Wednesday, March 14, 2012

Cost Management in Paper and Pulp Industries


Target Cost Exercise in Paper Plant

Shank & Fisher (1999) gave an example of application of  target costing in the case of Montclair Paper Mill  abd showed how the target costing principle could be applied even at a later stage of the product life cycle. The situation of Montclair Mill was gloomy. The mill was making $700 loss per every ton of paper sold. The management believed that the standard cost of $2900 per ton was thought to be based on a solid analysis and was taken for granted.

The target costing gave a target of $1162 per ton, which equals a 60% cost reduction. The management accepted the challenge, and after rigorous analysis, four major reductions were accomplished:

   1.       Fiber cost: 60% cost reduction.
   2.       Paper machine cost: Yield from 47% -> 75%.
   3.       Dye costs: material savings of $250 per ton incorporated in the yield improvement at the paper machine resulted in an amazing $769 reduction per ton.
   4.       Conversion costs: Based on benchmarking, a reduction from $303 to $150 was challenged with the risk of possible outsourcing. During 18 moths, the cost dropped to $240, and the continuous improvement seemed to gain even more.

Together, these produced the desired level of costing and a dramatic turnaround in the mind set. (Shank & Fisher 1999.)


Ergonomics Cost Benefits Case Study in a Paper Manufacturing Company

Dan MacLeod,
Anita Morris, Ergonomics Coordinator, Crane & Co., Dalton, Massachusetts.

Original publication: Proceedings of the Human Factors and Ergonomics Society, September, 1996.

Total investments in ergonomics over a five-year period is estimated at about $2.5 dollars, including cost of new machinery and equipment. Total benefits over the same five-year period are estimated at $3.5 million, based primarily on workers compensation cost savings plus improvements in productivity. Thus, the Return on Investment (ROI) for this ergonomics program is approximately 40%.


Energy Cost Reduction in Paper Manufacturing


Bearings Reconditioning Cost Reduction

Waster Water Utilization - Cost Savings in a Paper Plant

Total savings due to the intensive water reuse modifications completed by the company are estimated at $112,000 per year. Avoidance of transportation/handling costs and landfill fees by diverting wastewater sludge to the production process resulted in cost savings of $72,000 per year.


With its new "fiber loading" process, Voith Sulzer, Inc., is greatly improving the efficiency of paper production and recycling. Fiber loading produces precipitated calcium carbonate (PCC) filler in the pulp recycling process at costs below conventional means.;jsessionid=025ADAEBC2C445B85DD1EA2364FE8ADB?purl=/751069-LA3c7Q/webviewable/

Reports on Paper Manufacturing Plants

Deloitee 4 page Note on Paper Industry - 2009

Productivity and performance improvement in paper mills: Procedural framework of actual implementations
John Fogelholm, DSc (Tech.), PhD, Frank Bescherer, MSc
Performance Improvement
Volume 45 Issue 10, Pages 15 - 20, Published Online: 1 Nov 2006

Rupesh Kumar Pati, Assistant Professor, Indian Institute of Management Kozhikode
Kozhikode – 673 570 (

Vertical Gap Analysis And Labor Productivity Benchmarks on Asia Paper Manufacturing

Two of the most comprehensive studies to date on vertical gap analysis and labor productivity benchmarks for Asia Paper Manufacturing (SEO: 02310).

The methodologist for this unique study is Philip Parker, Eli Lilly Chair Professor of Innovation, Business and Society at INSEAD (Fontainebleau, France and Singapore).  The goal of the reports is to assist consultants, financial managers, strategic planners, and corporate officers in gauging certain indicators of Asia Paper Manufacturing's financial and human resource structure.

The report has benchmarked Asia Paper Manufacturing against competing firms in the Paperboard Containers and Boxes Manufacturing industry worldwide going beyond traditional methods of company benchmarking. The results are two specialized reports: (1) global financial benchmarks using common-size statement ratios (vertical analysis), and (2) labor productivity and utilization measures collected across borders.

