Achieving operational efficiency at Indian paper companies

Indian paper companies can reduce costs and boost customer satisfaction by taking three steps to improve operational efficiency.Companies who successfully transition from purchasing to strategic sourcing gain substantial benefits.

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In a consolidating market, Indian paper companies need to act fast to improve performance and remain competitive. One of the most important areas for such performance improvement lies in manufacturing operations. Despite some progress in recent years, many Indian paper mills are still behind the curve in applying best practices in process measurement, lean principles and advanced analytics to optimise their operations. 

Drawing on our experiences in paper and other manufacturing sectors, we identify some of the practical steps Indian paper companies can take in each of these three areas to immediately reduce costs, improve operating efficiency and boost customer satisfaction.


Measure and track everything

As the old adage goes 'if you can't measure it, you can't improve it'. The journey to operational excellence begins with first accurately capturing and tracking performance data at every step of the production process from raw material to finished goods. Today, many Indian companies skirt around this challenge by running their operations according to rules of thumb or rough approximations based on incomplete or outdated data points. 

As a starting point, paper companies should focus on accurately measuring and tracking data on six key aspects of their manufacturing operations.

  1. Capacity utilisation
  2. Equipment efficiency
  3. Raw material consumption
  4. Quality achievement
  5. Waste
  6. Inventory

The first data point every manufacturer should establish and track is their real capacity utilisation. Most companies calculate their utilisation rate based on theoretical assumptions of production capacity that are far removed from the real-world operating environment. Paper mills can establish their real production capacity by conducting a production run with a single product under actual operating conditions and then identifying and calculating the impact of different variables such as ambient temperature, product type, changeovers, and maintenance downtime. With a clear picture of their real production capacity, it is then possible to accurately track capacity utilisation over time.

The second area of measurement is equipment level monitoring to understand the plant's overall equipment effectiveness (OEE). At a minimum level, this requires having proper log sheets in place for the regular recording of key data points by machine operators including planned and unplanned shutdowns and changeovers. At a more advanced level, companies can capture continuous machine-level data in real-time through Internet-of-Things (IoT) devices. 

The third area for measurement is the consumption of raw material such as waste paper, agri residue, pulp, chemicals, dyes and starches. While companies may have established standard measures for raw material input, these often aren't tracked for every production run with implications for both cost and quality parameters. One paper company introduced barcoding of waste paper bales to enable more accurate tracking of consumption according to the actual paper content of each bale. Once companies can accurately track their raw material consumption at the aggregate level, they then need to get more granular and track it at the product level to know the real costs of different products.

The fourth area for measurement is tracking the key quality parameters for input, process and output. This is vital to understand variances in production quality and isolate their root causes. For paper companies, some of the key quality parameters to monitor throughout the process are the moisture content, strength and thickness.

The fifth, and often most neglected, area of measurement at paper mills is wastage in the production process. From raw material input to finished goods companies need to put in place standard processes and templates for capturing shop floor data on waste.

The sixth and final area of measurement to focus on is finished goods inventory. To efficiently manage working capital and improve on-time-delivery, paper mills need to have real-time visibility on their inventory position.

With measurement systems in place in these key areas paper manufacturers can establish reliable baseline data against which they can set performance improvement goals and benchmark their achievement.

Apply lean principles

After establishing baseline performance through right measurement systems, paper manufacturers can start applying lean principles to their operations and measuring their impact. While lean principles have penetrated deep in sectors like automotive they are still at the early stage of application in the Indian paper industry. At the core, it entails a shift in mindset from thinking in a narrow or fragmented way about operational efficiency, to instead thinking holistically about all the integrated factors that influence the running of the machine or the customer's satisfaction with the product. 

For example, when it comes to machine maintenance many paper companies take a reactive approach which results in unnecessary losses due to unscheduled downtime and higher maintenance costs. One paper manufacturer was suffering from reduced sales and declining customer satisfaction due to regular machine breakdowns. They successfully transitioned from a reactive to preventive maintenance approach by mapping the existing maintenance process, identifying all the key parameters of machine performance that needed to be tracked, and identifying right machine maintenance system to implement. 

Beyond maintenance, paper companies can apply a variety of lean six sigma tools such as Kaizen (continuous improvement), Pokayoke (mistake proofing) and 5S (workplace organisation). A leading paper company reduced cost and complexity in raw material management by applying lean principles to its warehouse. By redesigning processes for storing and retrieving the raw materials the company gained clearer visibility of its raw material inventory, was better able to link specific raw materials to the production of different products, and substantially reduced time and labour involved in material management.

When applying lean principles leaders should always keep in mind that mindset change is even more important than a process change. Sustained improvement in operations requires people from the management to the factory floor to have a shared belief in the benefits of continuous improvement. Companies can help bring about this cultural change through continuous communication, workshops and training on lean principles. 

Leverage advanced analytics

While lean principles are well established in manufacturing best practices, the next level of efficiency gains will be driven by the adoption of advanced analytics. With the emergence of Industry 4.0, connected devices can now capture and communicate continuous streams of data from every aspect of manufacturing operations. Simultaneously, advances in computing allow this data to be analysed and interpreted to achieve a step-change in efficiency. Paper companies should focus on applying advanced analytics in three high potential areas: sales forecasting, energy consumption and maintenance.

The first area to leverage advanced analytics is sales forecasting. Paper companies can better satisfy their customers and reduce costs through better production planning and inventory optimisation thanks to analytics-based sales forecasting. In our experience data-driven forecasting substantially improves predictive accuracy by modelling multiple demand drivers and learning from patterns in historical trends to produce dynamic sales forecasts that continually adjust to changing market realities. 

Secondly, paper manufacturers can make the leap from preventive to predictive maintenance by applying machine learning algorithms to equipment-level data which can provide increasingly accurate alerts as to when to carry out maintenance.

The third high potential area for advanced analytics is energy consumption. One of the biggest costs for paper manufacturers, energy consumption can be significantly reduced by using smart metering technology to capture real-time data and then set targets for energy usage for specific areas and equipment according to their rating, load, and other environmental factors.

About the authors

Shiv Sharma is an Associate Prinicipal at Kanvic Consulting in Gurgaon. Ashwani Kumar is a senior consultant at Kanvic.

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