1. Bring strategic alignment
To bring about the step-change in performance that Indian paper companies will need to remain competitive, it is vital to set clear strategic goals and build an appropriate review system to bring alignment of the organisation with these goals. The first step in this journey is to set clear and coherent goals based on sound market analysis and future aspirations. Next, these goals need to be broken down into key performance indicators across functions and management levels.
It is also important to bring visibility of these key performance indicators at a team and individual level so there is firm-wide consciousness of how they are progressing toward their performance goals. Once the goals are clarified across the organisation there is a need to have a robust management review system that aligns daily, weekly, and monthly actions to the overall business direction and goals. Finally, individual pay and incentives need to be linked to the achievement of performance goals to bring focus and accountability to the performance improvement process.
2. Achieve operational efficiencies
Paper is a commodity business and a large part of the business value is derived from achieving operational efficiencies. However, in our experience working with Indian paper companies, we have found that they trail behind many other industries in terms of key operational indicators such as process changeovers, waste generation, overall equipment efficiency (OEE), and shop floor management practices. As a result, we believe there is substantial scope to achieve efficiencies from raw material sourcing to finished product by targeting cost, quality, waste, equipment health, inventory, and delivery.
Paper manufacturers can take three types of actions to bring operational efficiencies. First, they should identify gaps in their manufacturing processes by the application of lean management principles. Second, they should measure everything in the factory. Finally, they should apply analytics to draw daily insights and act on them. By employing these measures we have found paper companies can reduce their costs by 10-15%.
For example, in the case of one paper manufacturer, we uncovered opportunities for improvement by identifying the actual constraints on plant capacity through a single product run along with checking the availability of key process inputs. From this baseline we then adjusted the capacity to take account of the client’s actual product mix, making the client aware of substantial unrealised capacity.
Our work with paper companies has found that there is an over-reliance on past experience and less focus on gathering data to generate insights. Paper manufacturers have a large number of opportunities to measure key drivers of their business from raw material to finished product. For example, many waste paper and agro-based mills use rules of thumb to calculate raw material consumption. However, this leads to wrong conclusions and consequent wastage. By applying weighing systems at different stages in the process and using barcoding paper mills can get an accurate and real-time measurement of their highest cost input to not only know the real cost of manufacturing each product but also identify the variances across shifts.
Finally, paper companies should train their people in using analytics based on available data to make adjustment to their processes and business based on real insights. For example, we have found large gains can be made by recording details on equipment breakdown and analysing them regularly to reduce downtime and bring more predictability to operations.
3. Pursue strategic sourcing
With raw materials typically accounting from 55-65% of a paper company’s costs, strategic sourcing is crucial to reducing cost and achieving performance excellence. Many Indian paper companies are behind the curve on sourcing best practices, routinely leaving money on the table in procurement.
The first step toward strategic sourcing is to bring full visibility of the current spend by category, department, and suppliers. In a previous client engagement, we created an automated spend cube to provide a single-window view of sourcing - highlighting potential leakages and outliers to investigate further.
After gaining visibility, companies need to apply tools like Total Cost of Ownership (TCO) to their sourcing practices to ensure the purchase of equipment and consumables is done on value rather than price.
Finally, the use of demand prediction models can help paper companies better anticipate periods of high demand and plan procurement more accurately, reducing their inventory costs. At the same time, price prediction modelling for key input materials helps organisations time their purchases to take advantage of favourable price fluctuations.
4. Improve sales and channel management
An important and often neglected area of performance in Indian paper companies is sales and channel. Through more effective segmentation and key account management combined with digitalisation of customer-facing processes, paper companies can increase sales and customer satisfaction at the same time as reducing their selling costs.
In a recent client assignment, we helped one paper manufacturer transition its customers to web-based ordering and provided real-time order-to-delivery status updates. This reduced friction for the customer during the buying process and improved visibility on their pending order - increasing their loyalty. At the same time, it improved efficiency for the client as their sales staff could be redeployed from non-value adding administrative activities to new business development.
5. Create a high-performance culture
The sustained performance improvement that Indian companies require demands a wholesale cultural shift across the organisation. Performance excellence programmes that rely only on top-down initiatives are destined to fail. Therefore Indian paper companies must focus on building their team’s capabilities in problem-solving, analytics, leadership and communication at every level of the organisation.
A programme of capability building must be supported by measures to energise the team for the challenging but exciting journey ahead. To achieve this mindset change paper companies can initiate workshops and individual mentoring to communicate the road ahead, engage people in overcoming the challenges at hand, and coach them to tap into their potential.
Creating a culture of high performance also means that HR must come out of the support role and play an active part in transforming the process of hiring, developing and retaining talent to ensure the workforce is aligned to the requirements of the new era of Indian paper.