14.10.1 Delivered Cost and Woody Biomass Logistics

For facilities using woody biomass as a fuel or raw material, a central objective of logistics management is to reduce the delivered cost of the material. For woody biomass, delivered cost generally includes three core components: stumpage, forest operations costs, and transportation costs. Stumpage is the term used in the forest sector to denote the fee paid to owner of the raw material, typically the landowner. Stumpage costs are highly variable and regionally specific, but biomass generally has the lowest stumpage cost of any material removed from the forest. In contrast, operations costs for biomass, especially logging residues, can be quite high compared to large diameter roundwood. Operations costs include all on-site harvesting, handling, and processing, as well as handling and processing at intermediate transfer points, like concentration yards. Operations costs can be accounted for using a marginal costing approach, where biomass is considered a by-product of the production of high-value products that support most of the operations costs, or a joint product costing approach where biomass is considered a co-product and operations costs are proportionally allocated among all products, including biomass [10]. Transportation costs most often cover a single motor carrier transporting material from the harvest site to the end user, but may include multiple trucking segments, depending on logistics. If a short-haul transportation segment is required to bring slash or processed biomass from the harvest site to a nearby concentration yard, short-haul transportation costs may be included in operations costs, especially if the short haul is conducted by the logging contractor. In general, if the total costs of delivering woody biomass to a facility exceed the price that the end user is willing to pay, the material is left to decompose or burned on site to reduce fire risk and open growing space for regeneration. In some cases, the net costs of woody biomass utilization may be offset by revenues from higher value products if biomass use is uneconomical but desirable for other reasons. For example, utilization may be used as an alternative disposal method in situations where open burning is prohibited.

Different logistics costs may be borne by different organizations along the supply chain, or by a single firm in a vertically integrated operation. In locations where biomass sup­ply chains are characterized by independent firms specializing in land investment, forest management, harvesting, transportation, and conversion, the details of cost structure are typically proprietary because efficient operations are a competitive advantage for com­peting firms. In this context, firms along the supply chain typically interact on price (e. g., stumpage price or gate price for delivered material). However, a number of different sources of information can be used to guide logistics management with regard to costs. The most important and reliable form of cost information is transaction evidence, or records of costs and prices from previous market transactions. In addition, in well-developed biomass mar­kets individual firms are often surveyed by public agencies or industry organizations that aggregate market information, especially prices, into stumpage reports and other similar market data reports, which are available for free or for a fee. Government land management agencies sometimes have publicly available data and methods that characterize the value and costs of forest products from public land, including fuel wood and biomass. For forest operations, a large body of research is devoted to quantifying and improving the cost struc­ture of woody biomass harvesting and processing. These data can be compiled to provide delivered estimates for a certain size and type of facility in a specific location.