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Within the pulp and paper industry, the year 2000 might be seen as non-eventful from a technology perspective, starting with the uneventful (due to lots of hard work) Y2K systems rollover and ending with the e-commerce anti-revolution. Certainly, the seeds of the "New Economy" were planted in the industry, with more than four dozen Web sites springing into existence with the mission of replacing bricks with clicks. Intended to eliminate traditional sales channels, streamline supply chains, and profit from fees charged for transactions executed on be-all, end-all horizontal and vertical exchange platforms, several of these "first movers" were going down for the count by year's end. At the same time, many of the pulp and paper industry players were still waiting to be convinced that e-commerce has a clear direction and a benefit, or even that it is here to stay.
According to a 2000 survey by PricewaterhouseCoopers (PwC), although 82% of paper companies have a presence online, only 6% of companies have product availability data online and just 5% sell products through their Web sites. PwC says that most paper companies haven't ad-vanced beyond using the Internet for "channel en-hancement," or as a means to provide "brochureware" information. PwC suggests that the three most serious challenges to companies implementing e-business are:
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Integrating legacy systems
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Managing change in the business culture
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Establishing business processes and industry standards.
Touted advantages of business-to-business (b2b) commerce on the Internet are the advent of a wide-open, free-flowing market for products and the potential attraction of new customers through the Web's global reach. So, what are the major barriers to e-commerce in the pulp and paper industry? As paper companies lurch towards participating in the New Economy, there is one area where industry players will need to develop business models differently-the paper industry must establish industry standards not only for communicating transactions, but also describing the product being transacted.
Standards are not the only barrier to e-commerce in the pulp and paper industry. The industry culture is such that sharing of existing, detailed product data with customers is not common. A looming question surrounds whether or not the benefits of e-commerce and its supporting technology can change this culture so that customers are more confident in pulp and paper purchases through the Internet.
KNOWING THE CUSTOMER'S BUSINESS. When accepting Pulp & Paper's CEO of the Year Award last November, John Dillon of International Paper described IP's strategy for improving its financial performance by saying that "we must know as much about our customers' businesses as we do about our own. We must help them grow and become more successful if we are to be successful."
The pulp and paper industry hasn't always excelled in the customer focus area, and product specification and quality standards for external consumption have always been less of a priority than long term supplier/customer relationships. Industry culture is such that buyers often feel they have to personally know the producer and its specific machines or production lines to be assured that a particular product will meet their needs, or perform satisfactorily.
"Similar grades of paper produced by different vendors can have such different characteristics that many converting companies buy their paper from only a few suppliers so that they know how the paper will perform," states Marc Kobren, information technology director for Chesapeake Packaging Co., based in Richmond, Va. "To converters, paper is not a commodity that can be purchased just anywhere."
As e-business evolves in the pulp and paper industry, knowing each other's businesses will become even more important to electronic business transactions. Buyers will need more product specification and quality information than has traditionally been available in order to have confidence in an electronic trade for merchandise listed on an exchange, or for any purchase from someone other than their usual supplier. Craig Campbell, partner in PwC, recommends that paper companies develop a comprehensive strategy to become winning e-businesses. Campbell says that above all else, the key to a successful strategy is that "customer needs must drive the e-business."
In a June 2000 Pulp & Paper article, Bill Dowdell, president of the Flexographic Technical Association (FTA), noted that one of the most crucial issues for converters is receiving roll data with paper specification information. This data might include such standard containerboard measurements as basis weight, smoothness, brightness, porosity, moisture, strength parameters, and caliper. Dowdell said that most converters would be unfamiliar with the proper tests and testing equipment, and that the data is necessary for creating a stable manufacturing process. In addition, since many converting facilities are ISO 9000 compliant, roll specification data is needed to allow quality tracking and to maintain certification.
All paper rolls and pulp bales are different, unlike specific General Motors, Ford, or Daimler-Chrysler part numbers where every part is expected to be identical. A paper product is essentially analog in nature. Its quality and physical characteristics vary from roll to roll of the same intended/named product in ways that have an important impact on end users. This means there is virtually no way to list a grade, size, and three or four quality parameters for a paper product on a Web site and have a buyer snap it up in an e-commerce exchange environment with complete confidence in exactly what will be delivered.
If the industry is going to sell paper in an e-commerce environment, more information must be supplied to buyers on what is being sold and why it will perform to customers' needs and expectations. Dowdell says that "everyone understands each tree is not identical, so it [converting efficiency] basically comes down to what paper manufacturers communicate about a particular roll and how the converter compensates for that."
