Packaging Grades
Stay Competitive
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Producers of packaging grades, liner and medium, face major challenges in their efforts to gain a reasonable return on equity or assets. Historically, these segments of the paper industry have suffered from the classic market price fluctuations associated with a close supply versus demand marketplace. These primary grades are considered to be in the commodity category with the pricing level determined by the short-term supply/demand ratio. As fluctuations in costs and product pricing are very difficult to reconcile, it is also extremely difficult to project or predict a lasting return on investment. The inability to adjust market prices based on cost variations results in a continuous effort to reduce all costs and produce products in the most efficient manner possible. |
The short-term focus on managing all costs to the absolute minimum can result in long-term performance problems and may in fact jeopardize the entire enterprise. This is typically done through reduced routine maintenance and insufficient capital spending. Over time, the reduction in capital spending reduces the facilities ability to produce a competitive product in terms of quality and cost. The stronger companies in this market have employed a critical balance between short and long-term objectives to both manage today's cost and maintain the longer-term viability of the enterprise. This seemingly conflicting approach is essentially required to produce the financial performance demanded by both stakeholders and financial institutions. Page 1 of 2 |
