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Innovating in Wood Measurement

By By Ruth Bradley
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New laser measurement technology, developed by a Chilean company, can save wood pulp manufacturers millions of dollars a year.

Every schoolchild knows how to calculate the amount of wood in a log. It’s just a matter of taking a measuring tape to the length and width and doing the right multiplication.

But it isn’t quite so easy for wood pulp manufacturers to know exactly how much of their main raw material they’re getting from suppliers. They can receive as many as 500 trucks a day, each with up to 1,000 logs.

That makes manual measurement a time-consuming and, at best, inaccurate process. And, then, there are all the irregularities in the shape of the logs that affect not only the calculation of their volume but also their commercial value.

And suppliers are, of course, well versed in how to load trucks to make measurement more difficult and so it looks as if there is more wood than there really is.

But a Chilean start-up company, Woodtech, has come to their rescue. Founded by two young engineering graduates from the Catholic University in Santiago, it has developed a laser measurement system that, in just 45 seconds as a truck passes through a portal - not unlike those used on Chile’s electronically-tolled highways - takes two million measurements and creates a three-dimensional picture of the truck and its load.

That’s the easy part, says Michael Yorston, one of the founders. The more interesting and innovative bit is that, by applying the right mathematical formulae, this picture can be used to calculate not only the volume of wood in a load, but also how straight or warped the logs are.

Using manual measurement, the typical error in the calculation of a load’s volume is in the range of 5%-10% - and always against the buyer, says Yorston. Or, in other words, a pulp plant that spends US$100 million a year on wood can be losing US$5-10 million a year.

And accuracy is not the only advantage of Woodtech’s logmeter. As well as being faster and saving on staff, it also creates a computer record of the load that is still there, in case of subsequent doubts, when the logs have long been pulped.

Automatic wood-measuring technology is only just beginning to be developed in other countries but, in Chile, was explored in the 1990s by Excelsys, a company owned by the family of Olivier Paccot, Woodtech’s other founding partner. But, because of the technical limitations that then existed, Excelsys preferred to focus on software for the banking industry, its core business, and its wood-measurement idea remained dormant.

That is until it was rediscovered by Paccot and Yorston - fresh out of university, eager to set up their own business but, as they recall, short on ideas.

Even then, it took them a while to get to measuring wood. Taking a disciplined approach, their first step - with the backing of a local investor - was to create a model to evaluate different business ideas. They must have looked at about 15 different projects, they say, and their first venture was in executive jet services.

“We saw an opportunity to professionalize that market in Chile,” says Paccot. They went on to start a school for helicopter pilots and even bought a helicopter, but soon realized that it was going to be difficult to scale up the business to a significant size.

Developing the logmeter promised richer rewards, but was a challenge on an altogether different scale. To start with, it meant they were looking for US$3 million in start-up capital, more than their original backer was prepared to commit.

But, as well as obtaining some early funding from the Chilean Economic Development Agency (CORFO), they got to talk to the Angelini forestry group; it liked what it heard and put up the capital they needed in exchange for a 51% stake in the new company.

Some of Woodtech’s first logmeters - each of which cost around US$400,000 - were installed at the pulp plants of the Angelini group’s Arauco company in Chile. But it is when they talk about Brazil - by far, Latin America’s largest pulp producer - that the two entrepreneurs’ eyes light up with pride.

Breaking into that market wasn’t easy, but seven of the 12 logmeters that Woodtech has installed or is in the process of installing are in Brazil. And it was a big feather in their cap when, earlier this year, they clinched a contract with Aracruz, the world’s leading supplier of bleached eucalyptus pulp.

Woodtech’s technology can be used to measure wood chips as well as logs but Brazil opened up yet another application - the measurement of coal loads. The catch with coal is that, because it soaks up water, weighing doesn’t work and it is for a Brazilian company, which approached Woodtech, that it is installing its first coalmeter.

Another event that, according to the two entrepreneurs, gave them an important leg up was their company’s selection to receive guidance from Endeavor, an organization that promotes entrepreneurship. “That gave us access to strategic advice from experienced businesspeople and encouraged us to think bigger,” says Yorston.

And, because it put them in touch with other young entrepreneurs, it’s also been useful in the down moments, adds Paccot. “You think you’re the only ones with a problem and, then, you discover you’re not alone.”

Woodtech, which now has a staff of 15 engineers, expects its sales to reach US$2.5 million this year but it still has a problem, confess the two entrepreneurs. It needs a more regular cash flow, rather than bumping from one big sale to the next.

That is what it hopes to obtain through Woodtech TotalService, a new arrangement that, as well as allowing clients to pay for the measurement service as they use it, also includes maintenance. Woodtech’s logmeters are, in any case, monitored from its offices in Santiago and, if something goes wrong, the chances are that it can be fixed from there.

By 2010, Woodtech aims to have 50 logmeters installed and its short-term focus will be on Chile, Brazil and Argentina. But, after leaving university with more enthusiasm than ideas, the two entrepreneurs now have plenty of the latter, both for their company’s geographic expansion - Scandinavia and South Africa are what they have in mind - and, when they have time, for experimenting with new applications of their technology.

Ruth Bradley is general editor of bUSiness CHILE. She is also the Santiago correspondent for The Economist.