THE NEED FOR UNIVERSAL PRODUCT SPECIFICATIONS. Universally accepted product specifications, including quality and uniformity specifications, that would begin to give e-commerce buyers more confidence about what paper product they are buying are not completely in place today. Yes, every buyer and every seller has a set of specifications for its products, and every mill has a product specification for each grade. Universal product specifications need to spell out information about the grade and how as-built quality for each production unit or roll will be reported. Putting these standards in place will help buyers become less wary of purchasing products from companies or mills where they lack a relationship and significant history.
When contacted for this article, more than one converter said they believe that the rolls they see for sale on the exchanges today are nothing more than fugitives from some mill's beater chute. These converters say they would not take a chance on these "blind" purchases unless they were "absolutely desperate."
"One important point is that most converters can get almost any paper they need in just a couple of days from where they know what they are buying, whether from a paper supplier or another converting facility," states Kobren of Chesapeake Packaging.
Converters also say that if the detailed "as-built" quality information and more detailed product/grade specifications were in place to help them evaluate the suitability of each product for its intended use, some of their reservations would be diminished.
NO COMPREHENSIVE REPORTING. Paper companies have yet to embrace comprehensive reporting of product quality at the level of detail that many paper consumers need. The type of information paper manufacturers communicate to their customers usually consists only of the summary information put on roll labels or sent through the Certificate of Analysis (COA) generated by their ERP system. Values for basis weight, moisture, caliper, etc., may have been measured according to the manufacturer's testing procedures. However, that information is still not enough to give many paper consumers confidence in product quality and uniformity unless they have had previous experience with that particular mill, grade, paper machine, and, in some cases, the reel position for the specific rolls.
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FIGURE 1. Detailed information such as this basis weight profile is often available from mills, but not always provided to customers. |
Many paper manufacturers have much more data on the "as-built" quality of each reel and individual rolls than they report to the buyers of those rolls today. This data comes from gauging systems and lab testing, but is usually summarized for customers rather than reported in its entirety. Paper companies often use this data extensively for internal quality control and process engineering, but it is seldom shared outside the mill. However, in the age of e-commerce there is no technical reason why the mills could not share all of this data with customers, giving them a complete machine direction (MD) and cross direction (CD) profile of the roll for each quality parameter measured (Figure 1).
"The use of a 'color map' based on storing all scan data from the online quality measurements system is a powerful tool to document the quality as made," says Ole Fadum, president of Fadum Enterprises. "By overlaying the actual trim, we can calculate quality data on a reel, set, and roll basis, including MD/CD trends."
Kobren notes that such data exists at some mills. "I worked on the mill side previously, and for some customers, we had to provide quality specifications for every roll sold," says Kobren. "With most mills having quality scanners on paper machines, it would be quite simple to attach an electronic profile to each roll that was placed on the web for viewing by prospective buyers."
FACILITATING TRANSACTIONS VS. PROVIDING DATA. Industry associations and Web sites have only begun to address the issue of standards and are focused on transaction facilitation, essentially replacing electronic data interchange (EDI), and not on providing quality and performance data to meet customer needs. To date, several major companies within the European and American paper industries have focused their collaborative efforts on the development of a single, unified, international, XML-based e-business standard said to be designed for improving the efficiency and accuracy of the paper supply chain, while reducing the cost of operations.
| What is Product Life Cycle Management? |
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Late in 1999, AMR Research, a research company offering analysis of the e-commerce field, coined the term Electronic Product Life Cycle Management, or e-PLM, to describe the requirements manufacturing companies face in dealing with information about their products, including sharing that information in a collaborative manner with suppliers and customers.
The core of the PLM concept is that product information must be organized and put in the context of manufacturing business processes such as production and order fulfillment.
This product information includes specifications, material history, manufacturing process history, material or product genealogy, recipes or formulations, customer complaints, and measured quality parameters coming from both process control systems and laboratories. All information is combined in an integrated database that allows manufacturers to manage all information about a product throughout its entire lifecycle.
A PLM system becomes the storehouse of information about the product. This storehouse enables manufacturers to communicate effectively with customers in the e-commerce environment. At the same time, it offers internal organizations such as production, process engineering, R&D, and even important suppliers a tool to collaborate and analyze their product specifications, manufacturing processes, and production practices in context of the impact all of these have on the end product.
So, in addition to the goal of providing the right information about end product quality for customers in an e-commerce environment, an effective PLM system in a paper manufacturing company offers an important tool. This tool allows mills to better understand and continuously improve the things that will impact end product quality and manufacturing costs. The dual return on product life cycle management systems has lead many paper manufacturers to begin implementing the PLM concept.
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The e-business standard is PapiNet, and the development agreement marks the first time these industries have established a common approach regarding international business. Sponsoring organizations are the Confederation of European Paper Industries (CEPI) and the U.S.-based Graphic Communications Association (GCA). Other participants include major customers of the paper industry, such as: Banta, Gruppo Espresso, News International, Quad/Graphics, Quebecor World, Axel Springer Verlag, R.R. Donelley, Time Inc., and more.
