

10.000.000

m³

3.180.000

m³ (2006)

Firewood

production

(solid-m³)

7.000.000

(approx.)

6.000.000 30.000.000 984.000

(2006)

2.000.000

Firewood

consumption

7.400.000

solid-m³

(2006)

5.300.000

solid-m³

27.000.000

solid-m3

(2006)

*) harvested m³

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2. Current firewood producers




place via advertising in local newspapers, internet or through branch magazines.

Today there are three kinds of producers in all participating countries depending on the

produced and traded firewood volume. One of these represents the producer of smallest

quantities for own purpose, which is characterized by inefficient harvesting techniques

and logistics. These techniques are traditionally using a chainsaw for the tree felling,

cutting off branches and cutting the stem into suitable lengths. In some cases an axe is

used as well. The firewood is chopped by the use of an axe, or by the use of an

automatic wood log chopper (see figure 1), usually at the storage place. Transport of the

wood to the house is by whatever means available, and not necessarily very effective.

Figure 1: Equipment of small scale producers for own purpose

Source: Dietmar Hagauer

This way of production is very common in rural areas of Spain. The administration

marks some trees in the public forest and sells a quantity of wood that it is usually close

to 20 m³ to people that fulfil certain characteristics (e.g. having a household in a

determinate village). In France too, municipalities assign from 3 to 13 stacked-m3 of

woodlogs directly to individuals who want to buy firewood. In Slovenia also the public

fund for agriculture and forestry issues a call and companies apply with their offers for

cutting trees in state forests. On average, a Finnish firewood producer manufactures

about 300 loose-m3 of chopped firewood. The reasons for the limitation of firewood

production to a few hundred cubic meters per producer are the limited work resources as

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well as the taxation. The Finnish forest owner is allowed to harvest 125 solid-m3 of

wood tax free every year.

Another way of production, is the small-scale forestry for primary income, which uses

better equipment, produces a larger quantity, and not necessarily every year, but maybe

every second or third year. They are usually semiautomatic installations where firewood

is supplied with different mechanization levels; from automatic systems that are

supplied by a shovel or a wheelbarrow, to other manual systems. After that, the

firewood is sized in length, by a chain saw or a circular saw, in pieces of 30-70 cm.

Finally, pieces are lengthwise divided with some fixed blades combined with a

hydraulic mechanism. Cut firewood transport is usually done with a conveyor belt that

later on puts firewood directly in the storage space. Then it is transported in trucks,

containers, etc. to the end consumer. These kinds of companies for primary income are

even the most usual ones in Spain.

In France 2 000 to 3 000 people belong to this category (for own purpose or primary

income). They are mostly farmers, then workers and employees who come from rural

areas, but mainly the firewood selling is down in this manner. In Slovenia this is also

the main firewood production, but is not considered for primary income. In most cases

the producers are farmers with own forest who also produce and sell firewood or urban

forest owners who produce and sell firewood for additional income to their regulary

salary.

But of course there are also professional forest enterprises. These ones are bigger traders

and suppliers of wood for heating purposes, either as firewood or wood chips. In most

of these enterprises the rationalisation potential is completely exhausted (see figure 2).

Examples for such professional forest enterprises are Viken Skog BA (Norway), Havass

Skog BA (Norway), Empresa Nacional de Celulose (Spain) and Gozdno gospodarstvo

Postojna (Slovenia).

Figure 2: Professional equipment for firewood

production


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Then there are the service companies, which act in a similar dimension of trade. They

make money on buying big, at moderated prices, and then selling off at a higher price.

Typical service companies are the big players within the retailing chain stores and

shopping centres, together with gas stations (Norway, Slovenia). The larger

entrepreneurs are buying ready raw material.

Forest owners can also be organized in forest owners associations. These associations

act as lobbyists and marketers if they have enough members. They therefore represent a

considerable force, controlling large values and having a substantial market influence.

