The recurring theme for all involved in the paper industry is high competition, overcapacity and low margins and it is the merchants that work smarter, more efficiently and can broaden their services, products and customer value in these difficult times that will ultimately succeed. Industry size and scale is increasingly important for profitability whilst preserving the best of local service and brands.
The paper industry is a very traditional market with well established supply chain processes in place. However, rapidly changing product requirements and increased customer expectation levels have created pressure on merchants that many are finding difficult to contain whilst maintaining competitiveness and profitability.
In addition, product and service extensions into new areas, such as packaging, signage and associated machinery and new services around print and facilities management, drives increased complexity as well as the demand to add increased value to distinct customer groups. This needs to be delivered in a highly competitive and commoditized environment where delivery performance, availability and logistics efficiency are key to profitable business.
Printing technology is having much more influence on the paper industry than ever before. Newer printing techniques, such as digital, have enabled printers to offer a more specialized service, giving the customer greater choice and more flexibility. This means paper merchants have to provide a much larger range of products to meet the specific needs of printers and their customers. The size, coatings, light and water resistance, indoor/outdoor display and many other aspects of the final printed material all result in a significant increase in product lines, which in turn has an impact on the merchants’ supply chains, inventory and customer service capabilities.
In addition, with many printers being relatively small organizations, they have a further issue of not being able to pay for paper stocks until they are sure their customers will pay for the finished work. The very nature of printing means that if there is any mistake on the printed material, the customer is unlikely to pay for it and will either have to be redone or abandoned. Similarly, if the materials are not delivered on time, they may well be worthless and again the customer won’t pay. In the UK, the National Association of Paper Merchants (NAPM) has already warned that the aggregate level of bad debt has risen from GBP 13 million to more than GBP 25 million. However, this is a global issue and, invariably, it is the paper merchants who carry the risk of shouldering the cost burden of these lost sales.
Dealing with specific local country differences in a global market has also become an important requirement. For example, there are significant differences in how distributors operate between the US and European paper merchant industries. In the US, many companies operate a dual merchant route to market, where distributors open up a walk-in retail trade counter, usually at the warehouse itself. This practice is used rarely in Europe, but with the overall globalization of many organizations, greater synergy in operations needs to be planned for. The National Paper Trade Association (NPTA) chairman in USA recently identified several key trends, including continued consolidation, increased ecommerce and automation by removing processes that add no value to customers.
Paper merchants have historically been slow to adopt new technologies, but this is rapidly changing as the opportunities to reduce costs and increase efficiency become both affordable and essential to maintaining competitiveness and profitability. The adoption of eCommerce is becoming a key factor globally for driving change within the industry. Communications protocols like PapiNet and XML in general, have become much less costly and this is driving easier to use standards and market take-up.
Market drivers:
- Shrinking market driving industry consolidation
- Development of new distribution channels
- Need to retain profitability on reduced margins
- Increased customer demand for new products/services
- Increased product ranges to meet specialist customer requirements (packaging & equipment)
- Need for improved and cost-effective logistics
Business pains:
- Increased bad debt/credit issues
- Over production puts pressure on pricing
- Need to adapt to electronic trading
- Cost of stocking and distribution needs to be reduced
- Need greater flexibility for pricing and logistics function, increased consignment stock and VMI options and visibility – Simon – not sure about this – is it meant to be one bullet point? The two parts don’t seem to go together
- With financial ownership control
- Need to increase efficiency of trading relationship between merchants and customers
Customers’ demand:
- Greater range of product lines and services
- More flexible service
- More flexible pricing structures
- Faster, more efficient distribution
- Localised stock holding
- Electronic trading capabilities
- Increased credit
Signed, sealed and delivery – all from one system
To help paper merchants deliver Best Practice, the effective use of IT is essential, overlayed with best practice in business processes. However, until recently, there has not been an established global enterprise-wide system dedicated to paper merchants and distributors. There are some very specific requirements for merchants, which need to be considered before any significant investment is made in IT. There is little point implementing a system that just doesn’t fit the requirements and complexities of the industry.
Merchants require a system that delivers high levels of flexibility and functionality when it comes to financial areas such as credit control, margin control, year end bonuses and complex volume/pricing taking into account true costs. The software needs to be able to allow merchants to work in the most efficient and profitable way for them and automate these complex calculations, while maintaining the highest possible levels of customer service and satisfaction.
- Item segmentation
- Pricing and dual pricing
- Indent sales
- Supplier price support
- Increased stocking options e.g. consignment stock and VMI
- Faster invoicing/remittance
- Converting
- Activity-based costing
- Greater control and visibility across the entire organization.
IBS software allows paper merchants to gain leverage over their entire organization, with industry specific, tailor-made functionality that delivers high levels of flexibility and seamless integration.