According to Stefano Rossi, vice president/business development manager for Svenska Cellulosa Aktiebolaget (SCA), the agreement will benefit companies doing business in a global environment as never before, because trading partners will not be limited by technical differences across international boundaries. SCA is member of the PapiNet sponsor CEPI, and Rossi says the new standard will facilitate trading procedures between the paper industry and its customers by creating a set of electronic messages as a tool for efficient and simple trade routines through the Internet. This will eliminate the cumbersome process of first creating and then exchanging formal paper-based documents by fax, as well as any additional manual entry of responses into each party's computer systems for the majority of companies not using EDI messages to handle business transactions.
"The benefits these standards will bring to the industry are immeasurable," confirms Norman W. Scharpf, president and CEO of GCA. "Companies will be able to operate in a global environment using the same processes and systems, regardless of where their trading partners are located."
"This international cooperation is a great opportunity for the entire global structure of e-business," says Luis Deslandes, CEO of Soporcel and chair of the European part of the project. "It is the first time the industry has come together on such a broad scale and in such a unified fashion to agree on a common approach to conducting business."
The first phase of this project has now been completed, and five core trading messages created as electronic documents will be available for test purposes in January 2001. The first five documents are:
Initially, the PapiNet standard encompasses three segments of the paper industry: publishing paper, fine paper, and packaging paper. A number of new messages will be developed during the first half 2001, according to Rossi. The PapiNet standards project will continue to develop a full set of XML trading messages, which will cover most business cases within the pulp and paper industry. However, quality standards are not specifically addressed by the PapiNet effort, although development of a customer feedback message as an additional document is planned.
COMMUNICATING DETAILED PRODUCT DATA. The information systems application software and tools used for defining paper product specifications in great detail already exist, as well as tools for measuring compliance of as-built products to these specifications and communicating it in an e-commerce environment. However, these tools are not always used in ways that ultimately benefit customers.
ERP systems are designed to communicate small, roll label-type information regarding products through quality functions that produce some sort of COA, not large amounts of very detailed, as-built data. Because of this, many paper companies have begun to invest in a category of application software that leading industry analysts such as AMR Research refer to as product life cycle management systems, or PLM (see sidebar). These systems manage and communicate a wide range of product information (Figure 2).
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FIGURE 2. PLM systems offer one way to manage and communicate a wide range of product information. |
Mountain Systems Inc.'s Proficy for Manufacturing is one example of a PLM for the paper industry. Also, a large installed base of manufacturing execution systems (MES) from vendors, including ABB, Honeywell, and Majiq, is in place that offers the ability to manage similar information about product specifications and "as-built" product quality on a roll by roll basis. However, to date, most of the investment in these systems has targeted internal quality control and the management of internal product specifications. Despite this, there is no reason the same functions and data used in these systems could not become an important tool for communications in an e-commerce or exchange environment.
Many paper companies have the basic infrastructure in terms of measurement, data collection, and data management to incorporate all of this information into an e-commerce information stream. "The quality data is available to share with buyers," Kobren says. "The industry just needs a good way to present it to the on-line community."
As mills Web enable their quality systems, notes Fad-um, customers can directly access to quality data on their products. This may reduce the need to transmit quality data, as it is easily accessible using a Web browser.
"The limiting factor to making quality data available for customers continues to be mill operating people," observes Fadum. "Quality producers, however, see information availability as a competitive advantage."
SEIZING (OR STALLING) A COMPETITIVE ADVANTAGE. Paper producers who are able to compete on value have an opportunity to seize this moment in time and turn e-commerce into a competitive advantage. Paper manufacturing companies are the ones who will make the biggest investments if e-commerce is going to replace the simple, but tried and true, EDI used today. If paper manufacturers only see e-commerce investments as defensive moves, then many e-commerce initiatives will likely stall when the need for them is seen to have disappeared or diminished.
The challenge for the proponents of e-commerce investments, both inside and outside paper companies, is to demonstrate how those investments can contribute value for customers. Value for the paper company's customer can be defined as the combination of price, service, logistics, and product quality. Paper manufacturers who excel in all four of these areas could overcome the reservations buyers have about doing business with a new supplier or mill and build their brand based on value.
Information systems applications and tools to help paper manufacturers integrate better product specifications and "as-built" product quality information into their e-commerce environments are available today. Implementing and integrating those applications with e-commerce systems could provide a critical piece of the value equation for buyers, overcoming many of the concerns those buyers have about products purchased in a free flowing e-commerce market place.
Mark Cubine is vice president of EnteGreat, Birm-ingham, Ala. Kenneth Smith is director of business development for Paperloop, based in San Francisco, Calif.
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