TIMBERIA.ORG - OPEN MARKET B2B ONLINE COMMUNITY

2.2.1 Business Models

Analyzing the development of forest product B2Bs from 1999 to present day, one could classify B2B business models as either horizontal or vertical in organization.  Horizontal organization refers to B2B services provided for different industries without a focus on a particular product group.  The vertical organization of a B2B is often industry specific and “[r]eflects orientation along many steps in the supply chain of one product group” (A Report by Federal Trade Commission Staff. 2000, p. 6).  B2B models with horizontal organization specialize in the sales of raw material and components, also called as “direct inputs”, that will be reprocessed in the further manufacturing process or become parts of a final product sold by a retailer (Kaplan and Mohanbir 2000, p. 98).  In contrary, a vertical organization may imply “indirect inputs” – operating inputs that are necessary in a manufacturing but do not become a part of a final product (Kaplan and Mohanbir 2000, p. 98).

2.2.2 Pricing Mechanisms

Most of the forest products eMarkets that emerged as a result of the dot.com revolution hype exhibited horizontal organization and used directories (catalogs), trading hubs, online negotiation platforms, and online chain supply management tools to implement a mechanism to establish a price on forest products and enhance the price transparency of the forest product marketplace.  The analysis of today’s B2Bs presented in Table 1 demonstrates that 13 companies, a majority, use directory listings as a pricing mechanism. 

Seven companies determine prices on forest products with negotiation platforms and five companies offer wood and forest industries capabilities of online supply management tools while only three companies provide an automatic match between a buyer and a seller operating as trading hubs (Figure 2).

Figure 2: Number of companies by pricing mechanism

2.2.2.1 Online Directories

Online directories and catalogs accept information about direct inputs from suppliers through online submission forms and facilitated a search process for buyers of forest products using catalog navigation in which forest products were aggregated by categories and then by subcategories.  ForestIndustry.com and StickTrade.com are typical examples of forest products directories.  While most online directories were simple to use there were disadvantages for such systems.  For example, suppliers were unable to update information about product availability and prices on a regular basis without being first reviewed by an administrator that resulted in a delay.  Also, prices for products in those directories were fixed and a negotiation on price between a supplier and a buyer never occurred.  Essentially, an online electronic catalog or directory of forest products in its business model was similar to a traditional e-commerce store.

2.2.2.2 Trading Hubs

Forest product trading-hubs emerged as another pricing mechanism utilized by forest eMarkets with horizontal organization.  The idea behind electronic trading hubs was to match offers posted to the system by buyers and suppliers automatically and then to email both buyer and supplier if a match is found (A Report by Federal Trade Commission Staff 2000, p. 11).  The classic example of a forest product trade hub is the buyer-oriented WoodPlanet.com.  After a seller posts his offer, a buyer receives a notification if an offer satisfies his request.  The main disadvantage of this mechanism was the absence of human involvement in the process of finding matches.  Since this process is supposed to be entirely automated and take into account only a few criteria, for example the price and product categories, participants of a trade-hub received many superfluous offer notifications.  And the flexibility of negotiation between a seller and a buyer was impeded since sellers and buyers were forced by the system to deal on matched offers only.

2.2.2.3 Negotiation Platforms

Negotiation platforms allow more flexibility then trading hubs do.  The idea behind the negotiation online platforms is that a buyer can search through a database of seller’s offer profiles and could contact them directly.  If a seller responds, they can then deal directly with each other.  Negotiation platforms appear to be a successful business model for forest product B2Bs since it provides flexibility to adjust an offer to the benefits of both buyers and sellers.  Timber-Exchange.com is a Germany-based B2B negotiation platform and is probably the largest eMarketplace in Europe that facilitates negotiations among buyers and sellers of forest products.

2.2.2.4 Supply Chain Management Tools

Finally, online supply chain management tools provided capabilities to facilitate collaboration between businesses (Shook and Vlosky 2004).  Such collaboration often includes optimization of a company workflow and provides tools for electronic exchange of documents such as order, order confirmation, change order, shipment notifications, invoices, and product catalogs and integrated different businesses of one supply chain through the web based application. 

Figure 3: Value-added distribution chain for forest products (Damery 2002)

For example, TimberWeb.com eMarketplace, based in the United Kingdom , uses specialized software called eTrader that provides buyers and sellers with effective workflow management solutions that allows them to conclude deals online and manage the entire supply chain from making an online contract to the final delivery of forest products to the end customers.

The value-added distribution chain for forest products is presented in Figure 3.  All B2Bs presented in Table 1 that provide online supply management tools to their clients mainly facilitate workflow process between primary and secondary producers and the distribution tier of the supply chain depicted on the Figure 3.  The exception is ForestToMarket.com system that also connects landowners (Resource Base) and Primary Producers of forest products.

Figure 4a: Minimum price to use basic web site features	Figure 4b: Price to use full web site capabilities

2.2.3 Revenue Generation

Table 1 also summarizes the means by which different B2B platforms generate revenue.  According to this analysis, the following revenue mechanisms can be identified:

1.) Membership fees

2.) Brokerage

3.) Middleman

4.) Data sales and marketing services

5.) Advertising(rich-content web site)

6.) Auxiliary services

2.2.3.1 Membership Fees

About 96% of forest products trading web systems in this analysis use membership fees to generate revenues and stay in business (Figure 5.).  Membership fees are paid periodically by B2B participants.  All B2Bs discussed in this paper that use membership fees in their business models charge their members annually.  The amount of a membership fee varies.  Almost all B2B systems with membership fees provide users with introductory features that may be either free of charge or a minimum charge may apply.  For example, timberweb.com hides contact information of users who posted their offers to the trading system from website guests and reveals this information to members only.  Figure 4a shows the distribution of a minimum charge among B2Bs presented in the Table 1.  It shows that the distribution pick demonstrating the maximum number of occurrences lies in the range between $200 and $250 USD.  Figure 4b demonstrates distribution of a charge when all web system features are available to a B2B member.  This distribution shows $1,200 as an average amount with the highest frequency.

