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The sector covers the business activities specified in NACE Rev. 1.1 Division DE 21. The manufacture of pulp, paper and paperboard (NACE 21.1) is mainly an industry where large companies typically operate in a world-wide market. In the manufacture of articles of paper and paperboard (NACE 21.2), often termed the 'converting industries', companies are usually smaller and operate more on a regional or national basis. The total sector directly employs about 740,000 people in the EU-25 and has a production value of about 150 billion euros.
Among the ten sectors studied by e-Business [email protected] in 2006, the
P&P industry is a near-perfect yardstick for the state-of-play
in ICT adoption and e-business activity. For many of the indicators,
figures for the P&P industry are very close to the all-sectors average
and represent the typical situation in manufacturing industries.
The P&P industry is neither among the avant-garde in ICT adoption
(such as ICT-related sectors themselves), nor is it a slow ICT adopter.
Survey results show that companies within the P&P industry use ICT quite intensively in all application areas along the value chain: for procurement processes, in production, for inbound and outbound logistics, marketing and customer service. As in most manufacturing industries, improvements in supply chain management by integrating business processes with suppliers and customers is probably the main focus of all activities.
In the P&P industry, the impact of ICT is mainly felt as a driver and enabler of process innovation in business-to-business (B2B) trading processes and logistics. Meeting requirements for organising trade and logistics on an international scale has been a strong driver of ICT adoption. However, the e-business activities and experience of the smaller companies in the sector are quite different from those of large companies. The large P&P manufacturing companies are quite advanced users of e-business, while many of the smaller companies rely on a rather simple ICT infrastructure.
Agreement on common standards linking disparate ERP systems between trading partners is one of the critical success factors for e-business. The P&P industry has developed and promotes the papiNet® standard for facilitating B2B trade processes. Despite the success of this standard in the sector, there is still considerable scope for new implementations, especially those involving small and medium-sized enterprises (SMEs).
In parallel to papiNet®, GUSI is being promoted by the consumer goods industry as a standard for e-business with their suppliers, including the packaging industry.
The integration of digital information flows, during all phases of B2B transactions (including ordering, invoicing and payments), with production management and logistics has significantly facilitated business processes between P&P producers and their suppliers and customers. Effects tend to be most significant if both trading partners have an ERP system as the main 'hub' for automating processes.
The main effects of ICT adoption with regard to process efficiency noted from case studies and interviews with companies are:
Manufacturers of pulp and paper increasingly use RFID for warehouse and inventory management. Early experience of RFID implementation demonstrates that it can help companies to link ordering, production and logistics processes, thereby streamlining their supply chain and reducing lead times.
However, the benefits of the use of RFID over barcode technology, for the same purposes, are not yet obvious. In particular, the total costs for RFID implementation are still considerable. Therefore, adoption strategies differ: some P&P companies choose to be early adopters, while others deliberately opt for a “wait-and-see” strategy.
In the converting industry, compliance with customer demand (in particular from large retailers and the consumer goods industry) is the most important driver for RFID adoption.
Although, in some instances, the adoption of ICT by households and businesses leads to substitution of paper or paper-based products, the net impact of all factors that have an influence in this respect results in a continued growth in paper demand and consumption.
Substitution effects are most significant in the daily and weekly newspaper markets, where a large proportion of classified advertising is already migrating to the internet. The average volume of newspapers as well as their total circulation are decreasing. However, a projection of figures on paper consumption in Europe since the mid 1990s indicates a moderate growth even in advanced economies.
ICT and e-business have a considerable impact on work processes and on business process efficiency in companies from the P&P industry. Companies increasingly use ICT for enhancing customer service, and also expect that this will be a major area of ICT impact in the future.
All evidence suggests that the powerful ICT systems and e-business solutions of the large companies currently allow more advanced practices, which enable greater achievements in terms of process efficiency and cost savings. Many of this sector’s smaller companies, on the other hand, have only recently taken their first steps towards e-business. However, the P&P industry has good pre-prerequisites for B2B exchanges; thus, a dynamic development in e-business can be expected over the next 3-5 years.
Structural determinants make the P&P industry a sector with intense competition, mostly between well-established players. Rivalry could further increase if Asian or South-American competitors enter the European market. However, the key drivers of this competition are not to be found in ICT and developments in e-business. For instance, globalisation issues and the critical impact of rising energy costs (with implications on costs for raw materials such as chemicals) are not directly linked to ICT or e-business developments.
Survey results, case studies and desk research point at some issues which could be relevant for policy. The first two points concern the acceleration of ICT adoption among small and medium-sized P&P companies; the latter two points concern the objective to ensure a favourable framework for e-business.