Supply Chain of Pulp and

Paper Industry
Submitted towards partial evaluation of
Supply Chain Management

Submitted by:
J. Bheemendra Narayan
Roll no: 09
MBA 2014 2016

Centre for Management Studies,

NALSAR University of Law,
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Hyderabad,
October, 2015.

Table of Contents:
1. Abstract
2. Introduction
3. Supply Chain of Pulp and Paper
Industry
4. Customer Relationship and Order
Penetration Point
5. Importance of Information Technology
in Paper Supply chain
6. Transportation
7. Cost and Efficiency
8. Conclusion
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ABSTRACT:
Purpose The basis of this paper is to analyse current developments in the
theory and practice of supply management in Paper industry and to identify
possibilities and key trends.
Design/methodology/approach A literature review in Operations
Management and Logistics has been conducted for the period 1995-2005.
The objective is to collect and organize existing knowledge relating to SCM.
Originality/value The paper is unique in the path in which it draws on a
precise study to survey current hypothesis and advancements. The value of
this paper is to define SCM, to analyse how supply chain management in this
area has evolved and to identify some lines of further research.
Keywords Supply Chain Management, Logistics
Paper type Literature review

Introduction:
The pulp and paper industry is distinguished by a huge and unsegregated
supply chain. The actual supply chain starts at the forest, then gathering,
mills and to the end customers. Some products used in our everyday life are
newspapers, tissues, bottle labels, cigarette paper. To coordinate all these it
requires supply chain management, which involves outline, alterations and
the business process management. Globally there are around 5000 pulp and
paper mills. United States of America (USA) has got huge market and Asias
major markets are Japan, Singapore, China, India, and Malaysia. For
management of all the processes and providing information, information
systems are very much important. More importance should be given to data
movement between organizations. However, availability of data is not
enough for proper management. Supply chain management requires proper
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planning at distinct stages. Enterprise Resource Planning (ERP) mostly used

information systems, helps in planning and taking decisions also.

Supply Chain of Pulp and Paper Industry:

Usage of Paper Products:
The usage of paper worldwide at different levels is approximately 36 crore
tonnes per annum. Based on the usage by the end customers, it can be
divided into five different components:
1.
2.
3.
4.
5.

Newspaper
Magazines, Catalogues
Packaging paper
Tissues
Paper bags, Paperboard

The annual consumption for printing magazines and catalogues is higher

when compared with the other four segments i.e. 12 crore tonnes per
annum, the next segment that consumes more is for packaging segment
which consumes around 10 crore tonnes, paper bags consumes 8 crore
tonnes, newspapers consumes 4 crore tonnes and the least consumption is
tissue segment which has a consumption of only 2 crore tonnes.
80% of weight of a paper is because of cellulose fibre. For any end product of
a paper, the properties of cellulose fibre are very important. This constitutes
solid connection in reverse in the production network to the very starting
point of the fibre utilized as a part of paper making. Initially the best fibres
should be identified and separated in different woods.
Different paper products need different specifications. For a facial tissue, the
softness of material is very much needed for that we should get a short fibre
pulp and whereas the other tissues need some strength along with the
softness. For this kind of specifications, we should have a long fibre pulp.
Long fibre can also increase the softness of the paper.

Source of Fibre:
For the production of a paper, 95% of fibre is used from wood. The fastest
growing Hardwood pulp is found from Eucalyptus. The three different pulp
grades are Bleached Softwood kraft, Bleached hardwood kraft and
Mechanical pulp. The hardwood grade of pulp is widely used for production of
many papers. For magazines and catalogues it helps in providing more
softness to the paper and thereby increasing the printing quality. To make the
paper strong softwood kraft is needed. It is needed at all times like at the
time paper production and then for printing purpose also. And the third type
of pulp grade, mechanical pulp is very much needed for printing newspapers.
So, any fibre cant be used for production of a paper, it is the type of fibre
that is important for production of any type of paper. Generally, Eucalyptus
fibres are short in nature, so these type of fibres are used for getting
smoothness of a paper. Softwood fibres are long in nature, so they are used
for strength of a paper. Even in a single tree, there are different types of
fibres, at the bottom part of the tree we can get long fibres and at the top
part of the tree we will get short fibre, which are used for smoothness.
From a demand point of view, a lot of changes are happening as the paper
industry in Asia is moving fast. As there is not much availability of wood in
this region, most of the production runs on imports. Worldwide, North
America consists of 40% of market and out of that, 60% of production is
exported.