The membership fee as a means to generate revenue has its advantages and disadvantages.  The main advantage is that it provides a B2B company with annual fixed revenue and thus allows predictions and business planning.  The main disadvantage is that revenue that a B2B company generates during the year is limited by the number of members.  Also, users that commit transactions online only one or two times per year may be reluctant to pay high membership fees, or perhaps membership at all.  For example, an owner of a forestland who sells timber every five years would unlikely use a B2B portal that charges a high membership fee.  This leads to inability of membership fee oriented B2Bs to facilitate transactions between a resource base owners and primary producers (Figure 3).  Indeed, as mentioned above, most forest trade systems with membership fees focus on facilitating transactions between primary and secondary producers.  Another disadvantage with membership fees is that it is hard to get a large number of users, especially if a B2B is a young startup company.  Membership grades and introductory free basic features may increase the number of registered users but it does not guarantee that all users would use all capabilities of a web trading platform, and will be willing to pay for a full membership.

During the early stages of forming online business models, when there were a small number of online competitors, the first B2Bs charged membership fees.  However, increasingly these companies have come to realize the importance of providing free services (Mahadevan 2000).

Figure5: Mechanisms of generating revenues used by forest B2Bs

2.2.3.2 Brokerage

The brokerage is another mean of generating revenue for a B2B company.  B2Bs that use this as a revenue generating tool charge a fixed or percentage fee from each transaction made by web site members.  Brokerage is often combined with membership fees.  E-wood.com charges from 5 to 10 percent of the total monetary amount of a transaction and requires its members to pay a $50 annual fee.  Forestexpress.com applies a fee of $0.15 - $0.25 per one ton of products being transacted. Our analysis reveals that only three B2B companies (12% from total) use a brokerage business model. 

Brokerage is a more flexible instrument to generate revenue for a B2B company compared to a membership fee model.  The advantage is that the company primarily depends on the number of transactions generated.  The total number of members is still important, but becomes a secondary factor.

2.2.3.3 Middleman

Another revenue generating tool for online forest product industries is acting as a middleman.  In middleman business models, the company does not charge a transaction fee, though it may apply an annual membership fee.  An example is Timberweb.com – the biggest European B2B web-based company that facilitates trade of forest products.  This company not only charges a membership fee from members but also assists in all aspects of international trade including preparation of contracts; help with insurance, and resolving financial matters among parties involved.  Though the middlemen schema is used only by 2% of B2Bs presented in Table 1, this model of generating revenues has many advantages.  Middlemen function as a bridge that connects conservative old-school forest businesses with new technological solutions.  The establishment of such connections becomes possible through partial human involvement in the process that creates trustworthiness in utilizing the company’s online trading tools.

2.2.3.4 Data Sales and Marketing Services

Data sales and marketing services are another way of generating revenue for a B2B company. For instance, Forest2Martket.com assists forest businesses by providing information on prices for forest products in micro markets in the Southern United States.  This B2B sells licenses to users so that they can use the services of the company.  Though this, to some extent, has similarity to membership fees, it differs because a registrant buys a package of services that helps to market his forest products or to facilitate business in small geographic areas called micro markets.  By purchasing a license, a landowner or a small business owner may request that the online firm conduct a marketing analysis, order price quotes, and find a seller or buyer.  Therefore, Forest2Market.com primarily facilitates the supply chain connection between resource base (forest landowners) and primary manufacturers. 

The advantage of this data sale model is that a landowner or a small business can obtain information services for decision-making on the local market of forest products.  The disadvantage is that such B2Bs, like Forest2Market do not look for an actual buyer-seller match for buyer and seller but rather shows them the general picture of the micro market under analysis.  Data sales require very good knowledge of regional markets which relies on company staff expertise.  In some instances, the accuracy and validity of data might become an issue.  Collecting data can be expensive.

2.2.3.5 Advertising

35% of B2B companies presented in Table 1 use advertising as an additional means to increase revenues from their operations (Figure 5).  Usually, advertising coincides with a membership fee mechanism and usually by itself, cannot support a B2B company.  Advertising can only be efficient if the web content is rich, thus it is interesting to view or read and the web site receives a sufficient number of visitors (viewers) to justify charges applied for placing an advertisement.  Well thought through, correctly organized and frequently updated content can attract more viewers. 

Forestindustry.com is an example of an efficient web site which utilizes advertising as revenue generation mechanism.  They combine the Internet and print products to give participants of the forest products market an opportunity to meet their needs by maximizing the effectiveness of the Web.  Along with the Internet, this company also uses traditional channels such as hosting trade events and connecting forest businesses through leading associations.  Another B2B that utilizes advertising is Woodweb.com.  They create rich content through maintaining a knowledge base, wood product directory, and topic-based discussion forums that provide woodworkers with reference material and product information they need to run their businesses, and provide a real-time problem solving platform. 

The main disadvantage of advertising for revenue generation is that advertisements interfere with the web page content and format.  Advertising reduces the amount of space available for other information.  It can distract a user’s attention and in can decrease the usability of the web site in general.  Moreover, some graphic advertisements can impact the time to download and to render a web page.  The delay in page downloading and rendering may negatively impact the end-user’s experience.  Thus the trade-off between the number of advertisements and the value of the content is analogous to trade-off between a price and quality of a product and thus should be considered carefully (Dewan and Freimer 2002).

2.2.3.6 Auxiliary Services

Logsplitters.com and Timberandmore.com provide their customer with so-called auxiliary services that do not connect sellers and buyers of forest products directly but may help them to improve their marketing positioning on the web.  This is done by providing customers with services such as web site design and hosting, search engine optimization tailored to the wood and forest industries, and web site promotion through niche banner exchange.

Figure 6 shows the relationship between pricing mechanisms of B2B companies presented in Table 1 and their means of generating revenues.  This figure shows membership fees, a mean to generate revenue, is found in 45-60% of the firms, regardless of a pricing mechanism.  Directories, as the least technically sophisticated B2Bs, extensively use advertising to increase their revenues.  The share of advertising for directory-based B2Bs constitutes about 40%.  At the same time purely technically complex implementations for pricing mechanisms with minimal human involvement, such as trading hubs, rely either on the brokerage model or membership fees, or both. 

Figure 6: Relations between pricing and revenue mechanisms for B2B companies presented in Table1

This can be explained by the fact that these technical solutions use Internet protocols to run their software that is, as in case of Forestexpress.com, not necessarily browser-based.  Companies that use their B2B services to facilitate supply chain management rely equally on data sales and middleman schemas.  Negotiation platforms do not utilize brokerage business approaches, a buyer and seller meet each other using the platform but conduct the transaction outside the system.  Consequently, negotiation platforms utilize advertising and data sales to generate revenues.  In this analysis, B2Bs that act as negotiation platforms represent the highest share (60%) of the membership fee approach.

