Industry’s Balancing Act

As the 2015-’16 heating season approaches and retailers begin to build pellet inventories, Pellet Mill Magazine dug into the complexities of operating a year-round facility that manufactures a seasonal product for its September/October issue.
By Tim Portz | September 21, 2015

The continued growth and vitality of this industry hinges on the satisfaction of its customers after each heating season. The surest way to frustrate and ultimately lose customers is to not meet their needs. As the 2015-’16 heating season approaches and retailers begin to build pellet inventories, the team at Pellet Mill Magazine dug into the complexities of operating a year-round facility that manufactures a seasonal product. Our team appreciates these nuances and we’re fortunate to have the guidance of our excellent editorial board.

Two features in this issue are built upon the results of an industry survey we wrote in close consultation with our editorial board in early August. We invited and urged the industry to participate, and we were thrilled when more than 50 producers took the time to answer our questions. Both Senior Editor Ron Kotrba’s and Associate Editor Katie Fletcher’s features build upon the survey’s findings. Our survey establishes that the majority of producers in the industry are aggressively growing their businesses, as a third of respondents reported over a 20 percent increase in annual production in the past two years. Still, the survey and Fletcher’s and Kotrba’s stories make it clear that the product’s seasonality creates challenges for producers and retailers alike.

For her story, “Capacity, Capital, Storage Partner in ‘Pellet Dance’,” Fletcher asked a number of producers how their operations balance the opportunity for growth while limiting the risk of ending a heating season holding too much inventory. American Wood Fibers CEO Stephen Faehner told her, “I believe more of us are putting a higher percentage of our capacity in storage—at least those of us who have the financial ability to do so.”  For Faehner, the ability to capture upside demand with on-hand inventory late in the heating season outstrips the risk of inventory carryover. The sources in Kotrba’s story, “Matching Pellet Supply With Growing Demand,” are quick to point out that amassing inventory not only requires a storage solution, but an outlay of capital and disciplined management of cash flow. Paul Stringer, vice president of sales and marketing, told Kotrba, “This is a business that requires investment. It is an investment that you have to make to be a good supplier.”

This issue, more so than any other issue this year, would not have been possible without the guidance of our editorial board and the robust participation of the entire industry. I offer you our thanks and invite you to enjoy the great stories we were able to produce as a result.

Tim Portz
Vice President of Content & Executive Editor
tportz@bbiinternational.com