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Paper & Packaging Report
Paper and packaging mills become more adaptable, optimized, sustainable, and data driven.
By Mattia Bernardi, Andrea Isabella, and Jared Lapin
Report
This article is part of Bain’s 2023 Paper & Packaging Report
The paper and packaging industry is changing rapidly amid unprecedented turbulence within the sector. As a result, chief executives are dramatically rethinking their operational models and their global footprints. The market mix is changing as traditional commodity markets such as newspapers are shrinking and specialty papers such as high-barrier papers that protect food from moisture and oxygen are growing. Global competition is intensifying, and technology is disrupting all parts of the supply chain. Economy-wide raw material shortages and volatility are further complicating market dynamics.
Agile companies are reacting now to exploit new markets and products. They are shifting from a mill-centric to a customer-centric approach, which requires greater flexibility and structural changes to the company. Business-wise, players are engaging in M&A and consolidation. Process-wise, they are capitalizing on the increasing availability of data and sensors that are providing new opportunities to optimize production.
While the manufacturing mission in the paper and packaging industry has historically centered on maximizing throughput and being highly efficient in a standalone mill-by-mill approach, this approach will no longer suffice. Leading companies are taking steps now to create interconnected mills of the future.
The mill of the future is integrated and flexible, sustainable and technology driven. It enables maximum productivity through high uptime and high asset health, effectively leveraging its full capacity. It is adaptable and optimizes for different objectives—whether a company’s mission is to lower costs (producing the right quality with the lowest possible cost), minimize carbon emissions, or optimize customer service. Finally, mills of the future attract top talent for current and evolving needs.
The mill of the future is part of an integrated network of plants with an optimized footprint, meaning products are made at those plants with the lowest production cost and that are nearest to customers to minimize logistics costs while ensuring quick delivery times and factoring in regional market demand, including expected demand growth.
In addition to being integrated, the mill of the future is highly flexible. This allows companies to optimize performance of the overall footprint of their plants as well as to react to changing conditions such as increasing energy prices, market downturns, or plant closures. Mills of the future balance cost efficiency and customer demands and service levels through next-generation sales and operations planning.
With an integrated network of plants and factories, executives can optimize for multiple scenarios and identify opportunities to improve, such as reallocating volume, upgrading assets, and optimizing portfolios and capacity. If they want to optimize for carbon emissions and reach carbon neutrality, for instance, they can move production to plants where energy sources are sustainable.
Footprint optimization also helps when there are drastically different energy prices in one region vs. another, as happened in Europe vs. the US in 2022. Conflicts and natural disasters such as the earthquake in Turkey can also interrupt the supply chain. Leaders can quickly pinpoint impacted plants and move production to other plants that are the most cost-effective and efficient.
The mill of the future is fully sustainable. Energy sourcing, production, and consumption are optimized for net zero, requiring both very high-energy efficiency through the full deployment of operational levers and a massively increased use of renewable energy. No or little waste is sent to landfills, and there is full recyling of water usage. In addition, the full life cycle of the manufacturer’s products is designed for sustainability and zero impact. The mill follows high safety standards, with a zero-accident mindset.
Employees use technology and data to make better decisions and innovate faster. The digital mill is made possible by a full technology stack (see Figure 1).
A key technology in the technology stack is the digital twin, which is a digital copy of a company’s mills and network. The digital twin enables improved analytics and decision making by optimizing process parameters (such as the quality of paper, strength of paper, and weight of paper) and performance parameters (such as the speed of the machine and consumption of raw materials).
The digital twin has many specific applications in individual mills that can help improve performance across utilization and productivity, cost optimization and asset health. For example, digital twins can be used to make machines more efficient, producing better-quality products with fewer resources. Digital versions of machines allow operators to test different configurations of the machine and find the optimal setup without the need to physically test many configurations, therefore making optimization quicker, less costly, and more effective.