2.2.4 Online communities and forest sector business

The analysis conducted above reveals both strengths and weaknesses of the existing business models, pricing mechanisms, and means to generate revenues.  There is a feature that all these models have in common.  Almost all B2Bs presented in Table 1 are survivors of the dot com crash and their business models have not been adequately adjusted to the changing trends in post-crises Internet environment.  According to the study of how the Internet impacts different social interactions in the modern American society conducted by Nie and Erbring (2002) “the data strongly suggested a model of social change with not only a growing number of Internet users, but with web users doing more and more activities on the Internet in the future” (Nie and Erbring, 2002, p. 278).  Forest product B2Bs presented in our analysis were not be able to respond adequately to the new types of social and business interactions that emerged as a result of the rapid growth in the number of Internet users and development of new web-based technologies.  Business models of these companies were formed during the era of the dot com bubble and targeted a “classic Internet user-businessman” who used the Internet merely as a tool of communication through electronic mail and search for information on products and services.

The study conducted by Koh and Nam (2005) provides empirical evidence that Internet business applications are evolving with respect to the value chain framework that include inbound logistics, operations, outbound logistics, marketing and sales, as well as customer service.  Unfortunately, for most forest product eMarketplaces the Internet is still only a tool to disseminate information thus its applications are likely to be found at the marketing and sales phase.  Only two companies, ForestExpress.com and E-wood.com, use the Internet as a transaction processing mechanism, and presently only one company, Timberweb.com, uses the Internet as an integrated technical infrastructure to support different types of operations for its clients.  However, even this site has no capabilities to seamlessly integrate all value chain phases; in particular, it is incapable to support outbound and inbound logistics operations.

Another drawback that is common for most B2Bs presented in Table 1 is that their online processes are rather oriented to asynchronous user’s inquiries to static web or dynamic database content and lack, or have no tools, that would increase social and business interactivities among members.  Moreover, interactions among members of an eMarketplace might contradicts to its business model because, especially in cases of negotiation platforms and directories, its members pay a membership fee to get instant access to contact information of potential buyers and sellers registered in the company’s database.  An isolation of B2B members from free-of-charge interacting with each other prevents a company from building an online community – an organization of online environment based on the human desire for social and business interactions (McInnerney and Roberts 2004).

De Souza and Preece (2004) defined online community as the people who come together for a particular reason or purpose, and who are guided by policies that include rules and norms and supported by software.  An online community is not a business model in itself, but potentially part of the customer relationship (Osterwalder and Pigneur 2005).  This is a virtual space in which people tend to have common interests, needs and goals and where they can easily find and communicate with each other and establish relationships (Andrews and Preece 2001).  At the beginning of the Internet era online communities were seen as social phenomena without commercial focus (Schoberth et al. 2003).  However as the number of Internet users grew and new technologies emerged online communities become strong stimuli to eBusinesses (Hagel and Armstrong 1997).

In the forest sector, a product focused or region focused online community can help to build a sustainable collaborative platform for long term-business relationships among its members.  According to the surveys conducted in Vermont, Massachusetts, and New Hampshire, approximately 75% of family forest owners are online (Belin 2002).  However, 20% or fewer forest owners use the Internet for selling timber and land online due to the absence of web tools applicable to their specific needs at a particular decision point (Belin and Kittredge 2005).  These tools can help in disseminating specific up-to-date information, providing a mechanism for eBusiness transactions, catalyzing regional business activity, and increasing sales leads (Kallioranta and Vlosky 2006).  An online community focused on forest products may contribute in educating its members about many aspects of this business and could make them operate more efficiently and profitably.  Two newly born forest industry communities, the Louisiana Forest Products Community www.laforestproducts.org and the Oregon Forest Industry Directory www.orforestdirectory.com, were recently mentioned by Kallioranta and Vlosky (2006).  Both “candidates” are non-profit web-sites oriented to regional markets of forest products and have no online tools implemented to provide a fully interactive environment for their users and thus qualifying them as online communities.  The Oregon Forest Industry Directory is rather a typical example of a web-based regional directory (catalog) of forest products.  The only attribute of an online community that may be recognized on this web site is the discussion forum.  The Louisiana Forest Products Community publishes news-releases, government documents, and related external links online but has no technical solutions for the users to interact with each other on the web site.  Neither one of the web sites has policies supported by software that is an attribute of an online community.

 

Figure 7: B2B data integration in B2B online community

Policies supported by software means that the system applies rules or standards for input, storage, and output of data.  Rules define how inputs received from different members of an online community should be integrated.  Rules also define standards for data entry, database design, and formats for data output while norms regulate an appropriateness and validity of a content that the system displays on a web site.  Data integration is a key element of a business to business online community (B2B-OC) primarily because of the fact that its members tend to store information about their product and services in different data formats and may define the same products differently.  For example, a small sawmill business (A) may maintain its inventory in Microsoft Access database while a large secondary manufacturer (B) may use Oracle or SQL Server for its data warehouse (Figure 7).  To exchange information between these two business entities in order to originate a transaction, the product specification rules and information exchange format should be defined.  As presented on Figure 7, both members of B2B-OC should define information about properties of their products they submit to the B2B-OC database according to the certain rules to make this information equally accessible to all participants.  The problem of data integration is how to manage the data generated by the B2B-OC so that members of the community can access such data with ease without discarding their own software (Adiele and Ehikioya 2005).

No existent forest products B2B operating today can provide a sufficient technological solution for data integration across the entire value added chain.  We present Timberia.org - an attempt to design a web-based platform built on B2B-OC principles with strong considerations for data integration and facilitation of the information exchange on each phase of the value chain framework for forest products.

2.3 Timberia.org – open market B2B-OC

The Timberia.org (Figure 8) is an open market B2B-OC that facilitates transaction of forest products, logging and woodworking equipment by providing wood industry professionals with a tool to market their products and services on the Web.  The Timberia.org is a database driven web application that utilizes the capabilities of ColdFusion MX 7 Server.  The user web interface is written in ColdFusion Markup Language (CFML) and JavaScript.  SQL Server 2005 is used to manage data received from the community members. 