Furnish Design and Cost Optimization
KSH Consulting

New Manufacturing Process for Tissue Paper Reduces Energy Use While Increasing Use of Recovered Office Papers


Production Information System in a Paper Plant



Cost Management Software

The EPS Cost Management Suite is designed for the pulp and paper industry with numerous functions and features developed for its specific cost management needs. The EPS Cost Management Suite has three modules; EPS Real-Time Costing, EPS Product Cost Management, and EPS Transportation Cost Management.

The EPS Real-Time Costing module empowers paper machine operators  by providing machine operators and production managers with immediate feedback on how their decisions impact the cost of the paper reels being produced.

EPS Real-Time Costing can be implemented as a stand-alone module or in conjunction with one or both of the other two modules in the EPS Cost Management Suite.

EPS Real-Time Costing can be implemented in just four to eight weeks per paper machine, providing payback as quickly as one to three months.

The EPS Product Cost Management module has pulp and paper industry specific functionality for:

    * Recipe and grade specification management
    * Standard grade costing
    * Actual grade costing
    * Short-term cost and consumption forecasting based on block schedules
    * Long-term cost and consumption forecasting based on sales forecasts

EPS Product Cost Management supports pulp and paper companies to harmonize its cost management process to ensure that costs can be compared across mills. The module also improves the accuracy, timeliness and increases the level of detail in the grade costing to better support production planning, financial forecasting, and product sourcing decisions. Significant time and resource savings during the monthly closing process and during the yearly budgeting process can be expected after implementing this module.

The EPS Transportation Cost Management module helps transportation and supply chain managers to gain control of the transportation costs. The module makes it possible to budget freight costs, monitor the effects of transportation decisions, and track cost variances.

EPS Transportation Cost Management is based on an innovative accounting concept developed specifically for the needs of pulp and paper companies. The module responds to pulp and paper companies needs for systematic cost planning and control to combat etc. escalating fuel costs.

EPS Transportation Cost Management administers the mix of factors that drive supply chain planning and control decisions, and it provides precise measurements of how specific components of the transportation cost mix affect the overall budget and forecast.

To effectively control transportation costs, EPS Transportation Cost Management examines key cost drivers including: destination mix, source paper mills and warehouses, transportation routes, modes of transport, carriers, freight rate, fuel surcharges, and exchange rates, among others.

EPS Transportation Cost Management helps pulp and paper companies to identify and explain factors that are at variance with expected levels as a first step to reduce transportation spending and increase effectiveness.

TIPS Cost Management Suite to improve the profitability of the pulp, paper, board and tissue industries

TietoEnator Forest Trade Press Release 20 October 2005

During the last years, the paper industry has become more global, with paper companies supplying their customers from production facilities worldwide. At the same time, the industry has become even more commoditized.  Together, these two factors have created a focus on cost competitiveness and a need to accurately understand production costs and customer profitability. TietoEnator Forest is responding to this challenge by launching the TIPS Cost Management Suite. The suite is a complementary part of TietoEnator Integrated Paper Solution (TIPS), a comprehensive business and manufacturing execution solution for the pulp, paper, board and tissue industries. The TIPS Cost Management Suite is provided to TietoEnator’s customers in cooperation with Enterprise Performance Solutions (EPS) – a provider of the next generation cost management solutions.

The TIPS Cost Management Suite contains modules for corporate level profitability analysis, mill level product cost management, and process level real-time costing.  Some of the benefits include the ability to compare production costs across multiple locations for improved sourcing decisions, support for accurate profitability analysis and understanding of what makes products, customers and regions profitable. Furthermore, users are empowered to make operational decisions in real-time, resulting in improved productivity.;93;16080;164;20685;20692
Original Knol - 2utb2lsm2k7a/ 2373


  1. A very useful resource, highly recommended! I had been looking for information on process improvement for pulp and paper and this is one of the best resource I have found. thanks!

    1. If you use ERP software for your institute then It's good for you. You have to save paper cost and other type of maintains on save money.

      institute management software

  2. "1. Fiber cost: 60% cost reduction.
    2. Paper machine cost: Yield from 47% -> 75%."
    These data indicate a significant increase in productivity pulp industry. If we consider the application qcs paper machine in the paper industry, we can see significant reductions in the cost of production.