The relationship between customer and producer is regulated through delivery contracts,

often long term contracts. Examples for forest owner associations are the Norwegian

Forest Owners Association (Norsk Skogeierforbund, www.skog.no), in Finland

Metsänhoitoyhdistys (http://www.mhy.fi/mhy/) and the Slovenian Society of forest

owners and hunting claimants. Forestry Centres in Finland

(www.metsakeskus.fi/web/eng) are the essential part of the Finnish regional forestry

network. Each Metsäkeskus office offers the service of drafting a comprehensive, as

well as individual, forest management plan. Great care is taken to correctly emphasise

or combine different aspects of forest productivity, recreational use or landscaping

needs, to create a plan that represents the state of the forest today. In France there are 3

organisations that offer help to french forest owners: the forest development

organisations, the union of private forest owners and the cooperatives. A special

production form of France is the production in institutional forests, which is similar on

the Austrian market. However, in Spain the situation is just the opposite. There is not

any kind of association between producers, so there is no chance for taking the

advantages of exerting influence on the firewood market.

http://www.mhy.fi/mhy/

http://www.metsakeskus.fi/web/eng

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3. Current production and supply chain

In traditional firewood production and supply chains, the entrepreneur fells trees in the

forest normally with a chainsaw or sometimes with an axe. The producers attach little

importance to the common machine usage, because the forestry basis equipment is

usually existent at the undertakings. This includes in addition to the chain saw a tractor

and frequently also a rope winch.

The transport in the forest stand to the forest road takes place manually, through a rope

winch and the tractor. The further transport, unless the firewood is split at the forest

road, is done by tractor or lorry and trailer (see figure 3).

Figure 3: Transport from forest stand to production site.


Cutting, chopping and packing can take place either besides a road close to the forest or

at storage site and terminals. Industrial suppliers execute the sawing and splitting mostly

on the eve of selling to assure a optimal adaptation to customers‟ preferences.

Depending on the combustion type the common lengths of firewood are 25, 33, 50 and

100 cm, whereas 33 cm firewood dominates the market. In other cases the final

reduction in size takes place at the farm-stead or even at the end consumers place.


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There are two main principles in wood chopping: sawing or cutting with a blade. The

average diameter of the wood has the biggest impact on productivity. Other factors

include the length of the trunk, chopped firewood length and the feeding arrangements

for the trunk.

Depending on the processed amount the axes, brick axes and hydraulic vertical splitter

are used. Combined sawing-splitting-machines are only used by larger firewood

producers. Cutting and splitting is combined in one single machine. For this production

step mobile and stationary equipment is available (see figure 2).





To ensure faster drying even when drying naturally part of the bark should be removed

by chainsaw or axe and the chopping should be done immediately after harvesting –

before storing at the latest.

In general the wood should be felled in winter and split immediately. A favourable

storage location would be preferably outside of the forest in several hundred metres

distance to the next forest stand, especially when the firewood is made of conifers

because of the bark beetle. It should be an airy and sunny place, where the wood can dry

stacked under permanent circulation, on underlayers for about 2 years. It has to be

mentioned that firewood should never be stored for more than 4 years, because then the

heat value declines.

The quality of chopped firewood is best maintained in the covered stacks, in which the

firewood is totally protected from rainfall or snow (see figure 4). In this case, no signs

of mould will be visible on the firewood.

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Figure 4: Ideal storage locaton

Photo: Dietmar Hagauer

During summer, the initial moisture content of the stems (about 50 %) decreases to 20-

25 %. The difference between covered and uncovered stacks is quite low. During the

following winter, the moisture content of the covered stacks remaines almost the same,

but the moisture content of uncovered stacks increases considerably. During the

following summer the covered firewood dries further, reaching moisture content of less

than 20 % - of course depending on climate conditions. The moisture content of the

uncovered stacks will remain higher than 20 - 25 %.

Artificial drying of chopped firewood has been adopted to an increasing extent in

professional firewood production. Artificial drying and appropriate storage ensure the

quality of chopped firewood and faster stock rotation. To ensure a good quality of

firewood it is very important to reach a moisture content of about 20 %.

The transport of firewood is usually done by trucks on the road or for small quantities

by cars with a trailer (see figure 5), depending on the size of business and the amount of

wood. Transport is an additional cost, therefore the transport distance should be strictly

limited.