Figure 8: Timberia.org front page

The Timberia.org also provides an application programming interface (API) built on web-services that could allow other web sites, for example personal web pages of forest landowners or large industrial web portals, to receive information posted to the Timberia.org B2B-OC and seamlessly incorporate it into their designs.

Table 2: Types and categories of transactions for Timberia.org markets

Market	Transaction Type	Transaction Category
Timber Market	Sell Buy Exchange	Chips & Wood Residues Engineered Wood & Panel Products Flooring & Decking Moulding & Millwork Paper & Paperboard Poles, Piles, Ties & Construction Logs Pulpwood, Cordwood & Firewood Sawlogs & Veneer Logs Sawn Timber & Lumber Standing Timber, Stumpage Veneer Sheets Wooden Furniture
Equipment Market	Sell Buy Lease/Rent	Woodworking & Furnishing Equipment Logging & Forestry Equipment
Services Market (Consultant Board)	Offer Service Request Service	Finding, Mapping, and Marking Property Boundaries Forest Inventory and Appraisal Planning Estates, Taxation Matters Selling & Buying Timber Stewardship Plan Timber Stand Improvement (TSI) Wildlife Habitat Enhancement Forestry Service Export and Import Equipment Installation and Maintenance Freight Service Other
Financial Market (Investment Proposals)	Invest Submit Proposal	Forestlands Commodities Real Estate Bonds & Loans Stocks & Shares Joint Venture

The design of the Timberia.org user interface reflects the structure and business activities of the forest sector.  It has been designed in a way to provide its members with guidance that helps them to select an action (e.g. sell or buy) and complete such an action quickly with the assistance of the software.  At the design stage, an assumption was made that the forest sector can be segmented into four major “Markets”: Forest Products (Timber Market), Equipment, Services Market (Consultant Board), and Financial. 

To participate in Timberia.org eMarketplace a member must register using an online registration form.  Both registration and membership are free.  After registration has been complete, a member receives a login and password to access the system.  A logged-in participant initiates transactions at the Timberia.org front page by hitting a post-an-offer button.  At the next step a member selects one of the four markets relevant to the transaction.  A community member decides whether he/she would like to:

• trade timber, lumber, and other forest products,
• trade woodworking machinery and logging equipment,
• use/provide services of a professional forester (a business consultant),
• submit an investment proposal

After the user selects a market to participate in, the system offers a web-interface designed for this specific market.  Using this interface a member can specify a type and category of a transaction (Table 2).

2.3.1 Timber market

Timber Market is the primary market of Timberia.org and contains twelve major categories (Table 2).  Transactions in this market are either buy or sell.  This market is designed to connect landowners, log buyers, sawmills, lumber buyers, and other primary and secondary producers.  To help explain the process of conducting a transaction by a member in this market, we present four transaction examples: Sawn Timber & Lumber, Standing Timber (Stumpage), Sawlogs & Veneer Logs, and Engineered Wood & Panel Products.

2.3.1.1 Sawn Timber & Lumber

The first step a user must take is to assign relevant product properties for their desired transaction.  Assignment of properties of a product in Sawn Timber & Lumber category takes two sequential steps.  At the first step a user defines product species, sawing method, and lumber surfacing.  Next a user selects the lumber grade and qualitative characteristics of a transaction such as volume, units of measure, and price.

Timberia.org encourages users to provide supplementary information about Green Certification of the forest products being traded in order to promote responsible forestry practices.  Therefore, when specifying the properties of their lumber, a user can specify whether the product matches certification standards developed by one of the following organizations:

• Forest Stewardship Council (www.fscus.org)
• Sustainable Forestry Initiative (www.sfiprogram.org)
• The American Tree Farm System (www.treefarmsystem.org)
• Canadian Standards Association & Sustainable Forest Management System (www.csa-international.org)
• International Organization for Standardization (www.iso.org)
• Programme for the Endorsement of Forest Certification (www.pefc.org)

As data is entered the system passes control to a script that configures the next form.  After certification data is entered the user is taken to a form where they can specify whether the product(s) are hardwood or softwood.  Then based on the geographic origin of wood, the system provides an option to select a species type and product grade.  For softwood lumber and timber, a user specifies a class of softwood lumber, first and then a grade for the class selected.

Both softwood and hardwood lumber grades are based on the standards developed by US-based organizations, for example APA, WWPA, and RIS.  An international member is encouraged to define grade of his/her lumber following the rules established by these organizations.

The classification system for softwood lumber grades used by Timberia.org have been derived from the different sources (SPIB 2002, RIS 2000, WWPA 2005, USFPL 1999).  The American softwood lumber standard PS–20 (USDC 2005) is a basis for the classification of lumber grades presented in Table 3.

Timberia.org classifies softwood lumber for five major classes.  Each class has its own grading rules.  Common lumber (Table 3) are boards that are less than 2 inches in nominal thickness and 2 inches or more in nominal width.  Appearance lumber, also known as Finish or Selects, are boards for making quality softwood furniture with a natural finish or softwood lumber that has been custom milled to a pattern or surfaced on all four sides.

Table 3: Classes and grades for softwood lumber

	Classes of Softwood Lumber
	Common	Appearance	Dimension	Timbers	Factory & Ind.
Lumber Grades	No. 1 Common - Construction No. 2 Common - Standard No. 3 Common - Utility No. 4 Common - Economy No. 5 Common - Economy	Superior Prime Clear B&Better Select C Select D Select Clear All Heart A Grade B Grade E Grade	Construction Standard & Better Standard Utility & Better Utility Economy Dense Select Structural SYP Select Structural Non-Dense Select Structural SYP No. 1 Dense SYP No. 1 &Better No. 1 No. 2 Dense SYP No. 2 No. 1 Non-Dense SYP No. 3 No. 4 Stud Economy Stud	Select Structural Non-Dense Select Structural SYP No. 1 Dense SYP No. 1 & Better No. 1 Structural No. 1 No. 2 Dense  SYP No. 2 & Better No. 2 Structural No. 2 No. 1 Non-Dense SYP No. 3 Utility	Molding & Better Molding Factory Select Select Shop No. 1 Shop No. 2 Shop No. 3 Shop No. 1 Mining No. 2 Mining No. 1 Scaffold No. 2 Scaffold Foundation

Dimension lumber is softwood lumber that is nominally 2 to 4 inches thick.  This class of lumber is widely used in residential construction.  The “Timbers” Lumber class represents lumber that is 5 inches or larger at least one dimension and is generally used in heavy construction.  Finally, Industrial lumber is used in industrial applications and Factory lumber are boards used by secondary producers and manufacturers graded on the basis of the percentage of the area which will produce a limited number of cuttings of a specified, or a given minimum, size and quality.

