Richard P. Vlosky and Francisco X. Aguilar
According to the theory of clusters in the business world, companies tend to spatially concentrate in places where they experience unusual competitive success. Clusters are generally geographically concentrated and are composed of a group of companies encompassing related industries in an industry supply chain. They may include suppliers, ancillary service providers or providers of specialized infrastructure. The study and identification of clusters can contribute to a better understanding of forest products industry competitiveness and regional development.
Spatial analysis can be applied to forest products manufacturing sectors to identify clusters. Spatial analysis is the process of extracting or creating new information about a set of geographic features. Spatial data consist of measurements taken at specific locations or within a specified area. Spatial analysis often requires the use of Geographic Information System (GIS) combined with statistical tools.
The forest products industry is considered to have cluster characteristics. The industry ranks among the top 25 largest clusters in the United States based on the number of people employed and spatial concentrations. Various factors affect industry concentration in certain regions. For example, transportation costs and associated proximity to resources and markets contribute to the concentration in the forest products industry. Sawmills benefit from economies of scale and the spatial aggregation of manufacturers can result in gains in efficiencies and cost reductions. Hence, there seems to be a spatial tendency for primary and secondary manufacturers to conglomerate in clusters. This classification is not always clear, but most industry observers agree on general definitions of the groups:
- Primary products are those produced directly from raw timber input. Examples include pulp, chips, lumber, veneer, plywood and their by-products.
- Secondary manufacturers use primary products as input for remanufacturing. Examples include various types of paper, paperboard, panels, engineered composites or dimension stock. Secondary products can also include final consumer products such as furniture.
The forest sector is by far Louisiana’s most important agricultural sector. According to the LSU AgCenter’s AgSummary for 2006, the forest sector contributed more than $4.8 billion to the state’s economy. The forest products sector accounts for about 11 percent of total manufacturing jobs in Louisiana employing nearly 28,000 people.
To conduct a spatial analysis of primary and secondary forest products manufacturers in Louisiana, spatial point patterns and spatial correlations of 78 primary producers and 176 secondary producers in Louisiana were calculated. Using a map projection for Louisiana, socio-economic data from the 2000 U.S. Census were merged with the zip code map projections and geo-spatial industry clusters for primary and secondary forest product manufacturers were identified and mapped.
In Figure 1 a lighter color indicates a higher incidence of primary forest product manufacturers. Note that there are several clusters of primary companies throughout the state. Primary forest product manufacturers are forest resource dependent and are located primarily close to the forest and raw materials (logs). In the northwestern part of the state, the predominant forest type is loblolly/shortleaf pine. In the southwest it is longleaf/ slash pine, and in the southeastern part of the state it is a mix of loblolly/shortleaf pine, longleaf/pine, and gum/oak/cypress. The dominant species in these areas may be a factor affecting this spatial pattern.
In Figure 2 the frequency for the secondary forest products industry is less dispersed. The largest incidence is located in the southeast part of the state, suggesting that the two largest incidences of secondary manufacturers are located close to the largest urban areas in the state, New Orleans and Baton Rouge. Compared to the primary forest products industry, the secondary manufacturers are typically situated near final consumers for their products in more populated areas. This pattern is in part motivated by easier access to consumer information and potential benefits derived from scale economies as a cluster grows larger. Secondary forest products manufacturers can source input materials from other areas (regions or even countries) and are not spatially tied to the source of input materials.
Some of the elements that encourage companies to be a part of a cluster include proximity to markets, access to plentiful supply of raw materials and potential customers, and skilled labor. The clusters identified in this study embody commonalities that can facilitate economic development efforts in this sector. Working with clusters enables policy makers to identify the most promising opportunities to encourage further innovation, develop worker skills and address issues that affect industry productivity. Primary forest products’ manufacturers are found in Louisiana near raw materials supplies, while secondary forest products’ manufacturers are concentrated near major populated areas. A cluster approach can also help firms achieve a competitive advantage by promoting common interests and can also help the public sector be more effective in supporting the cluster industry.
Future research will build on this analysis to identify geospatial locations of supply chain members in the wood-producing sector, model more complex business relations, and ultimately identify additional socio-economic factors that contribute to or hinder supply chain success. (This article was published in the winter 2008 issue of Louisiana Agriculture.)