Most of British Columbia’s value-added wood manufacturers operate well below best-practice efficiency levels, and the sector’s productivity has lagged behind that of the province’s sawmills and panel makers since before the 2007–2009 financial crisis. That is according to a new study by Lili Sun, Rico Chan and Bryan Bogdanski of Natural Resources Canada’s Pacific Forestry Centre, published in Forest Policy and Economics, which measures firm-level efficiency alongside a long-run productivity index.
Of the 143 British Columbia firms in the sample, only 17 per cent are fully efficient on the study’s aggregate measure, and the technical-efficiency scores suggest most could cut their use of wood and labour by anywhere from 14 to 49 per cent without producing any less, a gap that points to slack across the sector rather than a handful of laggards.
The finding cuts against a long-running policy bet, because secondary manufacturing has been promoted for decades as the way to diversify British Columbia’s forest economy away from declining commodity lumber, a case that has sharpened as US import duties and shrinking timber supply force mill closures across the province. The study effectively tests whether the value-added sector that policymakers have relied on is itself operating efficiently and finds that it largely is not.
The study defines secondary manufacturing as the further processing of lumber into intermediate and finished goods, spanning Cabinets, Engineered Wood Products, Furniture, Millwork, Other Wood Products, Pallets and Containers, Remanufactured Products, and Shakes and Shingles, whilst excluding veneer and panels. A Canada-wide survey cited in the paper estimates the broader sector at $19 billion in sales and 92,000 jobs, whilst British Columbia alone accounts for 680 firms, an estimated 16,888 full-time equivalent workers, and $4.46 billion in sales in 2016.
Drawing on the 2016/2017 survey, the researchers run Data Envelopment Analysis that treats labour and wood use as inputs and sales as the single output, a reasonable lens given that wood purchases and labour together account for 79 per cent of sector costs.
The inefficiency varies sharply by business type, with Furniture firms posting the strongest technical efficiency and Remanufactured Products the weakest, whilst Other Wood Products leads on aggregate efficiency at 55 per cent of firms fully efficient, compared with just 6 to 7 per cent in Millwork and Cabinets.
To connect firm-level efficiency with long-run performance, the authors build a chained Malmquist productivity index from Statistics Canada data running through 2024, which shows sawmills and panel products pulling steadily ahead of secondary manufacturing, with the gap widening after the 2007–2009 financial crisis.
The authors caution that the long-run series is an imperfect proxy, since Furniture and Cabinets drop out of the industry data and engineered wood producers cannot be cleanly separated, meaning the productivity gap is indicative rather than exact.
The combined picture points to a sector with room to raise output from the wood and labour it already uses, and on the study’s logic the larger prize lies in closing the technical-efficiency gap, improving how firms turn inputs into product, rather than chasing scale, which most categories already manage reasonably well.
For more information: Sun, L., Chan, R., & Bogdanski, B. (2026). Efficiency and productivity analysis of the secondary wood manufacturing sectors in British Columbia. Forest Policy and Economics, [volume], [article no.]. https://www.sciencedirect.com/science/article/pii/S1389934126001176