Table 4: Hardwood lumber grades

Grade	Minimum Board Length	Minimum Board Width	Minimum Cutting Size	Minimum Area of Clear Cuttings
FAS	8'	6"	4" x 5' 3" x 7'	83-1/3%
SELECT	6'	4"	4" x 5' 3" x 7	83-1/3%
No. 1C	4'	3"	4" x 2' 3" x 3'	66-2/3%
No. 2AC & 2BC	4'	3"	3" x 2'	50%
No. 3AC	4'	3"	3" x 2'	33-1/3%
No. 3BC	4'	3"	1-1/2" x 2'	25%

The classification of hardwood lumber is based on standards developed by the US National Hardwood Lumber Association in which a piece of hardwood lumber is determined by the proportion of a piece that can be cut into a certain number of smaller pieces of material, commonly called “cuttings”, which are generally clear on one side, have the reverse face sound, and are not smaller than a specified size (USFPL 1999).  As presented in Table 4 hardwood lumber is usually manufactured to random widths and lengths.  Table 4 provides minimum values of these dimensions.

Figure 9: Decision-making diagram to define properties of lumber

The complete decision-making tree that leads a member through the process of defining product properties for this category is presented on Figure 9.  After species and grade have been specified, the user enters lumber dimensions, units of measure, transaction volume, price per unit, and quote type.  Quote type is an international commercial term that defines the trade contract responsibilities and liabilities between buyers and sellers.

All prices in the system are converted to the United States dollar equivalent using the present conversion rate at the Federal Reserve Bank of New York.  The dynamically generated user’s interface allows selection of appropriate units of measure for both dimensions (board thickness, width, and length) and transaction volume.  This is the last stage of the input process and the user’s specified data are then saved into the database.

There are B2B community rules, that on the one hand, restrict a member’s options but on another hand provide data integration for the Timberia.org eMarketplace.  One of these rules is that a member can commit only one transaction at a time.  For example, if a member is selling appearance lumber graded as FAS and also dimension lumber graded as Economy, he/she should conduct two sequential transactions.  Lumber of different grades and types can not be entered at the same time.  There must be transactions conducted both for the lumber graded as FAS and also for the dimension lumber graded as Economy.  The same rule applies if a user is selling or buying, for example, FAS graded lumber and his/her lumber inventory consists of two species, for instance red oak and birch.  Again a Timberia.org member must submit two offers: one for the red oak lumber and another one for the birch lumber.  An exception arises when lumber has different dimensions but all other characteristics are the same.  In this case only one transaction is needed but a user has to specify minimum and maximum dimension ranges for board thickness, width, and length. 

The same approach is applied for all categories of wood products at the Timberia.org Timber Market.  This approach guarantees a correct specification of all product characteristics including price and volume in a standardized format that allows Timberia.org to quickly integrate data received from its members and make these data accessible for a parameterized search and available for sharing through web-services.

2.3.1.2 Saw Logs and Veneer Logs

When the Saw Logs & Veneer Logs category is selected the logic to define properties of logs are similar to the definition of lumber properties.  Based on a species group, a member of the online community selects a log grade first, and then defines the quantitative properties of a transaction. 

Table 5: Hardwood log grades (Source: Kittredge 2004)

Grade	Minimum Diameter (DBI)	Minimum Length	Clear Faces
PRIME	16"	9'6"	4
VENEER	14"	8'8"	4
SELECT	12"	8'8"	4
GRADE 1	12"	8'8"	3
GRADE 2	12"	8'8"	2
GRADE 3	10"	8'8"	0
GRADE 4	10"	8'8"	0
GRADE 5	8"	8'8"	0
TIMBER 1*	12"	20'4"	0
TIMBER 2*	12"	14'4"	0

* Knots must be sound and 4" or less in diameter. Logs must be straight with no double heart on the small end

To assist a user in defining a grade correctly, Timberia.org provides a grading system for hardwood and softwood logs presented in Table 5 and Table 6.  As shown in Table 5, hardwood log grades are based on the minimum diameter (DBH), minimum length, and number of clear faces.  This grading system was a result of generalization of log grading systems being used in the Northeast of the United States (Kittredge 2004). 

Softwood logs are graded with the same principles as hardwood sawlogs and veneer logs except the system reflects a narrower spectrum of grades, and the requirements for clear faces, minimum diameter and length are less strict (Table 6).  This is because softwood sawlogs are usually used for structural purposes and the appearance is less important, than it is for hardwood sawlogs.

Table 6: Softwood log grades (Source: Kittredge 2004)

Grade	Minimum Diameter	Minimum Length	Clear Faces	Properties
PRIME	16"	8'8"	4	Surface clear.
VENEER	14"	8'8"	4	Surface clear.
GRADE 1	12"	8'	3	A net scale after deduction for defect of at least 50% of the gross contents of the log, 6" trim. Maximum knot size 3", or no larger than 1/6 scaling diameter. No black knots allowed.
GRADE 2	10"	8'	0	A net scale after deduction for defect of at least 50% of the gross contents of the log. 6" trim, 3" maximum knot size or 1/6 scaling diameter.
GRADE 3	9"	8'	0	50% of gross scale. Maximum knot size 4", 6" trim.
GRADE 4	6"-8"	8'-12'	0	50% of gross scale. Maximum knot size 4", 6" trim.

Timberia.org also provides its users with the ability to identify the measurement of the wood volume contained in sawlogs, commonly known as “log scaling”.  A user is required to specify ranges for diameters at both ends of the log as well as to select a log rule if volume is being measured in board feet or indicate that no log rule is used if volume itself in cubic feet as opposed to board feet.