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Figure 5: Trailer for the firewood transport of small quantities

Source: Recken Brennholz

In these days it is one of the most important basic rules of marketing to meet customers‟

preferences. Effective business requires professional marketing and customer service.

The firewood market is a buyer‟s market and therefore the producer has to adapt to

maximise profit.

There are big differences in the development of the firewood trade within the countries

in Europe. Norway, Austria and Finland are examples for well developed firewood trade

market by contrast to the trade in Slovenia or Spain. In Slovenia, the grey market is so

well adapted to customer needs that the professional producers can hardly compete

without making losses in the firewood trade.

The Austrian as well as in Spain firewood trade market exhibits big differences between

the urban and the rural areas. In the countryside the people prefer the traditional way of

firewood trade directly from the producer. As stated before in many cases this is a

farmer or forester in the neighbourhood. Self-collectors can even buy the marketable

lumpy firewood at the forest road. This is mostly split or unsplit 1 meter or 2 meter

timber. At this level, active marketing is not really an issue, word of mouth is enough.

On the other side end consumer can buy their timber ovenready in loose or stacked

form, in containers, foil fused on expendable pallets of 2 stacked-m³ or in nets (see

figure 6). But there are also special offers for the end consumers like fireplace wood

http://dict.leo.org/ende?lp=ende&p=thMx..&search=pallet

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assortments (see figure 7), that include the whole equipment for heating with firewood.

1-Meter-timber is sometimes also sold in bundles with tearproof non-metallic straps of 1

stacked-m³ (see figure 8). This facilitates the loading through crane and fork-lift.

Figure 6: Firewood assortment.


Figure 7: Advertising fireplace wood assortments.

Source: Hornbach

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Figure 8: Bundles with tearproof non-metallic straps.


For big producers active marketing is a relevant part. The marketing then takes place

through advertisement in local newspapers/media, in some cases via internet or through

branch magazines. Price and wood species are an issue. In addition to that the moisture

content is specified in some cases. But sometimes that is done quite vague. “Oven

ready” or “stored for 2 year” are often the only references to the moisture content. Many

people collect the firewood at the reseller. The reseller may be a firewood reseller only,

or may be big shopping centres or gas stations. Firewood import takes place to some

extent, and big resellers are the typical importers, but this is not the case in Austria or

Slovenia, there the firewood import is close to none, even though in Slovenia big

hardware stores import firewood to sell it to urban customers.

In Norway, Finland, Austria, Spain and France the end consumer receives or collects his

wood, usually in bags of different sizes or unpacked. Differences have to be mentioned

concerning the units. For example in France cubic meters and steres are the typical trade

units, as well as in Austria. However in Norway firewood is sold by the fathoms, in

Finland by m³ (loose). Another type of supply is typical for Slovenia, where the

firewood is usually sold unpacked by volume in length or cubic meters and rarely in

bags.

At the end consumers house the firewood is stored usually in a dry location until it is

used. The ideal case would be a storage space which covers the one and a half time of

the annual need of firewood and offers a good access facility. It is very important that

the firewood is in his natural state and has become very dry before finally being used. It

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is very important the the firewood does not get wet again between delivery and final

storage in a storage room.

The fact that today wood firing still needs short intervals of fuel loading is seen upon as

a drawback among some wood firers. But on the other hand the majority underlines the

good image of wood for combustion and seems to take a fancy to the new design of

stoves, which also act as some kind of furniture. Another disadvantage is the need of

fuel storages and wood treatments. Producers and traders in all size categories are

bearing this challenge. They offer packages in different sizes. You can buy bags with

firewood in supermarkets for smallest amounts (15 kg) up to bigger deliveries by trucks

or trailers.

To find out the best solutions for firewood supply a workshop was held in Austria. The

result of that workshop was a pre-selection showing the main potential to optimise

firewood processing and supply. The biggest chance is seen in collaborative usage of

machinery and equipment and – even more important – a central terminal for processing

and drying firewood all over the year.

