This paper starts with an overview of methods for machine strength grading of timber being used in industry. It discusses attempts that have been made over the years to improve the accuracy of different grading concepts. Then a newly approved method based on laser scanning and utilization of the tracheid effect is presented. It utilizes high resolution data supplied by an industrial scanner and it gives, in comparison to other methods, very accurate results. Still it is based on several crude assumptions. Therefore the latter part of the paper takes a starting point in the limitations of this scanning based method and discusses what can be done within research and development to reach an even higher grading accuracy. Future work should lead to detailed and accurate models for timber, including geometry of knots, growth layers and fibre orientation in 3D and information of local material stiffness properties, and it should be possible to establish such models for individual boards in productions speed. Some recent and ongoing research that contributes in this direction is discussed. With access to accurate timber models several different strategies for prediction of strength and other engineering properties would be possible.