Professional Documents
Culture Documents
Lean operations
Preparing for lean times
Pulp and paper companies in Europe and the United States are going through a difficult time.
Industry costs have been rising by 9 percent a year since 2007 but prices have increased
by only 2 percent annually, so profitability remains low across the value chain. Demand is
shrinking in some developed markets and barely growing in others. Only in emerging markets
is demand growing stronglybut new, lower-cost capacity in the Southern Hemisphere,
especially in Indonesia and South America, is competing to meet these new needs, pushing
market prices down. At the same time, tighter regulation across the globe continues to
drive up costs as producers strive to consume less energy and water and to cut their carbon
dioxide and effluent emissions. Many pulp and paper companies are committed to tighter
environmental targets than regulators demand, and investing to be sustainable in the future
is inevitably adding to their costs today.
Raffaele Carpi
Peter de Boeck
Malte Hippe
Ken Somers
Under such dreary circumstances, what can pulp and paper companies do? The only options for
less cost-competitive mills in Europe and North America are to develop new business models,
such as generating bioenergy from pulp, or to refurbish mills. The second option may prove to
be a more fertile opportunity than it sounds, however. Over the past five years, McKinsey teams
in developed economies have worked with many pulp and paper mills to make their operations
leaner. Results from these projects indicate that a typical mill can expect to reduce fixed costs by
around 15 percent in this way.
Perhaps more surprisingly, in view of recent rises in the price of raw materials and energy, mills
can expect their variable costs to fall by 5 to 10 percent as well. Mills undertaking such projects
have seen their overall equipment effectiveness (OEE) and yields improve at the same time, so
they have increased output significantly without investing large sums of capital or taking on more
people. Since most of the measures these mills are using to streamline operations can be put in
place in less than a year, the results have shown up quickly in the bottom line.
13
14
Exhibit 1
-3
304
0
16
/-
353-
253-
053
3--
--402
402
/2 --402
402
/2
- 02
-402
0/ 2
--402
402
0/2
-30
303
4-
3-
-5
-401
40
40
-302
30
02
2
-9
-309
30
-30
302 -303
303 -304
30
3
30
-31
314
3
1
-1
4-
50
50
3,2
101
Description
-30
302
3
02
-30
01
1
-1
10
0/1
01
-101
101
10
0/1
-7/1,2
306-
201-
-101
101
10
0/1
-220
2201
2
22
0
306-
-101
1
10
15
Exhibit 2
Op 1
Op 2
Ideal design
Op 3
Op 4
Op 5
Op 6
Op 7
Op 1
Op 2
Op 3
Op 4
Op 5
16
17
Exhibit 3
Cost/ton of steam
EUR
Current usage
Boiler 7
Maximum load of
240 tons/hour
Less than 80 tons/hr
needed for 50% of
the time
Boiler 6
Boiler 3 Boiler 4 Boiler 5
Boiler 2
Boiler 1
0
Time in percent
100% = 365 days
50
100
150
200
250
18
Exhibit 4
A holistic approach
allows teams to diagnose
opportunities for savings
"How we operate and optimize
our assets and plants"
Operational processes
Tools and equipment
Operating
System
Management
Infrastructure
Mindsets,
Behaviours and
Capabilities
19