Pira International's Dr Graham Moore and Trifonas Mitrou describe how the corrugated sector is changing for efficiency

Pira International in conjunction with the UK’s Corrugated Packaging Association (CPA) has been undertaking research to understand current supply chain practice in the corrugated sector and develop more efficient strategies on which it can exploit and maximize its opportunity.

The paper and board industry and its associated supply chains are experiencing technical, market related and business practice changes. Such changes have been brought about by alterations in market expectations and end user needs. They are impacting on product sectors and companies in different ways.

Companies are having to move from their traditional vertically integrated position to one that is far more aligned with their customers and customer’s customer. This will result in paper companies becoming part of a developing supply chain relationship that will ultimately extend to complete integration with the customer base. In these cases, the paper product will only be part of the total package; relevant services will also be bundled together with the product. Customer focus will become the ‘by-word’ of the industry and companies will develop real-time response to customer demand.

A good example of where such integration will have positive benefits is in the corrugated case sector. Supply chains and partner relationships are evolving to match the pace of change in current marketplace dynamics; although, consequentially always playing ‘catch up’. This pace of change is being driven by increasingly demanding time and value based customers.

Given the inherent problems of forecasting in particularly dynamic markets, the goal of meeting customer demand presents many challenges for the corrugated supply chain. Solutions for the corrugated industry lie beyond an understanding of their customers and their suppliers. In addition, the sector must have greater information on market drivers for their customer’s customer – retailers – and their supplier’s supplier, the fibre suppliers. To improve supply chain efficiency, however, there is a need to match sequential manufacturing processes with ever changing service and customer requirements. Although this is complex it is not insurmountable.

The 12 month corrugated study funded by the UK Government’s Department of Trade and Industry has involved all parties in the supply chain, from the paper mill through to the retailer.

Findings indicate a far from consistent picture with discontinuities existing in many supply chains. Corrugating companies are operating in line with resources employed and the co-operation/co-ordination procedures followed. Where supply chains work effectively, there are a number of key enablers in place that support the infrastructure and provide focus, (see illustration). The focus dimension is concerned with the business strategy and company direction, whereas the infrastructure relates to the resources and capabilities required to support the supply chain.

The non fulfilment of the infrastructure requirements creates problems and inhibits the successful integration of the supply chain. Some factors such as IT architecture need the input of third parties to develop compatible systems that are accessible and usable by all. In addition there are a number of inhibitors existing in their own right, for example organizational structures and culture, that create discontinuity and prevent an effective supply chain working.

Many examples of current best practice have been identified and where good supply chains have been developed, players in the sector have achieved higher customer satisfaction, increased market share, reduced operating and overhead costs, enjoyed longer-term co-operative relationships with partners and enhanced communication. And they have created a flexible, pro-active business to respond effectively to the changing trends of the market.

Translation of the success seen in other industries to the whole paper and board industry will be required if the sector is to realise the financial advantages offered by participation in effective operational supply chains.

This article is based on aspects of Pira International’s on-going Supply Chain research programme and its Strategic Futures Programme of research.

More information fromGraham Moore, Pira International – +44 (0)1372 802127. EMAIL: grahamm@pira.co.uk