Table 7: Log rules

International 1/8 inch International 1/4 inch International 5/16 inch Doyle Scribner Ake Ashe Ballon Bangor Baughmans 1/8 inch Baxter Boynton

Brereton British Columbia Brubaker Calcasieu Carey Cedar Log Scale Chapin Clements Click Columbia River Taper Constantine

Cuban Cumberland River Delaware Middle Diameter Derby Drew Dusenberry Favorite Finch & Aprag Forty Five French's Hanna

Herring Hoyt Hyslop Knouf's Licking River Maine Margolin Massachusetts McKenzie Missisippi Pine New Brunswick Newfoundland

Northeastern Northwestern Ontario Orange River Parson's Partridge Preston Quebec Ropp Roy Saco River Sammi

Over one hundred log rules have been developed in the North America.  Some of these rules are based upon the lumber tallies of individual mills, while others are developed by either diagramming the cross-section of boards in the ends of logs or using mathematical formules.  The Doyle, Scribner, and International log rules are the most frequently used rules in the United States .  Log rules are usually not used when the net volume of wood is calculated in cubic meters, but in the unit of measurement is board feet, buying or selling of stumpage should be agreed upon the log rule.  Log rules presented in Table 7, constitute part of a data entry form in Timberia.org, and can serve as a useful method for scaling logs, as long as both the buyer and seller agree to it (Kittredge 2004).

2.3.1.3 Engineered Wood and Panel Products

In Timberia.org design, panel products such as fiberboards, particleboards, and laminated lumber are grouped under the “Engineered Wood and Panel Products” category that has the following product subclasses:

• Exterior Siding
• Glued Laminated Timber (GLULAM)
• Hardboard (HB)
• I-Joist
• Insulation Board
• Laminated Strand Lumber (LSL)
• Laminated Veneer Lumber (LVL)
• Medium Density Fiberboard (MDF)
• Melamine Faced Chipboard (MFC)
• Oriented Strand Board (OSB)
• Oriented Strand Lumber (OSL)
• Parallel Strand Lumber (PSL)
• Particleboard (PB)
• Plywood
• Rim Board
• Stress-Skin Panel
• Vinyl Overlay Panel

To specify the properties of these products a user must fill in two subsequent data entry forms.  As is the case with lumber and logs, qualitative properties must be defined first.  For Glued Laminated Timbers, Hardboards, Medium Density Fiberboards, and Oriented Strand Boards a member is required to select a proper grade.  Grades for these products are based on different characteristics such as exposure durability, type of use, water resistance, density, and physical-mechanical properties.

Table 8: Medium density fiberboard (MDF) grades (Source: CPA 2002)

Grade	Nominal thickness (mm)	Modulus of rupture (MPa)	Modulus of elasticity (MPa)	Internal bond (MPa)	Screw-holding (N)		Formaldehyde emission (ppm)
					Face	Edge
HD Interior		34.5	3,450	0.75	1,555	1,335	0.30
MD Interior	< 21	24.0	2,400	0.60	1,445	1,110	0.30
	> 21	24.0	2,400	0.55	1,335	1,000	0.30
LD Interior		14.0	1,400	0.30	780	670	0.30
MD Exterior	< 21	34.5	3,450	0.90	1,445	1,110	0.30
	> 21	31.0	3,100	0.70	1,335	1,000	0.30

For example, grades for MDF panels (Table 8) are based on density and durability.  Also, these panels could be designed for interior or exterior use and be of high (HD), medium (MD), and low (LD) density. 

Oriented Strand Board (OSB) is also graded by their durability.  OSBs of exterior exposure durability have usually a fully waterproof bond and manufactured for applications with permanent exposure to moisture while panels of Exposure 1 grade are designed for applications that can be exposed to moisture temporarily.  However, grades of OSB panels are also determined by the type of use.  Panels with Sheathing grade are used mostly for subflooring, wall and roof sheathing.  Boards of Sturd-I-Floor grade are used in single-layer flooring applications.  OSB for industrial application are called Industrial grade.

The Grading system for insulation boards used in Timberia.org is similar to grading system used for OSBs.  The Interior grade indicates that this insulation board has been manufactured to be used as a building board for interior construction, ceiling insulation tile, or sound-deadening board to control noise levels in buildings.  Exterior insulation board grade is used as sheathing for exterior construction, decking for a flat roof floor underlayment, or backing behind aluminum siding to improve the insulation of aluminum-sided houses.  Industrial insulation board grade may be included in various products such as expansion joint strips, furniture boards, and boards for automotive industries.

Table 9: Basic hardboard grades (Source: CPA 2004)

Grade	Surface	Thickness	Water resistance. Water absorption based on weight		Thickness swelling (max av per panel)		Modu-lus of rupture (min. average per panel)	Tensil strength (min av per panel)
								parallel to surface	perpendicular to surface
			S1S	S2S	S1S	S2S
		inch	percent	percent	percent	percent	psi	psi	psi
Tempered	S1S & S2S	1/12 1/10 1/8 3/16 1/4 5/16 3/8	30 20 15 12 10 8 8	- 25 20 18 12 11 10	25 16 11 10 8 8 8	- 20 16 15 11 10 9	7000	3500	150
Standard	S1S & S2S	1/12 1/10 1/8 3/16 1/4 5/16 3/8	40 25 20 18 16 14 12	40 30 25 25 20 15 12	30 22 16 14 12 10 10	30 25 18 18 14 12 10	5000	2500	100
Service-Tempered	S1S & S2S	1/8 3/16 1/4 3/8	20 18 15 14	25 20 20 18	15 13 13 11	22 18 14 14	4500	2000	100
Service	S1S & S2S	1/8 3/16 1/4 3/8 7/16 1/2	30 25 25 25 25 25	30 27 27 27 27 18	25 15 15 15 15 15	25 22 22 22 22 14	3000	1500	75
	S2S	5/8 11/16 3/4 13/16 7/8 1 1-1/8	- - - - - - -	15 15 12 12 12 12 12	- - - - - - -	12 12 9 9 9 9 9
Industrialite	S1S & S2S	3/8 7/16 1/2	25 25 25	25 25 25	20 20 20	20 20 20	2000	1000	35

Hardboard and particleboard grades also depend on physical properties, such as water absorption, modulus of rupture, and tensile strength.  In Timberia.org, basic hardboard - a panel manufactured primarily from wood fibers which are consolidated under heat and pressure in a hot-press to a density of 31 lbs/ft3 or greater with addition of other materials to improve certain properties, such as stiffness, hardness, finishing properties, resistance to abrasion and moisture, strength, durability, and utility -  is classified into the grades presented in the Table 9 as advised by the American National Standard ANSI A135.4-2004 (CPA 2004).

