Dawson Forest Products - Supply Chain Management

Module 8 SCMP

Services, Capital Goods and Major Projects

Case Study: Dawson Forest Products

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Prepared by: Gloria Lam, John Firth, Tom Liniarski, Rob Wong, M. Hasan Manzoor

Prepared for: Gary Palmer

March 20, 2018

Table of Contents

Executive Summary ……………………………………………………………………….....3

Issue Identification ……………………………………………………………………….…..4

Operating Environment ……………………………………………………………………………….5

Root Cause Analysis …………………………………………………………………………6

Alternatives ………………………………………………………………………………...….6

Decision Matrix …………………………………………………………………….………....9

Recommendation ………………………………………………………………………….…9

Implementation ………………………………………………………………………………10

Monitor and Control …………………………………………………………………………11

Executive Summary

The purpose of this report is examine Dawson Forestry Products’ (“Dawson”) business in a regulatory environment wherein it must factor in the cost of carbon emissions.  The provincial government of British Columbia (BC) has recently passed legislation which places a price on carbon emissions. Dawson has initiated capital projects which will reduce its emissions and subsequently its carbon tax owing.

This report’s scope is solely on the Biomass Thermal project. This project would upgrade the drying kilns, allowing them to be powered by biomass rather than natural gas. This project is currently over budget and months behind schedule. The primary issue for Dawson is whether or not to proceed with the project or to cancel the project.

The entire forestry industry in BC is burdened by government regulation and buffeted by the winds of the global economy and the political whims of the US federal government. As such, Dawson has encountered many downturns and shutdowns over its lifetime. This precarious financial situation has made this upgrade project feasible due to “Green” incentives from the BC government. Dawson would otherwise be unable to initiate a large capital improvement plan. These incentives may not be available if Dawson opts to cancel the project and reinitiate at a later date. With that in mind, the key factors to determine the correct decision are the cost of natural gas currently used in the drying process, the carbon taxes owing from emissions used in the drying process, and the value of carbon offsets from the government that would reward Dawson for its reductions.