While the workforce of many paper and packaging companies used to be characterized by highly experienced blue-collar employees with long tenures within their organizations, employers are now seeing higher turnover of younger employees who rotate jobs more frequently. As a result, instead of having decades of knowledge, employees now only have a year or two’s worth of knowledge. In addition, the various new technologies require entirely new skills that existing employees don’t necessarily have. This means leaders need to redesign how knowledge is transferred and retained.
Executives have different tools to centralize expertise, such as video training and augmented reality, which can be offered to employees in their local mills. Secondly, they can redesign the operating model to centralize employee competence and some of the mill activities. There will be an increased need for high-profile skills to remotely drive mills, such as the ability to remotely operate control rooms and monitor maintenance. The increased need for remote skills will also open up new labor pools of employees that don’t need to live near the mills they operate.
Finally, future mills will have a well-thought-out diversity, equity, and inclusion strategy that provides a welcoming environment for all employees. This helps the company attract a diverse group of talent, which is relevant as 65% of job searchers view inclusion as very important when considering a new role, according to a recent Bain survey—the same study found that employees who feel fully included are six times more likely to stay within the organization.
The mill of the future guarantees maximum productivity through high uptime and high asset health, which is achieved with the right maintenance strategy, operations, organization, and processes.
The largest drivers of downtime are known, the maintenance strategy for each piece of equipment is based on the likelihood and consequence of failure, and action plans are defined and followed through on for each asset based on their risk level.
Downtime is minimized through predictive maintenance, supported by machine learning. Maintenance is embedded within the organization, with dedicated roles and responsibilities and intelligent leveraging of external maintenance support. Productivity is boosted by improving utilization, overall equipment effectiveness, and de-bottlenecking.
Cost is minimized by reducing material consumption, realigning recipes to customer needs and specifications, maximizing energy efficiency, reducing waste, mitigating quality costs, and optimizing the distribution network. Performance is regularly monitored.
Finally, world-class mills are highly adaptable so that they can be optimized and tailored to each company’s specific goals. When done right, achieving true operational excellence can lead to great value generation. Bain has supported many paper and packaging companies in a broad cost savings program across more than 70 plants, resulting in an average 7-percentage-point EBITDA increase (see Figure 2).
Ilkka Leppävuori, who leads Bain & Company’s Global Forest Products, Paper & Packaging practice, prepared this report with help from a team cocaptained by Practice Senior Manager Jan Budde and Practice Director Catherine Safaya-James.
The chapters of this report were written by Bain Partners and Expert Partners Ilkka Leppävuori, Mattia Bernardi, Jenny Davis-Peccoud, Torsten Lichtenau, Oliver Straehle, Melchior Bryant, Peter Meijer, Moritz Vielhauer, Luciana Batista, Daniela Carbinato, Magali Deryckere, Erik Nordboe, Marcos Rutigliano, Florian D. Mueller, Sambit Patra, David Waller, Pablo Cornicelli, Manuel de Soto, Andrea Isabella, Elena Recio, Jared Lapin, Jason Heinrich, and Jenny Lundqvist; Associate Partners Anders Bäck and Pol Tarragó; Expert Associate Partner Stephanie Yee; Senior Manager Emma Elofsson; Consultant Kajsa Schrewelius; and Systemiq Partner Yoni Shiran.
The authors wish to thank Bain Global Advanced Manufacturing & Services Executive Vice President Andy Bankert; Partners Michael Staebe, Niels Koggersbol, and Jens Hjortegaard; Expert Partner Mark Burton; Senior Associate Consultant Andreas Kroebl; Leila Kunstmann-Seik and Anna Civilini for their planning and marketing support; and Aili McConnon and Paul Judge for their editorial support.
Navigating Turbulence in Paper and Packaging
Full Potential Transformation in Paper and Packaging
The Paper and Packaging Industry Faces a Biodiversity Crisis
Which Packaging Substrates Are the Most Sustainable?
How Paper and Packaging Companies Can Catch Up in Commercial Excellence
Putting Sustainability to Work in Paper and Packaging
The State of Private Equity and M&A in the Paper and Packaging Industry
Sustainable Packaging: What Consumers Want Next from the Paper and Packaging Industry
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