Paper Industry – Investment Cycles
Working in Solution Management for SAP in the area of Mill Products & Mining (which includes paper industry), I am trying to keep up to date on what is going on in the industry and how we could help our customer in this area to solve business needs they have. So when I am blogiging about a crucial topic for the industry and try to connect that with SAP solutions – is that marketing and not something I should post here? I don’t know… I am giving it another try anyway 😉 .
One of the evergreens in this industry is capacity. Building up capacity is something you plan for quite some time, it requires a high investment and is therefore also not that easy to take ouf of the market capacity again. Also a paper machine can not just be shut down for a while and then restarted, it is a process manufacturing that basically has to run as continuously as possible.
One of the largest paper machines is 600 meters long – and produces up to 4,537 t/day. So you may imagine that this is not something that you decide for today, build it tomorrow and shut it down the week after. And not only you are thinking about it – but all your competitors in the market are having the same thoughts
Fisher International has posted a pretty good paper on how the investment cycles are working in paper industry (http://www.fisheri.com/images/features/Fisher%20Analysis_Capacity%20and%20Investment%20Cycles.pdf?mtcCampaign=26303&mtcE…).
What I was wondering – would it be possible to work with predictive analytics to better forecast the demand on capacity for specific paper grades? I am not really an expert in the predictive analytics products (formerly KXEN) so I can not really judge if this would be a potential use case. But maybe there is someone out in this community who could help me better understand if there may be a good opportunity for customers to find a better basis for their decision on capacity building. Or maybe there is some completely other ideas out in the community how to work with the challenge.
Marketing or not? Well, I certainly like the fact that you keep trying 🙂 . In this case I'd say 'not so much', unless you wanted to do marketing for Fisher and their FisherSolve product, which is (I'm sure) a potential competitor to SAPs solutions. So well done.
Regarding the cycles: I've read the article (you should change the link btw, letting it end at .pdf, remember, no marketing 🙂 ), and my conclusion is that predictive solutions really won't help.
It is the competitive pressure that forces all companies to invest and increase capacity (basically because everyone is afraid of losing market share), and that inevitably leads to overcapacity, lower prices, etc. So even if you could predict what's needed in the total market, every company would still try to meet that increased demand as much as possible by themselves, and the result is (because they do it all) a surplus of paper. I'm afraid no software solution is going to solve that problem (not even SAP 😉 ).
Anyhow, thanks for pointing me to the article, I learned something from it!
Best regards, Fred