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4. New business models

4.1 Introduction

As we have seen firewood has an important share in the heating sector. The biggest

problem of the traditional firewood trade is that it is mostly raw material and production

oriented. To tap the full potential, new business models are being developed.

One of these innovations, which have been few, diffused until now, is the use of waste

heat of a biogas plant to improve the drying of the firewood. However, in Finland this

form of innovation is more commonly in professional firewood production. But there is

also the reverse situation that large scale heating enterprises procure their needed fuel

from the entrepreneurs own forest, from local forest owner or from local wood

processing industry. The heating entrepreneur operates a heating plants and earns his

income based on the amount of produced heat.






In this field attention has to be paid to the optimised drying in combination with storage

(see figures 9 & 10) and finally the use of firewood at home.

Figure 9: Bad example of storage Figure 10: Ideal example of storage

Source: Dietmar Hagauer Source: Dietmar Hagauer

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A typical firewood merchant is a farmer who, in addition to farming, manages his own

forest, and thus gains part of his income from forestry. The small production volume,

ineffective processing of raw wood and expensive delivery of small-scale forestry

makes this system quite vulnerable and unreliable. It is impossible to expand, because

this would be too time-consuming for a single farmer. To make the supply chain more

effective, it would be wise for the merchants to use production networks, to specialize in

a few phases of the chain and use subcontractors, because the most limiting factor of the

production is that there are too many work phases for one person, but also the taxation

is a problem.

4.2 Workshop

After having organised a workshop with the target to pre-select the best options for

optimising the firewood supply a second workshop was carried out together with a field

trip to visit the two central terminals for a better understanding and further discussion of

the concept. Starting with a short description of the EU-project Quality Wood, including

the project partners and the project runtime, the general target of improving firewood

production and supply chains as well as the individual work packages have been

explained. Special attention was drawn at the work package about new business models

in the firewood market.

The next point of the agenda was a speech of the representative of the Chamber of

Agriculture of Styria about the basic concept and the background of the idea for central

pick-up terminals. In the case of Styria the main point is a registered trade mark (see

figure 11), which is extremely important for the recognition value. Furthermore the

uniform appearance of the central organisation of the pick-up terminals in Styria is seen

as big advantage. The marketing is taken over by the Chamber of Agriculture. Within

the organisation of “Biomassehof-Stmk” the exchange of experience and information is

very important; therefore the two pick-up terminals in Styria hold meetings every 5

months.

Figure 11: Registered trademark of the pick-up terminals in Styria.

Source: biomassehof-stmk.at.

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The concept behind this idea is that renewable resources coming from the region should

be sold regionally as well. The farmers and forest owners are involved in the

manufacturing process, in some steps of the production process even with their own

equipment. The added value remains totally in the region. This fact and the effort of

customer- and service-oriented appearance implicate that the operators have to be ready

to be called off for a delivery 24 hours a day. On the other hand the flexible business

hours as well as the good quality of the products are the main reason for buying

firewood at the pick-up terminal.

To expedite the development of new pick-up terminals the Chamber of Agriculture

conducts a support programme. The idea is that several initiatives of one region should

be consolidated. This offers the costumer a better market transparency. But this support

is not disbursed until the project is implemented; therefore most of the applications for

support are still running. The basic requirement for receiving the support is that 75 % of

the logwood is secured from forests of the operators respectively is backed up by

contracts of delivery.

Basically standards don‟t play a decisive role up to now. Most of the manufacturers fear

a complications and difficulties of the firewood market. Therefore the implementation

of CEN-standards doesn‟t find favour within this field. However, in case of pick-up

terminals there could be a high potential in this domain, because they are exerted to

offer best quality of firewood anyway. Therefore most pick-up terminals are consistent

with the CEN-standards without being aware of this fact.

Following the agenda a lecture on the teething troubles as well as on the barriers of the

entrance at the pick-up terminal market of another representative of the Chamber of

Agriculture was given. As an example in Pölstal the initial willingness to attend the

project was extremely high. On closer inspection respectively at the moment of the

conclusion of contract only a small share of interested farmer kept at the idea. A special

problem was the implementation of a central organisation. In the past the manufacturers

were used to win their customers by an adapted price policy respectively the customers

bought their firewood every year from the same supplier by tradition.

