First of all, Indian paper mills need to bring a new level of strategic thinking to their business. This is required to identify where and how to compete in a changing market landscape and then optimise their product portfolio to maximise profitability.
Today, many Indian paper companies straddle a range of product segments but do not have a clear idea of each segment's role in overall business growth. For example, one leading paper manufacturer did not have an accurate picture of the market demand and growth prospects for each of its product categories, therefore it was unable to make right decisions about where to focus its efforts for the future. Instead, by building the market map and identifying the high potential products of the future, paper companies can make a strategic shift toward more attractive product-market segments.
Furthermore, different paper products enjoy very different profit margins, therefore in a continuous process industry like paper, maximising machine utilisation with the most profitable product mix is essential to improving the bottom line. Today, however, most Indian paper companies put new products into their portfolio on the basis of the latest customer demands, without realising the impact on their business model and competitiveness.
Paper manufacturers need to get a precise understanding of how different products contribute to their profitability, then take a stand on what they will and will not provide, rather than bowing to the whims and fancies of the latest request from sales.
By adopting such a strategic approach, paper companies can also move away from the price-driven commodity mindset that dominates the Indian paper industry today. Through a focus on categories and customers where there they have a clear and sustainable competitive advantage, paper companies can build a strong value proposition and capture pricing power.
Aim for excellence in manufacturing
The second area where Indian paper companies need to transform themselves is in manufacturing. To reap the substantial benefits of manufacturing excellence companies need to benchmark with the best, adopt lean practices and upgrade their people.
Today Indian paper companies largely rely on internal benchmarking to direct performance improvement initiatives. However, this approach offers limited scope for innovation and advancement. Instead, companies need to adopt external benchmarking with industry leaders in India and overseas. Companies can begin by defining average and high-performance benchmarks across all key parameters in manufacturing such as water, power, chemical and steam consumption, recovery of waste paper and machine downtime.
They can then compare their current performance with these benchmarks and develop a prioritised set of performance improvement initiatives accordingly.
Lean practices are also vital to improving performance in the Indian paper industry. With the bulk of input material being recycled paper the industry has typically paid less attention to waste. However, any overconsumption of raw material indicates an inefficiency in the production process that will be negatively impacting the bottom line. Manufacturers need to put in place steps to measure and then minimise waste of materials, as well as energy and the time of their people.
Achieving excellence in manufacturing also requires a mindset change on the factory floor and in the head office. The Indian paper industry has often struggled to attract quality talent, as a result, owners have tended to see factory staff as a commodity rather than a valuable asset to be nurtured. As the industry rapidly moves to higher levels of technology adoption, Indian paper companies will need to invest in training and developing their people on the shop floor. This not only includes acquiring new skills but more importantly changing mindsets so that all production staff become a driver of innovation and improved efficiency.
Bring marketing orientation
The third area where paper companies must take action is bringing a marketing orientation to the organisation. This will require much greater efforts to understand the real customers for paper companies, more effective customer targeting and shedding the commodity mindset.
Historically Indian paper manufacturers have been detached from their customers due to the influential role of dealers who aggregate demand from a large number of small customers and transact directly with the mills. However, as paper customers become larger and more organised, the industry structure will gradually shift. Already, large packaging and consumer companies are highly involved in the specification for paper and keen to build deeper relationships and get better integrated with their suppliers.
Even where dealers remain an important intermediary, it is essential that paper mills build up an accurate picture of their end customers' needs to stay ahead of emerging trends and new product requirements. Rather than waiting for this information to filter through to them from dealers.
With a clear picture of different customer segments, along with their needs and decision-making processes paper companies can take a targeted approach. This allows you to focus on those segments where you can more profitably serve the customer, and build a more compelling value proposition to communicate through your marketing activities.
Marketing has typically been an afterthought for Indian paper companies due to the production mindset that dominates inside the company and the commodity mindset that dominates in relations between producers and dealers. As a result, most companies lack a real marketing department and sales acts simply as order takers. To drive future profitability gains paper companies will need to build a marketing mindset and develop an internal marketing organisation. This will enable them to build and grow the brand through continually communicating and evolving the company's value proposition in tune which changing customer needs.
In the coming years, these needs and expectations are likely to move much faster and become much more demanding, as paper manufacturer's customers keep pace with rapid changes in consumer tastes and face increasing competition in their own industries.
Make paper digital
The fourth and final area where Indian paper companies must transform is digital. The Indian paper industry has been a clear laggard in the digital revolution that is sweeping the manufacturing sector. Companies that want to remain leaders in the future will need to quickly catch up by placing digital at the heart of their future strategy.
In our work with leading paper companies, we have helped firms identify clear opportunities to digitalise across manufacturing, maintenance, logistics, procurement, and marketing & sales.
For example, Indian paper companies incur substantial costs through unscheduled downtime. Through implementing Internet of Things (IoT) devices on the paper machine and other important equipment, it is possible to monitor key indicators like temperature and vibration in real time. This data can then be analysed and alerts raised when threshold levels are breached. Over time Artificial Intelligence will build up a picture of machine performance and parameters and provide increasingly accurate alerts for when to carry out preventive maintenance.
To give another example, today many paper companies take shop-floor measurements manually. This is imprecise and is often carried out inconsistently. Instead, by using newly available IoT solutions, it is possible to get accurate and consistent data on consumption of various inputs to manufacture paper.
Digital can't be just limited to the production process. As customers of all types get used to the frictionless experience offered by digital they will increasingly demand the same from paper suppliers. Today paper dealers and customers have very limited visibility of their order status. This results in endless calls, WhatsApp messages and email exchanges with company sales staff, production managers, and even owners. This consumes a huge amount of time and resources for both paper mills and their customers. By digitalising the order-to-delivery process paper mills can improve efficiency and customer experience, and free-up sales and marketing to identify and develop new customer relationships.
Central to the digitalisation process is creating a data culture within the firm. This can begin with a data audit that identifies current sources of data across the business operations and new areas where it can be captured through new technologies like IoT devices on equipment, GPS tracking on trucks or mobile apps for the sales force. Once data is being captured companies need to put in place analytics capabilities to draw insights and inform intelligent business decisions.
Companies that take concerted action to transform themselves in strategy, manufacturing, marketing and digital in the coming few years will be best placed to outperform their industry peers in the next era of the Indian paper industry.