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October 04, 2021 | by Paul Fillmore

PAUL’S PERSPECTIVE – QUANTUM’S 2021 FOURTH QUARTER PAPER AND TREND ANALYSIS

“He says the best way out is always through.

And I agree to that, or in so far

As that I can see no way out but through.”

-Robert Frost, A Servant to Servants

When was the last time you saw paper covered on the Today Show? If you answered September 14th, 2021, you would be correct. You can watch Kerry Sanders sprinkle shreds of baled waste about like magic pixie dust here, (Paper starring on Today) and marvel at what is likely the first time anyone has seen the workings of a paper machine on broadcast television.

For those in the trenches, the headlines are all too real.

  • Allocations
  • Moratoriums
  • “We’re 16 to 20 weeks out”
  • Force majeure
  • No replenishment date scheduled
  • It’s somewhere on a boat/train/truck/rocketship

The orders come in, the presses continue to hum along, clients and buyers scramble to find security of supply, substitutes, and solutions.

In other words… “the band plays on”.

In this quarter’s Outlook on Paper & Trends, we are going to take a step back. We already know what these next months are going to look like. We can also take a few guesses as to what 2022’s first and second quarters are going to look like. What I’m thinking about today is how fundamental assumptions about our interaction with our mills, merchants and clients are going to change.

Radios! Satellites! Magic!

Greg Janicki of Ambrose Solutions & Paper Express, posed an interesting question, when discussing what he would like to see in an e-commerce solution for paper buyers. Full disclosure: Greg and the fine folks at Paper Express -like Rob Ambrose, Dale Schmidt, and Dave Butwill-have been valued partners for me since 2018.)

There are immediate and future needs for buyers and planners to have real-time access to inventories, scheduled runs, block-out dates, and delivery lead times. This has typically been an opaque process; a carefully choreographed dance between buyer, merchant rep, mill CSR, mill rep, and mill management.

In the current market, where the success of securing an order might be a matter of minutes, the buyer and client can no longer afford the luxury of this waltz. Buyers need information and they need it now.  Why the urgency?  Because there is a good chance you have a client on line 2 ready to award the job if the schedule can meet the target in-home date.

I think Greg’s assertion was correct: we’re going to need more robust e-comm solutions. There’s plenty out there now, and the savvy buyer who knows how to utilize them will reap the rewards of order confirmation.

It’s All About The Programming.

Hand in hand with a transition to e-comm order management comes the natural inclination for the mills to want to support dedicated programs versus putting dollars in the limbo of inventory at a regional distribution center. I fully expect a consolidation of economy papers (and possibly a few retirements) as higher prices and less capacity become the new normal.

The program buyer will enjoy the advantage of being first, second, or third in line on a run and who knows, in this environment, may even be rewarded with a tonnage-based rebate/discount.

Cash flow and cash management will be key in allowing a print service provider to carry available stock on the floor ready to go at a moment’s notice. This is, of course, dependent on the mills being able to live up to their commitments-a heady challenge currently. Merchants will continue to excel in the role of managing the finance and logistics of these types of programs like the ones offered by Paper Express.

What About The Imports?

The decision by European and Pacific Rim manufacturers to tailor down their capacity and concentrate on supplying the European market dealt a heavier than expected blow to North American coated and uncoated fine paper availability.

Meanwhile manufacture of brown linerboard continues to grow worldwide, with demand and profits heading skyward. At the same time, when it comes down to whether it’s more profitable to put a PlayStation 23 or a skid of paper on a container that cost $20,000 today vs. $4,000 a year ago, the electronics are winning the argument every time.

Given that North American capacity will likely tread water and more than likely dip, there will be ample opportunities next year for imports to make a comeback. Smart mills like UPM-Kymmene, who own their own boats and manage their own fleet, are going to be at a natural advantage. Another example is Costco. We are seeing this giant taking the same approach only in a wider market.  Until trucks are rolling and boats are floating on a more consistent basis, strategic investments like these will be critical to continuing success.

As we step back into today’s challenges and issues, I think Frost’s advice holds true, “Sometimes the only way out is through”.

Good luck out there, and see you soon for our end of year wrap-up.

About the author:  Paul Fillmore is Supply Chain Manager at Quantum Group and has over 20 years of printing industry experience. Paul’s specialization is in sheetfed printing and he has master level experience in litho and digital print production, estimating, planning, purchasing, and process engineering.  Click here to learn more about Quantum Group’s printing solutions.

 

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