Inventory Management of Dimensional Lumber: Preventing the Loss of Current and Potential Future Revenues

In any commodity market, such as dimensional lumber, every effort must be made to reduce the loss of current and potential future revenues. TMO Global Logistics (TMO) has commissioned a research project for the University of Virginia (UVA) which emphasizes the need to design a solution that adds value and minimizes these losses. The loss of revenues, both current and future, associated with dimensional lumber arise for two reasons. The first of these is the loss of lumber in the transit from the mill to the final destination of the customer. The second is the deterioration of lumber while at the discharge port Through a study of the concept of operations for the current system, this paper identifies the causes of the revenue losses. A feasibility and economic study of proposed alternative solutions to properly rectify these issues has resulted in the recommendation that TMO implement barcode scanning of all packages to prevent the loss of lumber and implement a commodity code to improve the handling of the material at the port. In order to prevent the deterioration of lumber due to the ambient conditions, it is recommended that TMO store the lumber inside of a warehouse immediately upon discharge.