Table 10: Particleboard grades (Source: CPA 2001, Carll 1986)

Grade	Modulus of rupture (MPa)	Modulus of elasticity (MPa)	Internal bond (MPa)	Hardness (N)	Linear expansion max avg (%)	Screw-holding (N)		Formaldehyde maximum emission (ppm)
						Face	Edge
H-1	16.5	2,400	0.90	2,225	NS	1,800	1,325	0.30
H-2	20.5	2,400	0.90	4,450	NS	1,900	1,550	0.30
H-3	23.5	2,750	1.00	6,675	NS	2,000	1,550	0.30
M-1	11.0	1,725	0.40	2,225	0.35	NS	NS	0.30
M-S	12.5	1,900	0.40	2,225	0.35	900	800	0.30
M-2	14.5	2,225	0.45	2,225	0.35	1,000	900	0.30
M-3	16.5	2,750	0.55	2,225	0.35	1,100	1,000	0.30
LD-1	3.0	550	0.10	NS	0.35	400	NS	0.30
LD-2	5.0	1,025	0.15	NS	0.35	550	NS	0.30
PBU	11.0	1,725	0.40	2,225	0.35	NS	NS	0.20
D-2	16.5	2,750	0.55	2,225	0.30	NS	NS	0.20
D-3	19.5	3,100	0.55	2,225	0.30	NS	NS	0.20

For Particleboard, a composite panel product consisting of cellulose particles of various sizes that are bonded together with a synthetic resin or binder under heat and pressure with additives incorporated to provide greater dimensional stability, better fire resistance, or to impart additional characteristics, Timberia.org uses the American National Standard for Particleboard, ANSI A208.1, that classifies particleboard by density and physical characteristics (CPA 2001).  Particleboard grades are presented in Table 10. 

When selling or buying this panel product a Timberia.org user is prompted to denote a particleboard grade from the option menu as depicted in Table 10.  In this table, the letter “H” represents a density greater than 50 lb/ft3, and letter “M” is a density range from 40 to 50 lb/ft3.  Panels of low density, less than 40 lb/ft3 are graded as LD.  Grade M–S refers to medium density; “special” grade added to standard after grades M–1, M–2, and M–3.  Grade M–S falls between M–1 and M–2 in its physical properties.  The PBU grade indicates that this is particleboard floor underlayment, and D grades are ones designed for manufactured home decking (Carll 1986).

A user is not required to specify the grade of overlays such as melamine face chipboard (MFC) and vinyl overlay panels due to the non-wood nature of panel surfaces.  However, he/she must specify a type of an overlay core from the following options:

• Fire Resistant Particleboard Core
• Hardwood Veneer Core
• Industrial Particleboard Core
• Lumber Core
• Medium Density Fiberboard Core
• Moisture Resistant MDF Core
• Moisture Resistant Particleboard Core
• Softwood Veneer Core
• Standard Hardboard Core
• Tempered Hardboard Core

The specification of the core type is also required to define properties of plywood, a flat panel built up of sheets of veneer called piles and united under pressure using a bonding agent to create a panel as strong or stronger than wood (APA 2001).  Specifying properties of plywood, a member first selects a type of a plywood panel he/she would like to trade.

Table 11: Plywood classes, subclasses and grades (Source: APA 2001)

Exterior plywood grades				Interior plywood grades
Marine	Structural Panels	Special Exterior	Decorative Panels	Structural Panels	Decorative Panels
A-A A-B A-C B-B A-A High Density Overlay B-B High Density Overlay B-B High Density Concrete Form Overlay B-B Medium Density Overlay	A-A A-B A-C B-B B-C C-C Plugged C-C A-A High Density Overlay B-B High Density Overlay B-B High Density Concrete Form Overlay B-B Medium Density Overlay Special Overlays	A-A A-B A-C B-B A-A High Density Overlay B-B High Density Overlay B-B High Density Concrete Form Overlay B-B Medium Density Overlay	A-A A-B A-C B-B A-A High Density Overlay B-B High Density Overlay B-B High Density Concrete Form Overlay B-B Medium Density Overlay Special Overlays	Underlayment C-D Plugged C-D	N-N N-A N-B N-D A-A A-B A-D B-B B-D Underlayment C-D Plugged C-D

The type of plywood is based on its exposure durability.  As denoted in the Voluntary Product Standard PS 1-95 designed by the Engineered Wood Association (APA 2001) plywood is manufactured either for interior or exterior use and interior plywood has three subtypes based on its adhesive durability levels:

• Interior plywood:

  (1) interior with interior glue,

  (2) interior with intermediate glue,

  (3) interior with exterior glue.

• Exterior plywood

Interior and Exterior durability types have their own grades which are based on the veneers used and the panel characteristics.  When a member defines properties of plywood, Timberia.org allows the user to define the plywood type first, then to specify which class this plywood is, and then specify a proper grade for this class.  The classification of plywood used to support the decision making process for the user is presented in Table 11.

The letters denote the grade of the face and back veneers. A premium N-grade of veneer panel indicates that a panel is free from knots, knotholes, pitch pockets, open splits, and other defects while the lowest D grade allows defects related to appearance of a panel, if they do not impair its strength and serviceability.

For the engineered lumber, sidings, I-joists, and rim boards a user must specify dimensions only.  The exception is glued laminated timber where a member is required to enter an appearance grade, a stress grade and usage type.

2.3.1.4 Standing Timber (Stumpage)

Timberia.org B2B-OC differs from other B2B portals by its capability to conduct transactions to sell and buy standing timber (stumpage).  Therefore, the Timberia.org model facilitates a direct connection between resource, forest landowners, and primary forest product producers, sawmills, veneer mills, engineered wood manufacturers, and paper mills as well as to help forest businesses discover a fair price for stumpage in local or global markets.