At the beginning every member demanded a single box for drying and selling its own

firewood. However, a central organisation wouldn‟t have been possible in this form and

the expenditure of time and administration would be enormous. By contrast today the

pick-up terminals are characterized by this primarily undesirable central organisation,

because “Biomassehof-Stmk” stands for good and uniform quality and a fair price,

which is appreciated by the customers.

22

In summary it can be stated that the service exceeds the estimated effort. The pick-up

terminals in Pölstal and Waldstein have been an absolute success even after less than

one year of implementation. It is estimated that the terminals are profitable after a few

years in this way of organisation, especially because most of the machinery was

existent. For this reason further terminals in Styria are planned, for example a pick-up

terminal in Straden.

Finally a lively discussion of the future potential in the concept of pick-up services took

place. Even though there are some obstacles to overcome the example of „Biomassehof-

Stmk“demonstrates that the concept works.



recovery are provided (this includes firewood, wood chips and other biomass

combustions). But it is also their goal to appear as energy service provider.

Best practice examples of new business models, that are applied partially in Finland,

Austria, Norway and Slovenia are described in the following.

4.3 The best new business models

Virtual chopped firewood ‘factory’

The basic idea in this new business model is that firewood production is spread out in

small units near forest in the countryside. The round wood procurement and firewood

manufacturing are part time work for farmers or other people living in rural areas.

Produced firewood is collected and larger volumes are transported to a terminal.

At a central terminal the purchase takes place through cash-and-carry customers or

delivery. The drying of the firewood occurs on the open area with permanent control.

Because of the huge amount (see figure 12) of wood a fully automatic sawing splitting

machine is rentable. Basically the drying requires in total between two and three month,

therefore the wood remains not longer than one year at the terminal (from delivery to

selling).

23

Figure 12: Large volumes of oven ready firewood. Source: Dietmar Hagauer

The main focus of these central terminals (see figure 13) is at offering firewood adapted

to the customers‟ preferences. Therefore it is also possible to acquire fresh chopped

firewood at a lower price.

For upgrading the productivity the plant logistics of the chopping site must be examined

as a whole, with cost-effective work phases and handling of raw material and product,

and with the production process being seamlessly combined with sales and the order

and delivery process.

Figure 13: Central terminal in Austria

Source: Chamber of agriculture in Styria

24

Delivery to customers is still the biggest problem. The problems with packing and the

lack of cost-effective solutions are partly connected with these problems. For

counteracting this problem some individual terminals have established “packing

machines” for a short time to offer the customers ovenready firewood for example in

tearproof nylon grids of 1 stacked-m³ (see figure 14). Another innovation is the use of a

split log colander to provide high quality firewood.

Figure 14: Packing machine Bosch Packfix 1.0.


The ideal solution for this problem is to store and sell in the same packing units as it is

dried. In the majority of cases that means storage in lattice or wood boxes (see figure

14).

Figure 15: Drying and selling unit at the central terminal.


25

Outsourcing of customer deliveries to terminals in prime locations offers a clear

opportunity to save in costs. Comprehensive customer service, customer loyalty and

consequent mutual benefits will provide growth opportunities for well-planned service

concepts in the future.

Chopped firewood is collected with full trailer trucks and transported closer to the

markets by another entrepreneur. The entrepreneur organizes transport and deliveries to

customers and is in charge of marketing. The entrepreneur may use a terminal as an

intermediate storage or just organize deliveries directly from producer to customer (see

figure 16). Firewood is dried outdoors (seasoned), but strict quality standards are

applied. Saving in delivery and marketing costs are the main benefits of this model.

Figure 16: Virtual firewood „factory‟.

Source: Sikanen 2005

END USE

FIREWOOD PRODUCERS

TRANSPORT from

Producers 50- 100 m3

FIREWOOD TERMINAL To TERMINAL

DELIVERY TO CUSTOMER PICK UP AT TERMINAL

Forestry societies Own forest

e-TRADING

26

Both traditional farm based enterprises and terminal entrepreneurs use the „firewood

net‟ for marketing.

