Production Costs as a Basic Factor of Competitiveness of Softwood Sawmilling

Abundance of forests in the territory of the Republic of Croatia was the reason for the development of sawmill industry that has a century long tradition. Although lagging behind the European countries, the Croatian sawmilling industry, along with forestry, represents the first phase of wood processing development, which is based on high manufacturing technology, trained employees and skilled workers. Costs are the core of many business decisions. It is, however, not enough to analyze the costs of a specific or restricted business area, but the costs of the entire business process – from supplier to product/service buyer. The aim of this paper was to compare the selected production process factors so as to make comparison between the Croatian and foreign companies, in order to get an idea of competitiveness of the Croatian sawmilling industry. Factors that were compared were: output cost per unit, costs of raw material including transportation, energy costs, cost of capital (in this case amortization), and the cost of labor. In order to further increase and maintain competitiveness of sawmill industry, it is necessary to make higher investments into technology with the aim to reduce the unit production costs. It is also necessary to determine the optimal technology in terms of quality, quantity and wood species.