Today, one of the major problems, facing both stumpage owners (landowners), and purchasers is a lack of up–to-date information on current market prices. A second issue is the lack of knowledge of the underlying factors that influence stumpage prices, both ex post and ex ante.  That is, current reported stumpage prices (e.g., Southern New England Stumpage Price Reports, http://forest.fnr.umass.edu/stumpage.htm) do not provide any additional data such as road accessibility, site slope, harvest volume, intensity, and number of bidders, any of which can influence the reported price.  This uncertainty in the cost factors of stumpage forces wood product businesses to both underbid, and to maintain larger safety stocks of raw materials in their inventory to satisfy the potential demand.  This produces inefficiencies in purchase decisions that impacts the entire forest products supply chain. The lack of information on stumpage volume and price in particular geographic regions also prevents forest buyers from optimal bulk purchases from more than one landowner.  

The existing price discovery system is inefficient for a number of reasons.  Forest landowners, particularly small landowners, are often at a disadvantage in the stumpage market due to the infrequency of stumpage sales (often only once every 10 years) and due to their lack of knowledge of log and lumber markets.  In the absence of broader market information, the bid price spread evidenced in today’s stumpage markets is amazing.  

According to Kittredge (Kittredge 2004), in Massachusetts "the average range between high and low bids for surveyed timber sales with two or more bids was 212% or 2.1 times, with an average number of five bids”.

The author believes that an up-and-running and established Timberia.org will make it easier for both landowners and stumpage purchasers to estimate current market value, reducing the identified inefficiencies.  Both timeliness, and presentation of data relevant to the pricing decision will be available to participants.  This paradigm shift would allow sharing relevant data through a programmatic interface across a network.  The web services interface that will be discussed in section 2.3.6 of this paper will enable landowner and business users to post and view relevant data sets, and price information without intimate knowledge of each other's IT systems.  The data on stumpage including land and volume characteristics as well as prices would be collected from forest landowners who will submit their offers into the Timberia.org database to be used with an automated statistical procedure that would be run periodically to determine current and forecasted prices on stumpage by commercial species both per 1000 board feet (MBF) and per 1000 cubic meters.  This information will be presented to all members of the Timberia.org B2B-OC.

The stumpage sale process within Timberia.org works as follows.  Then the “Standing Timber and Stumpage” category is selected and the transaction type is “Sell” a member is prompted to describe the timber sale by filling in a data entry form that resembles a combination of both a State Forest Cutting Plan (FCP) and a timber sale contract.  As a basis for the entry form design, the statues of the Massachusetts Forest Cutting Practices Act (M.G.L. Ch. 132, 304 CMR 11.00) were taken.  Though FCP standards vary in different states and other countries, or may be absent, but much of the information taken in the Massachusetts FCP is universal and is meant to satisfy the objectives of a forest landowner who submits his/her stumpage to Timberia.org B2B-OC for sale.  Currently, Timberia.org utilizes the MA FCP.

A part of the input form related to the FCP includes information such as: geographic location of a timber sale, Best Management Practices (BMP) used for stream and wetland crossings, harvesting in wetlands, type of cutting being proposed for the property, special equipment, and the volume of products to be harvested.  Another part of the entry form bearing elements of a timber sale contract is designed to allow a member to (1) define a time frame of a timber sale with possible extension terms, (2) describe bidding and bonding specifications, and (3) specify utilization standards and harvesting specifications.  The user also specifies a time frame for a timber sale, which includes information about completion date and terms to apply for an extension.  Bidding and bonding specifications describe a payment schedule, have users specify a bid due date until which an initial bid or deposit must be made to initiate the sale, and a remainder due date until which a buyer pays must pay up in full for the stumpage.  A seller is also required to provide information about the lowest acceptable bid and bid bond amount.

Timberia.org offers an effective tool to facilitate a competitive bidding process in which a landowner can determine a realistic and fair price for his/her stumpage.  As mentioned above, the specific information about production factors provided by a seller

will help a contractor better estimate a price on the stumpage.  At the same time, since this B2B-OC is free to use and easily accessible through the Internet, a seller may receive as many bids as possible that statistically will decrease variations in prices on stumpage at local markets (Wisconsin Forest Management Guidelines 2003).

2.3.2 Equipment Market

The Equipment Market has the same logic of data submission as the Timber Market.  In this market all transactions fall into two categories: (1) Woodworking and Furnishing Equipment and (2) Logging and Forestry Equipment.  A member is prompted to select an appropriate class of equipment from the Timberia.org database and then specifies its properties such as condition (used or new), quantity and price.

2.3.3 Services Market

The Services Market also, including a Consultant Board, allows professional foresters and consultants to provide information about their services to forest landowners and forest product producers, Offer Services transaction, as well as gives a tool to forest sector participants to quote requests for services in the Request Services option.  In Timberia.org all services are categorized as follows:

• Finding, Mapping, and Marking Property Boundaries
• Forest Inventory and Appraisal
• Planning Estates, Taxation Matters
• Selling & Buying Timber
• Stewardship Plan
• Timber Stand Improvement (TSI)
• Wildlife Habitat Enhancement
• Forestry Service
• Export and Import
• Equipment Installation and Maintenance
• Freight Service
• Other Services

A member of B2B-OC has to provide an acceptable compensation rate whether a service is being requested or offered.  The Consultant Board is meant to facilitate the process of establishing business connections between forest owners and professional foresters, as well as linking the supply and demand sides at the market of the forest products through the offers posted by providers of freight and export import services.

2.3.4 Financial Market

Producing timber or managing the forest as an investment are often not the primary reasons most people own forestland.  But landowners are sensitive to what this land costs them, and at some point, many usually have an opportunity to realize income from their forest.  Like everyone else, forest landowners also invest in stocks, bonds or mutual funds.  Yet all too often, forestry investments are not scrutinized as critically as other financial investments (Wisconsin Forest Management Guidelines 2003).  As a result, forestry investments capable of generating a favorable rate of return are not recognized, or conversely, investments are made that are sometimes not justified financially.  Just as forestry involves good stewardship of natural resources so, too, sound financial management requires careful stewardship of investment capital.  The “Financial Market” of Timberia.org (Investment Proposals) allows its participants posting decision-guided offers about investment opportunities in the forest sector.

Timberia.org uses a number of criteria to help a member in evaluating the financial performance of forestry investments.  Net present value (NPV), internal rate of return (IRR), benefit/cost ratio, and payback period, are used when deciding whether or not to make a specific investment.  When analyzing the relative merits of a number of alternative actions the criterion might simply be