Managing the Sawmill with Product Costs - A Simulation Study

This paper analyzes the effects of using product costs derived from an LP-model for managing the salesmen's efforts at a sawmill company. The salesmen are not controlled by sales quota, as is usual, but assessed by the accounting profit they generate. The analysis is realized by a computer simulation experiments under various assumptions on sales response and the mill's flexibility in purchasing timber. The cost figures are recalculated in each period. The results indicate that the success of the approach decreases with the length of the recalculation period, and increases strongly with the mill's flexibility in purchasing timber.

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Scandinavian Forest Economics: Proceedings of the Biennial Meeting of the Scandinavian Society of Forest Economics
2004, Number 40
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