Wood pellets have become a cornerstone of renewable energy, particularly in Europe and North America, offering a sustainable alternative to fossil fuels. However, as demand surges, the industry faces mounting pressure to deliver consistent quality, optimize costs and reduce its environmental footprint. The solution lies in adopting a rigorous Operational Excellence framework and drawing on the latest thinking in the pulp and paper and wood products sectors to elevate wood pellet production into a world-class, sustainable practice.

Key Operational Excellence Levers
AFRY defines Operational Excellence not as a rigid methodology but as a mindset that drives continuous, integrated improvement across processes, technology and people. The goal is to maximize the performance of existing assets, uncover opportunities to enhance reliability, and ultimately boost profitability.

At the heart of Operational Excellence are several interconnected levers that, when applied thoughtfully, can transform wood pellet manufacturing. Reliability and maintenance stand out as a foundation. By shifting from reactive repairs to predictive strategies powered by sensors, data analytics and artificial intelligence, operators can anticipate failures in critical equipment like dryers, conveyors and hammer mills, reducing downtime and extending the life of their assets.

Equally important is process standardization, which helps stabilize operations and align the entire organization behind clear, meaningful performance indicators. By defining and cascading key performance indicators—such as moisture consistency, throughput and yield—companies can ensure that operators, supervisors and executives are all working toward the same objectives.

A holistic view of the supply chain is another essential lever. Integrating data from forestry operations, inventory systems and customer demand allows plants to optimize procurement, minimize waste and respond more effectively to market fluctuations.

Energy optimization also plays a crucial role. Through techniques like heat recovery, combined heat and power systems, and electrification of auxiliary processes, plants can significantly reduce their energy consumption and emissions while improving margins.

Finally, none of these improvements can succeed without strong cross-functional collaboration. Operational Excellence depends on clear communication and cooperation across departments such as production, maintenance, quality, logistics and sales. When these teams work in sync, they can eliminate bottlenecks, respond quickly to challenges, and deliver consistent quality and service to customers.

All together, these levers form a cohesive framework for continuous improvement, positioning wood pellet producers to achieve higher efficiency, resilience and sustainability.

A Roadmap to Excellence
In Operational Excellence, the ultimate goal is not just profitability but sustainable performance—creating lasting value while fostering a culture of continuous improvement. By minimizing input waste, reclaiming residues and improving energy efficiency, pellet mills can significantly lower their carbon intensity, contribute to circular bioeconomy goals, and bolster their reputation. This supports global momentum for renewable materials and positions pellet producers as trusted partners in delivering sustainable energy solutions.

Achieving Operational Excellence in the wood pellet industry requires more than isolated initiatives—it demands a clear, structured roadmap that aligns actions with long-term goals. The following strategic steps provide a practical pathway for producers to do so (see Figure 1). By approaching these recommendations as an integrated journey rather than a checklist, companies can build resilient operations that deliver both profitability and sustainability.

Begin with an asset diagnostic (ExGAP). Begin with a structured assessment—such as AFRY’s Execution Gap (ExGAP)—to establish a baseline for performance across reliability, yield, energy and supply chain. The ExGAP identifies the gap between an asset’s potential and its actual performance, highlighting profit leakage and pinpointing areas where optimization can deliver the greatest impact.

In wood pellet production, the cost of wood is by far the largest component of variable costs, typically representing 50%–70% of the total. Leveraging AFRY’s Smart Forestry ecosystem, wood sourcing teams can reduce unit costs by approximately $5–$10 per ton through precise digital forest inventories and optimized operations, eliminating inefficiencies such as empty truck hauls and inaccurate procurement valuations.

Launch analytics and predictive maintenance pilots. Start small—install vibration, temperature or moisture sensors on a critical asset (e.g., dryer) integrated into a dashboard. Demonstrate return on investment through uptime gains and maintenance cost reductions.

Standardize KPIs across the board. Define clear, tiered metrics for key performance indicators (KPIs):

• Operator level: moisture and throughput variance.

• Mid-level: asset utilization, scrap rates, energy per ton.

• Executive level: overall equipment effectiveness, throughput yield, cost per ton, emissions intensity.

Optimize energy systems. Assess heat flows to uncover opportunities for combined heat and power or heat recovery. Explore options such as cofiring fines or dust or switching to renewable electricity to reduce reliance on fossil fuels.

Implement cross-department process workflows. Use value-stream mapping to uncover bottlenecks in production, maintenance scheduling and order fulfillment. Improve with joint control boards and integrated planning.

Capture waste streams for valorization. Repurpose byproduct streams—fines, dust and residues—selling them as fuel or biochar or recycling them internally. Package byproducts for wood panel, biochar or fuel markets.

Embed OE in culture through leadership training. Launch internal workshops to cultivate Operational Excellence mindsets to promote visibility, experimentation, accountability and cross-functional collaboration.

Scale and sustain with governance. Establish oversight teams to track OE initiatives, integrating them into quarterly reviews, capital planning and sustainability reporting.

Case Study
While Operational Excellence has not yet been widely applied in the wood pellet sector, an illustrative example from a related industry—sawn softwood production—demonstrates the potential impact of this approach. AFRY recently partnered with a large sawn softwood producer that operates several mills with a combined annual output of approximately 750,000 cubic meters, to unlock performance gains through a structured, sustained Operational Excellence program.

Prior to implementation, AFRY conducted an ExGAP diagnostic, which identified an opportunity worth $18 per cubic meter through improvements in production, yield and product quality. Building on these insights, AFRY worked with the client over a 12-month period with weekly on-site presence to redesign management systems, optimize production planning, strengthen maintenance processes and implement a robust change management program.

The results were transformative:

• Production: Increased by nearly 12% across all mills, thanks to improved uptime and runtime efficiency.

• Yield: Improved by over 5%, reducing waste and maximizing output from each log.

• Value: Average product value rose by nearly 6%, driven by better quality and optimized product mix.

• EBIDTA Improvement: Together, these gains contributed to an annualized EBITDA improvement of approximately $10 million, based on the final three months of AFRY’s presence.

Sustainability of these gains was ensured through regular system-maturity audits and impact reviews with the management team.

Although this case originates in the sawn softwood industry, the parallels to wood pellet manufacturing are clear: Both industries rely on heavy machinery, face variable raw material quality, and operate within tight margins and sustainability expectations. The success of this project demonstrates that a disciplined Operational Excellence approach—combining diagnostics, implementation support and cultural change—can unlock significant untapped value even in mature manufacturing environments. It reinforces the notion that the wood pellet sector can adopt similar methodologies to improve reliability, efficiency, product consistency and profitability, aligning with both commercial and environmental goals.

Conclusions
The wood pellet industry stands on the cusp of a transformative opportunity. By embracing Operational Excellence—combining predictive assets, process discipline, energy optimization and byproduct valorization—pellet mills can dramatically boost efficiency, sharpen profitability and enhance sustainability. Aside from short-term gains, this positions producers as leaders in the circular bioeconomy and aligns with global climate imperatives.

Operational Excellence isn’t just about doing things better, but doing better things and leveraging every aspect of production as a value lever. By applying proven best practices from the pulp and paper and wood products industries, pellet producers can unlock new pathways to long-term, sustainable success.

Author: Alexander A. Koukoulas, Ph.D., Director
Stefan Kucher, Director
AFRY
www.afry.com

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Enhancing Profitability Through Operational Excellence

Alexander A. Koukoulas and Stefan Kucher