Supply chain challenges of North‐European paper industry
| Published date | 14 March 2008 |
| DOI | https://doi.org/10.1108/02635570810847581 |
| Pages | 208-227 |
| Date | 14 March 2008 |
| Author | Pekka Koskinen,Olli‐Pekka Hilmola |
| Subject Matter | Economics,Information & knowledge management,Management science & operations |
Supply chain challenges
of North-European paper industry
Pekka Koskinen
Oy Confidea Business Consulting Ltd, Espoo, Finland, and
Olli-Pekka Hilmola
Kouvola Research Unit, Lappeenranta University of Technology,
Lappeenranta, Finland
Abstract
Purpose – Owing to the consolidation and globalization of the paper industry, manufacturing units
have keen interest to focus on particular product groups. While this specialization will create
opportunities for scale economics in production, management of supply chains becomes increasingly
challenging, as one particular manufacturing unit serves a number of different sales locations. The aim
of this paper is to identify improvement areas in the new supply chain context of paper production,
and possibly give further support for the general discipline development.
Design/methodology/approach – Research work is based on two diffe rent cases tudiescompleted for
one major North-European paper manufacturer, which is mostly serving its customers in Europe and the
USA. The first case study (a preliminary one) started when supply chain challenges were recognized at the
end of the 1990s, and a manufacturing unit was seeking managerial remedies – this investigation only
concerned one manufacturingunit, while not singling cut any particular supply chain in the analysis. During
the most recent years a more detailed case-study was conducted with this paper manufacturer, which
concerned lead time performance of four different strategically important supply chains. These supply
chains were championed by two different large manufacturing units (the preliminary analysis concerned one
of these two paper mills). The objective of this research work is to identify whether general lead time and
response studies, mostly completed in the automotive industry, are applicable to paper production.
Findings – Accordingto the analysis North-European paper manufacturers hold ap proximately 45 days of
distribution inventory. Interestingly, in the case study it was found that in distribution this does not result in
high efficiency– on the contrary different parties involved (railway, port operations and vessels) need to have a
considerable amount of free and unused capacity in theiroperations to ensure the smooth flow of materials.
Research limitations/implications – The case studies were conducted in the factoriesof one large
North-Europeanmultinational.Therefore, theobservations are limitedto this company. However,in order
to generalize the results further, the authors have analysed North-European paper producers through
macro data and financialreports in any research environment.To cover a mismatch between company
levelquantitative analysisand macro data, the authorsconsulted several keypersons in the case company
concerning theresearch results. Therefore, triangulation in the empiricaldata was achieved.
Practical implications – It is argued that four reasons, namely: scale emphasis in production, IT
systems to support supply chains, sea shipment, and outsourced distribution, play a vital role in the
forthcoming performance improvement initiatives. At the moment this results in long supply chain
lead times, whatever the distance to the actual market. Decision makers in practice need to find
solutions for these in order to improve performance further.
Originality/value – Supply chains are rarely analyzed in research works through more than one
supply chain – here analysis of four different supply chains concerning lead time is provided. The
analysis is based on the enterprise resource-planning database, and findings are verified with
interviews with the managers and directors of the case company.
Keywords Supply chain management, Paper industry,Northern Europe, Case studies
Paper type Case study
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0263-5577.htm
IMDS
108,2
208
Received 27 July 2007
Revised 1 September 2007
Accepted 18 September
2007
Industrial Management & Data
Systems
Vol. 108 No. 2, 2008
pp. 208-227
qEmerald Group Publishing Limited
0263-5577
DOI 10.1108/02635570810847581
1. Introduction
Logistics and supply chain management (SCM) have gained increasing importance in
the strategic planning process of global manufacturing companies, and it considered
as contemporary topic of competitiveness (Kannan and Tan, 2005). For example, in
automotive industry assembly to order (ATO) strategy has been widely analyzed and
discussed recently (Holweg and Pil, 2001,2004; Holweg et al., 2005). Research t opics and
approachesrange from outsourced logistics/distribution servicesusing soft methodology
of behavioural science (Panayides and So, 2005) ending to mathematical analysis
(Tyan et al., 2003; Zhang et al., 2006). Interestingly, both dynamic high-tech industries
(Heikkila
¨2002) aswell as in less frequently changingtraditional industries(McCarthy and
Golicic, 2002;Mowat and Collins, 2000) have been under researchinterest. As the number
of production plants decreases and served market areas grow, so does the number and
complexity of supply chains – consolidation has created typical manufacturing vs
marketing debate in different industries, and based on literature review of Hsu and Lin
(2006) this has only intensified, and appears in tactical and strategic level.
Pulp and paper production is one part of wood processing industry, where usually is also
included mechanical wood processing. In this research, we concentrate only into paper
production, which significantly differs from other bulk type of production approaches in
this industry. In our paper, we firstly present in a nutshell industrial sector statistics with
respect of business and logistical pe rformance measures concerning t op five
North-European producers. All of these companies have their headquarters and most of
the production capacity as well as staff located in this region; this group of five companies
play significant role in European, but also in global markets (with respect of capacity
ownership and sales, Lee, 2005). Our examination in this paper is not limited to macro level,
but also includes detailed examination of operational supply chain challenges of Finnish
manufacturing units serving two different continents through strategically important
supply chains. We base our main findings in the unique analysis of enterprise resource
planning (ERP) database from the period of one year; in total we have 1,000 production lots
analyzed throughout the su pply chain. Examination sc ale and scope of one
cross-organizational supply chain is still rather rare; according to SCM case study
literature research completed by Hilmola et al. (2005) nearly half from the total population of
case studies examined supply chains through their own internal perspective. Research
validity of completed research work was assured with iterative triangulation; we use
previous research work, discussions with case company personnel, macro data and
analysis of IT database to draw conclusions (from iterative triangulation and case studies
Yin, 1989; Eisenhardt, 1989; Meredith, 1998). Research approach applied in this paper
reminds inductive research (Hilmola et al., 2005; Handfield and Melnyk, 1998, pp. 321-39;
Eisenhardt, 1989, pp. 532-50); logistics and supply chain paradigms have been
well-established in recent years, but our interest is to see how paper industry supply
chains work with respect of theory. In empirical data analysis, wetry to answer primarily in
“how” question, while in discussion thereafter more substance is provided on “why”
(case study questions, please Yin, 1989). As generally in inductive research works; our aim
is to give further support for supply chain theory development through specific, and still not
so well studied global paper production. Our objective in this research work is to use general
SCM theory as well as research methodology to identify improvement areas, and suggest
managerial remedies for the performance enhancement. Possibly our research results give
some sort of SCM-based improvement agenda for North-European paper producers.
Challenges of
North-European
paper industry
209
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