The basic principle for such central terminals is the time and quantity flexibility of the

supplier as well as of the customer and the try to keep transport distances as short as

possible.

Pick up terminal

In the firewood pickup terminal (see figure 17), the idea of ordinary supermarkets is

applied. Large quantities of goods, chopped firewood in this case, are transported to a

retail terminal where customers can choose and buy them. In this model the most time

consuming and expensive link of the supply chain, delivery is outsourced to the

customer. Most customers buying firewood at terminals would pick up firewood with

small car towed trailers. Ideally, they can pick up firewood at the same as doing their

daily shopping. In some cases a kind of showroom is even integrated in normal

household supply stores and the pick up takes place over separate warehouse. In Austria

these kinds of pick up terminals are the so-called “Lagerhäuser” and Do-It-

Yourself_Markets (“Baumärkte”), which also offer small amounts at a comparatively

low price. The customer is willing to do the delivery by himself if the price of chopped

firewood is lower than by ordering it directly from the manufacturer. Good marketing

and a right location – e.g. besides supermarkets - are the key factors to make this

concept successful.

27

From PRODUCERS

PICK UP 50- 100 m3 To TERMINAL

Forestry societies Own forest

PICK UP AT TERMINAL

FIREWOOD PRODUCERS

Figure 17: Firewood pick up terminal.

Source: Sikanen 2005

The flexible direct sale saves a lot of storage space at the customer‟s home, because of

the possibility to buy firewood in smaller quantities and shorter intervals without

additional costs.

E-Trading

Another possibility for increasing the sales is online marketing and sale or to export

products in other countries. As it is shown in table 1, firewood plays comparatively an

minor role at the international trade. E-trading offers an ideal possibility to improve the

national as well as the international firewood market.

At the moment different types of organisations of online firewood platforms exist. For

example in the case of single entrepreneurs e-trading offers the opportunity of relatively

easy kind of direct selling. A more common way is co-operative selling of several forest

28

owners of one region. This kind of e-trading is characterized by uniform prices and

delivery conditions. Special advantage of this new business model is the support to

connect customers and producers over a single contact point

An important duty of the e-trading is to offer the customers and also the producers the

possibility to get the information about the current market situation especially referring

to prices. Internet has proved to be an effective channel for marketing and even ordering

firewood. Customer friendly networks have been built to cover the whole country. In

Finland there are three non-profit organizations of forest owner associations providing

e-trading services at the moment. Those three regional organisations cover the whole

Finnish firewood market (the total of Finland and most of Finnish firewood merchants).

Both small and big producers (10 - 10 000 m3/a) can sell the firewood in this model. In

Austria there is the “Holzbörse” (see figure 19), which has the target to arrange the

firewood market more transparent by offering information about firewood via the

internet. A similar model is established in Slovenia (see figure 18), the biomass

exchange portal – Borzen (URL: http://ove.borzen.si/DesktopDefault.aspx) as well as in

Finland (URL: http://www.mottinetti.fi/).

Figure 18: Screenshot of the Slovenian biomass exchange portal.

Source: http://ove.borzen.si/DesktopDefault.aspx

http://ove.borzen.si/DesktopDefault.aspx

http://www.mottinetti.fi/

http://ove.borzen.si/DesktopDefault.aspx

29

Figure 19: E-Trading in Austria.

Source: http://www.infopoint.at.

By contrast in Spain the use of internet for trading firewood is not very usual, it is just

for advertisement, but not for selling and ordering directly in the web page, firewood

must be ordered by phone. In France, consumers can buy their firewood in internet like

any other product. A distributor company (Biomee) specialised in firewood sales via

internet has been founded in 2006.

Most of the e-trading platforms offer all the information required for an unobstructed

firewood trade, which includes prices, description of the different wood species and

their characteristics concerning the combustion.

Figure 20: Screenshots of German and French firewood e-trade.