Pulp and Paper Industry:

These are big production houses which converts wood into end products. The
entire production of converting wood into any paper product doesnt happen
with a single company. The production process start at the forest, from where
the wood is collected and stored in one place and from there it is distributed
to the production houses. There is also a link between the sales people and
the production houses, these people sends back the recovered paper again
for production.
We can broadly the entire process into 3 parts:
1. Collecting the wood (Harvesting)
2. Making of pulp
3. Making of Paper
Harvesting:
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Firstly the trees are cut down and the branches are separated and then they
are made into logs, this process is generally done at harvesting areas itself.
The logs can be directly sent to the mills or they are stored at some places
and from there it will sent to respective mills. Transportation of logs is
separately done by the transport firms and the harvesting is done by the
respective persons.
Making of Pulp:
At this stage, the logs will be converted into chips. The chips from various
logs are mixed depending upon the quality to get a desired product.
Now the chips heated and cleaned and they are separated. Then, they add
bleach to the fibres, to obtain some brightness.
The time taken for converting logs into chips for producing the pulp is twelve
hours. These fibres are then transported to paper mills.
Making of Paper:
Now, a certain width of paper rolls are produced using the paper machines.
Then the rolls are made into pieces using a winder and the rolls are sent to
the respective customers.
The entire production process requires various types of transportation. The
arranging extends from a large portion of a century down to hours and
minutes. The lead time generally varies from five to twelve months.
The entire supply chain can be explained by four stages, they are
Procurement, Production, Distribution and Sales. Procurement is concerned of
getting the raw materials i.e. wood and the other necessary resources.
Production, the wood is converted into chips (intermediaries) and then into a
paper product (finished product). Distribution involves the logistic taking care
of transporting the products for further processing or to the retailers. Sales
includes, the estimation of demand, the prices and prediction.

Customer Relationship and Order Penetration:

The request infiltration point is typically characterized just like the semifinished good (e. g. pulp) stock decoupling a push planning methodology
from a pull planning methodology. The semi-finished good at the OPP is
based on checking the demand forecasts with production capacity (make-tostock) while the other processes of production and distribution is planned
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based on just - in - time. Characterizing the area of order penetration point is

an important choice because it has a great impact on technology and
capacity deployment. Generally, the push procedure would be bolstered by
high capacity machine giving important economies of scale, whereas the pull
procedure would be assisted by manufacturing machines giving high
adaptability and responsiveness. Supply chain planning can also be directly
affected by the Order Penetration point.
Based on the response time by the customers, the positioning of Order
Penetration Point is restricted. If the delivery of a customer is allowed for few
days then the OPP can start the production process or if it is to be delivered
the next day to the customer, then it should be at the distribution center. In
case of paper industry the order penetration points have been placed at 3
different locations, paper machine (make-to-order), winder (convert-to-order)
and warehouse (deliver-to-order).

Importance of Information Technology in Supply

Chain:
Generally, for a supply chain to have proper management and a good
planning, information is the key attribute to know about the situation of the
system, requirements and opportunities of the business. In spite of the
companies of paper industry investing on ERP system and having high
inventories couldnt help them in improving the on time delivery. In order to
get better results from IT, the supply chain lead times should come down, so
the information can be used for other purposes like distribution and
production. Most of the paper industry companies uses ERP system for
planning purposes, though they have some minor problems in it. Any change
in the entire system leads to time consuming and expensive. So, some
companies trying installing other systems. In this case, the major concern is
combination of systems that arises when we want to continuously manage
the customer orders.

Transportation:

The transport mode of the finished products is done by train, ship or any
road transport vehicles, depending on the location of the customer. The
customer who is located closer to the mills will have a low freight rate. The
cost can also be reduced, if same truck which brings recovered paper to mills
takes back the finished products to the respective customers.

Cost and Efficiency:

Each and every paper mill have different production cost and different
manufacturing cost because the capacity of every machines varies and it
ends up producing products with different widths at different speed. Another
concern is production of different kinds of paper on a single machine, so
accordingly the machine is adjusted, which results in more manufacturing
costs.

Conclusion:
Supply chain Management is an important attribute for increasing overall
firms effectiveness and in reaching company goals such better customer
care and profitability.
Therefore, in this manner focus of supply chain management should be on
management of associations and mutual trust of all people involved in
supply chain in order to achieve the best market results.
In order to attain maximum benefits from executing a supply chain
management particular models, like, margin-based production costing,
revenue management and uncertainty models should be integrated in the
supply chain operation.