How the Pulp and Paper Industry is Optimizing for Success
Pulp and paper producers worldwide are expected to experience modest growth through Q3 2019, per Moody’s Investor Services, which predicted industry-wide revenue increases of 2 to 4 percent. This is welcome news for the businesses navigating this mercurial space. However, these organizations should avoid complacency, as several sector-specific developments necessitate shop floor nimbleness, an essential operational characteristic only achieved through the pursuit of continuous improvement and optimization. Here are two overarching trends affecting the pulp and paper industry, and how firms in the sector can optimize their processes for success:
Expanding worker and skill shortages
The blue collar workforce in the U.S. and abroad is shrinking, leaving organizations across numerous industries without the manpower they need to meet demand, Bloomberg reported. The companies within the pulp and paper sector are certainly feeling both the direct and indirect effects of this situation. Timber providers everywhere are struggling to recruit and retain loggers. The logger talent pool is expected to decline 13 percent between 2016 and 2026, according to analysts at the U.S. Bureau of Labor Statistics, who anticipate just 48,400 of these workers will remain in the states by the end of the aforementioned period. This development is immensely problematic for pulp and paper businesses, particularly those that source from domestic timber firms.
In addition to grappling with worker shortages in ancillary sectors, pulp and paper companies are dealing with workforce-related issues of their own – most notably, changing skill requirements for production staff. These organizations are modernizing their equipment and workflows out of necessity, swapping traditional hands-on setups for digital alternatives that require judgment and technical know-how rather than brute strength and muscle memory, pulp and paper recruitment consultant May Ooi wrote for LinkedIn. For instance, the robotic assets that now propel production areas require not only operators but also support staff who perform specialized tasks such as stock preparation. Unfortunately, many modern mill workers are not equipped to fulfill these duties, per the Confederation of European Paper Industries.
To address these issues, pulp and paper producers must make significant changes, starting in the procurement department. Here, personnel must trade relationship-based acquisition methods for strategic sourcing initiatives that facilitate optimal flexibility via expanded vendor pools. Using this approach, businesses in the sector can easily adjust to account for logistical problems or price increases linked to staffing issues in the forestry industry and elsewhere. Internal apprenticeship and upskilling programs are essential to address internal skill shortages, making it possible for employees with outdated expertise to acquire the knowledge they need to contribute in more modern production settings.
A growing need for innovation
The emergence of innovative digital technology has caused great damage to the pulp and paper industry. Once-essential products such as newsprint and letter paper have devolved into bottom-line burdens due to the growth of online journalism and the crystallization of consumer-grade messaging technologies. Even greeting cards have gone digital, forcing niche mainstays such as Hallmark to abandon paper and and cultivate alternative revenue streams, CNBC reported.
Keen industry leaders found a novel solution: embrace the force attempting to destroy them. Instead of bemoaning the emergence of internet-based services and solutions, pulp and paper companies in Wisconsin took advantage of the trend by realigning their processes to produce brown paper products such as cardboard, a critical ingredient for ecommerce giants such as Amazon, which ships millions of packages per day. Paper producers are switching out their white paper production lines – the apparatuses used to make common commercial offerings such as copy paper – for these brown paper alternatives, the darker, pulp-based covering used to sheath cardboard boxes, according to the Wisconsin Economic Development Corporation.
By going after this business and incorporating innovative process improvements – most notably, cardboard recycling – these firms not only survived but prospered. In fact, the producers that dot the Badger state are developing the blueprint for industry success through their embrace of brown paper products, The New York Times reported. This production shift has allowed pulp and paper companies in the state to tap into a hot market rather than toil away in an attempt to find success in a failing niche.
However, not every company should decide to jump on the brown paper bandwagon. It is highly competitive, with big players currently occupying the space. Plus, if everyone transitions in that direction, then the issues in white paper get repeated. Instead, optimizing production facilities with a third-party operations management firm is an option that may result in less capital spending versus the conversion to brown paper.
Similar events are unfolding worldwide. Pulp and paper producers everywhere are rolling out fresh products designed to attract new customers and facilitate operational sustainability, per CEPI. For instance, a large number of organizations navigating the arena are experimenting with fiber-based offerings, which are touted as the environmentally-friendly substitute for plastics. Pulp and paper manufacturers on the outside looking in on these developments would be wise to take action and implement shop floor optimizations that support innovation at all levels. Without forward momentum in the form of new workflows and approaches, laggards are likely to lose significant ground and risk falling out of the marketplace entirely. Now is the time to take action.
That said, pulp and paper organizations that pursue optimization in an effort to navigate these developments might find themselves struggling to catalyze change from the inside. This is where evidence-based external expertise comes in handy, lending shop floor stakeholders at all levels the guidance and perspective they need to move forward with sustainable process improvements. Here at USC Consulting Group, we provide such assistance. In fact, our consultants have been helping enterprises within the pulp and paper sector for decades, collaborating with leaders to reshape their workflows and workforces, and adjust to industry upheaval.
Contact us today to learn more about our work in the pulp and paper space, and how we can help your organization weather change.