Sources: www.die-holzboerse.de, www.e-bois.fr.

http://www.die-holzboerse.de/

30

As stated before the firewood trade is usually just a national market. That is underlined

by the fact that for example the German firewood-sales-platform (see figure 20) is just

available in German. It offers an ideal possibility for selling and buying various kinds of

wood products. There are big differences concerning the information content of

advertisements. The shortest ones give only general information and contact details, the

more detailed ones may include moisture content, offered wood species, length and also

the packing units.




relatively cheap form of advertisement and direct selling.

Basis of an efficient e-trading is a well-oiled and easy to comprehend platform, so that

the trade via internet exhibits advancement for the customers.

31

5. Summary

In general the firewood market is a very traditional market. Nevertheless it is necessary

to establish new business models to improve the quality of firewood especially when

trading larger volumes and to make sure that there is enough flexibility to react on

customers preferences.




place via advertising in local newspapers, internet or through branch magazines.

Today there are three kind of producers in all participating countries depending on the

produced and traded firewood volume. One of these represents the producer of smallest

quantities for own purpose, which is characterized by inefficient harvesting techniques

and logistics. Another way of production, is the small-scale forestry for primary income,

which uses better equipment, produces a larger quantity, and not necessarily every year,

but maybe every second or third year. But of course there are also professional forest

enterprises. These ones are bigger traders and suppliers of wood for heating purposes,

either as firewood or wood chips. In most of these enterprises the rationalisation

potential is completely exhausted. Then there are the service companies that act in a

similar dimension of trade. They make money on buying big, at moderated prices, and

then selling off at a higher price. Forest owners can also be organized in forest owners

associations. These associations act as lobbyists and marketers if they have enough

members. The relationship between customer and producer is regulated through

delivery contracts, often long term contracts.

In traditional firewood production the producers attach little importance to the common

machine usage, because the forestry basis equipment is usually existent at the

undertakings. The transport in the forest stand to the forest road takes place manually,

through a rope winch and the tractor. The further transport, unless the firewood is split

at the forest road, is done by tractor or lorry and trailer. Cutting, chopping and packing

can take place either besides a road close to the forest or at storage site and terminals.

Industrial suppliers execute the sawing and splitting mostly on the eve of selling to

assure a optimal adaptation to customers‟ preferences. Combined sawing-splitting-

machines are only used by larger firewood producers. Cutting and splitting is combined

in one single machine.





32


Firewood should be stored at an airy and sunny place, where the wood can dry stacked

under permanent circulation, on underlayers for about 2 years. The quality of chopped

firewood is best maintained in the covered stacks, in which the firewood is totally

protected from rainfall or snow. Artificial drying of chopped firewood has been adopted

to an increasing extent in professional firewood production to avoid the delay of several

years of natural drying.

In these days it is one of the most important basic rules of marketing to meet customers‟

preferences. Effective business requires professional marketing and customer service.

The firewood market is a buyer‟s market and therefore the producer has to adapt to

maximise profit. For big producers active marketing is a relevant part. The marketing

then takes place through advertisement in local newspapers/media, in some cases via

internet or through branch magazines.

At the end consumers house the firewood is stored usually in a dry location until it is

used. The ideal case would be a storage space which covers the one and a half time of

the annual need of firewood and offers a good access facility.








recovery are provided. But it is also their goal to appear as energy service provider.

The basic idea of the “virtual chopped firewood factory” is that firewood production is

spread out in small units near forest in the countryside. Produced firewood is collected

and larger volumes are transported to a terminal.

At a central terminal the purchase takes place through cash-and-carry customers or

delivery. The drying of the firewood occurs on the open area with permanent control.

For upgrading the productivity the plant logistics of the chopping site must be examined

as a whole, with cost-effective work phases and handling of raw material and product,

and with the production process being seamlessly combined with sales and the order

and delivery process.

33

Delivery to customers is still the biggest problem. The problems with packing and the

lack of cost-effective solutions are partly connected with these problems. The ideal

solution for this problem is to store and sell in the same packing units as it is dried. In

the majority of cases that means storage in lattice or wood boxes. Outsourcing of

customer deliveries to terminals in prime locations offers a clear opportunity to save in

costs. Comprehensive customer service, customer loyalty and consequent mutual

benefits will provide growth opportunities for well-planned service concepts in the

future.

