The merchantable tree-length size and quality has decreased over the past four (4) years. The average volume per merchantable tree-length was 0.876 cubic meters in 1985 versus only 0.705 cubic meters in 1989. This situation has forced Commonwealth Plywood to merchandize the company veneer grade of Deroulable in order to support its veneer plant. The resource merchandizing study identified a 3.5% veneer and 20.7% Deroulable recovery compared to a 40.4% veneer volume in 1985. By accepting a lower grade of veneer, the company is also manufacturing lower quality sawlogs. For tree-lengths containing butt rot or other veneer limiting defects such as: shake and seams, short F-1 or F-2 sawlogs were bucked to produce a veneer log once defects were removed. From tree-lengths containing little or no rot, lower quality sawlogs were merchandized further up the tree stem as a result of taking Deroulable veneer from the butt section. The general quality of the 1989 study sawlogs was better than the 1985 SIP sawlogs at the expense of recovering a lower volume and grade of veneer. The impact of this improved sawlog quality has benefited the conversion efficiency at the sawmill as opposed to the veneer mill. The lumber volume recovery dropped from 195bf per m3 in 1985 to 177 bf per m3 in 1989. On the other hand, lumber grade recovery was better for the 1989 study compared to the 1985 SIP as shown by the No.1 Common and Better recoveries of 35.7 versus 18.0%, respectively. The net effect of a higher grade recovery more than offset th lower volume recovery as summarized by the sawmill profitability analysis. The gross profits (before taxes) were -$6.54, +$8.42 and -$38.43 per Mbf lumber tally for the 1985 SIP study, the 1989 study and the 1989 long-term company average, respectively. The gross profit for the 1989 study sawlogs was significantly higher than for the present long-term results due to a better combination of lumber volume and grade recovery. The sawmill profitability analysis for the 1989 study logs differs greatly compared to the company's long-term average raising a question concerning the selection of a representative sawlog sample. Sawlog quality is a direct reflection of the resource quality. Furthermore, sawmill profits will vary considerably with sawlog quality. With a declining resource quality and a compay policy of maximizing veneer volume, there is increasing pressure on the veneer mill and sawmill to improve profitability as profit centres. Since Commonwealth Plywood is an integrated veneer/sawmill company, poor resource allocation will generally impact each profit centre in an offsetting manner. However, a serious decline in resource quality and improper resource merchandizing will adversely affect both the veneer and sawmill significantly. This study observed certain log making procedures that will improve the overall operating efficiency of both the veneer plant and sawmill. Recommendations are provided to address problems of tree-length merchandizing and sawlog scaling impacting on company profitability.