It is during the forest operations that harvesting activities are planned and executed. The wealth that has been created through silvicultural investments of site preparation, planting, thinning, pruning and fertilization are finally converted to income with the selling of the logs to the marketplace. Harvesting and transportation costs are two of the more significant cost categories in the primary forest products industry and the development and application of management tools is a key to promoting efficient operations. The decisions made during harvesting are critical in the conversion of this wealth to income.

Additionally, the forest products industry has been characterized as a mature industry with few new products being produced for the market. Therefore, the industry must focus shift its focus from growth to high levels of competition for additional market share with a constant threat of overcapacity that can cause prices to plummet. In mature, well-established markets, there is an emphasis on costs and service as the market has shifted to selling to sophisticated buyers with good market knowledge (Porter 1980). Finally, the primary forest products, logs and wood chips, have a cyclic as it often follows the housing markets where decisions are geared towards a patterned market. Ultimately, the decision maker must be able to incorporate this information their decision making practices.

The successful firms are the ones that can anticipate and respond to these cycles (Navaro 2005). They can use information to create forecasts that when combined with their operational cost control data that allows them to make decision for which they can be successful in the market place. For example, KB Homes was one of the larger home building companies in the United States founded in the 1957. During the 1990-91 US recession, KB homes was surprised the sudden downturn in the market and it had a huge inventory of unsold houses that nearly forced the company into bankruptcy. After surviving the recession, the firm was determined not to repeat the mistakes from the past that resulted in a large inventory of unsold houses. To prevent a repeat of the previous problem, they developed the decision tools necessary to integrate national and regional forecasting tools and to change the methods used make production and inventory decisions for the company (Navaro 2005). These changes in how they operated their business allowed the company to better adapt its business to the housing cycles present in its business. The result was a change in their basic business model from a build-to-inventory to build –to-order model. The company has maintained one of the strongest balance sheets within the home building industry for nearly two decades despite operating in a tremendously difficult business environment. The use of information to improve the company performance was a significant element in their ability to improve their financial performance.

Traditionally, the forest products industry has been a cost or production focused industry. Often, this exclusive focus on costs or productivity has come at the cost of ignoring market demand. In the Southeastern United States has resulted in a large unused logging capacity. Poor planning of operations was described as the third most prevalent cause of unused logging capacity as the average utilization of logging capacity measured between the years 2002-2004 was 65 percent (Greene et al. 2004). Increasing the utilization rate from 65 to 73 percent, could lower costs by 3.6 percent (Greene et al. 2004).One recommendation from Greene et al. (2004) was that improved planning to promote the cooperation among the wood-flow participants is one method to improve the efficiency of forest operations.

This chapter will chapter will describe the tools and decision models that will allow firms within the industry to better manage their operations. It will begin with a describing a simple decision problem and the developing the more complex tools that are used in the forest operations management that are used in the decision process. The goal is to provide a broad exposure to a variety of tools that may foster a desire for deeper study using texts dedicated to that particular technique.