In the firewood pickup terminal, the idea of ordinary supermarkets is applied. Large

quantities of goods, chopped firewood in this case, are transported to a retail terminal

where customers can choose and buy them. In this model the most time consuming and

expensive link of the supply chain, delivery is outsourced to the customer. The customer

is willing to do the delivery by himself if the price of chopped firewood is lower than by

ordering it directly from the manufacturer. Good marketing and a right location are the

key factors to make this concept successful. The flexible direct sale saves a lot of

storage space at the customer‟s home, because of the possibility to buy firewood in

smaller quantities and shorter intervals without additional costs.

Another possibility for increasing the sales is online marketing and sale or to export

products in other countries. E-trading offers an ideal possibility to improve the national

as well as the international firewood market. At the moment different types of

organisations of online firewood platforms exist. In the case of single entrepreneurs e-

trading offers the opportunity of relatively easy kind of direct selling. A more common

way is co-operative selling of several forest owners of one region. Special advantage of

this new business model is the support to connect customers and producers over a single

contact point. An important duty of the e-trading is to offer the customers and also the

producers the possibility to get the information about the current market situation

especially referring to prices. Most of the e-trading platforms offer all the information

required for an unobstructed firewood trade, which includes prices, description of the

different wood species and their characteristics concerning the combustion.




relatively cheap form of advertisement and direct selling. Basis of an efficient e-trading

is a well-oiled and easy to comprehend platform, so that the trade via internet exhibits

advancement for the customers.

34

6. Conclusion and Recommendation

All participant countries show inhomogeneous scenery concerning the size of

enterprise, the equipment and the production of firewood. Furthermore the market is

very confusing for a new end consumer due to the multitude of different offers. For this

reason in general the marketing is restricted to neighbourly word-of-mouth

recommendation or leaflets of DIY stores.

In the domain of firewood market the already mentioned central production possibilities

are certainly trend-setting. The young examples of these terminals described in chapter

4.3. The best new business models) possess a high potential because of their cost

efficiency in the production and distribution of firewood. In consequence the operators

can force the improvement of quality because of the collective acquisition of the

production as well as of the terminal itself.

For establishing such terminals in an economical passable size, It is necessary to

organise in associations or cooperations. The examples of Finland and Austria show that

a professional marketing plays a decisive role in this context.

In the range of E-trading there are also pioneers, which occupy this form of marketing

already very intensive. Nevertheless there is an enormous potential concerning this

manner to arrange the market more transparent.

Therefore beside the information about wood species, length and price, in future also

the conforming to standard production and quality should be marketed.

35

References

1. KRAJNC, R./POGAČNIK, N., 2000. Procesorji za izdelavo polen. Gozd. vestn., 2000, let. 58, št. 2, str.

96-97.

2. BORZEN; SLOVENIAN INTERNET WOOD EXCHANGE, URL [http://ove.borzen.si].

3. HEINIMÖ, J., 2006a. Future visions of international biomass markets, Developing bioenergy markets

– Focus on Forest Sector and Russia – seminar, Lappeenranta 24 October 2006, seminar folder.

(http://www.lut.fi/nordi)

4. HEINIMÖ, J., 2006b. Methodological aspects on international biofuels trade: International streams and

trade of solid and liquid biofuels in Finland, Submitted to Biomass & Bioenergy Journal, 28 p.

5. NÖ. LANDES-LANDWIRTSCHAFTSKAMMER. (2001): Energie aus Holz. St.Pölten: Selbstverlag

6. PILCHER, W. (2001): Marketing – Strategien für den österreichischen Scheitholzmarkt unter

besonderer Berücksichtigung der bäuerlichen Waldbesitzer. Wien: unveröffentlichtes Skript.

7. SIKANEN, L. 2005. New models of firewood business. TEKES seminar at Rajamäki, Finland

2.9.2005.

8. NATIONAL REPORTS (2008) of participating countries in the Quality Wood Project: Austria,

Finland, France, Norway, Slovenia, Spain.

http://www.lut.fi/nordi

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