Companies are working to improve the efficiency of their supply chains and thereby reduce working capital, increase transaction velocity and improve inventory turnover. Mergers, acquisitions and alliances are reshaping the pulp and paper industry. Although the pulp and paper industry has invested heavily in IT systems, a large variety of old systems is often complex, inflexible in regard to integration and difficult to operate. As they reflect past organisations and business models, the streamlining of business processes is difficult.
Mega trends in the pulp and paper industry IT.

The pulp and paper industry is stepping into a new phase of business evolution driven by consolidation of industry, globalisation and ever-increasing competition. These market drivers are forcing the pulp and paper industry to put a greater focus on cost efficiency. These focuses are creating totally new challenges for the organisation, specifically in the IT area.

IT is increasingly becoming a commodity. This is a result of product standardisation and the popularity of off-the-shelf-products that facilitate the economies of scale. This phenomenon is also supported by increasing utilisation of competence resources in low-cost countries.
Managing change becomes more and more difficult. Very often companies face the need for new changes before they have seen the benefits of the previous ones. The cycle of change is short and the transformation environment becomes very complicated. On the other hand, IT becomes the tool in forcing business changes to happen. Often the only practical way to roll out new processes and practices is through the modernisation of information systems.

Like many other industries, the pulp and paper industry is concentrating on providing digitalised self-services as part of their business development.

Industry background

Since the consolidation and globalisation of the pulp and paper industry, there has been increasing pressure to continuously improve both its internal and external efficiency. In the large pulp and paper mills, production management systems typically consist of several different systems, which might also be from different suppliers. Systems are often isolated islands, which are successful in managing information of their own area but they lack the comprehensive information exploiting and sharing. This has resulted in a complex and inflexible architecture of legacy systems. These legacy systems are expensive to manage and difficult to develop to meet business requirements.

This pressure has led to massive IT investments and a continuous rebuild of the IT environments in order to meet efficiency challenges. Although many pulp and paper mills have invested a lot in building up their business supporting IT, especially Enterprise Resource Planning (ERP) systems, the return on investment is often difficult to measure. There is a lot of potential to improve usability of systems by harmonising business processes and integrating the systems more efficiently in order to better support actual business needs.

Most pulp and paper industry companies have thus come to a point where a more radical rebuild and renewal of the entire IT and network environment is required. Fortunately, the conditions for this have improved over the last few years, due largely to an increasing range of commercially available application platforms adopted for the pulp and paper industry, the acceptance of common industry standards, and the evolution of refined integration and migration methods.

Renewing and harmonising the company’s operations and IT systems is still, however, a demanding undertaking. Securing continuous operations, while at the same time replacing the core systems and processes, requires a high level of expertise in pulp and paper industry processes and information technology. To complement the in-house competence, the pulp and paper industry will need to establish partnerships with outside solution providers and system integrators. To minimise risks and keep control of business-critical technology, new delivery models will be a necessity.

IT challenges

• Stiff competition requires a continuous reduction in cost levels and an increased service level to customers. This increases the need for flexible self-service solutions and process automation, which is a major challenge in a complex mill-system environment.
• The ability to react to the rapidly changing market is a crucial success factor today, but in many cases this ability is severely inhibited due to inflexible legacy systems.
• Business transformation, driven by industry consolidation and globalisation, is continuously setting new challenges.
• The used technologies of legacy systems are ageing and they are not compatible with other systems.
• Due to the absolute business-critical nature of the core systems, the modernisation challenge is increased.
  

As companies merge, over and over they find themselves in a situation where their businesses need to be harmonised and consolidated across regions and cultures. This is a complex multi-dimensional challenge, in which differences in processes, IT systems and architecture represent some of the major ingredients. Very often, this presents a good opportunity to begin a state-of-the-art technology renewal, which also works as a catalyst and driver for the harmonisation of processes.

An increasing share of the internal systems can be considered a commodity – they are highly critical and complex, and need to be operated with high quality at a low cost – but they do not have any considerable effect on business competitiveness. Since the legacy core systems are inevitably coming to the end of their lifecycles, the natural strategy for most pulp and paper industry companies is to replace these systems with commercial products based on standardised industry architecture. The main challenge is to replace these systems while securing continuous operations and customer service. Due to the size and complexity of these systems, a realistic process based on real experience is necessary in order to successfully manage the transition into the next generation of pulp and paper industry systems.

Modernisation dilemma

Companies starting to replace their core systems must observe and manage the modernisation dilemma of the value-creation gap. This gap refers to the transition period for the new systems when the IT productivity may be lower when compared to the old systems that are being replaced. The old, often tailor-made systems contain developments and functionality accumulated over perhaps several decades, which is often impossible to achieve immediately with the new systems. As new applications are usually based on product-based solutions, their implementation may require changing of the tailored processes and procedures to respond to the standards of the industry-specific products.
Internal end users may initially see these changes as a drop in productivity and an increase in the difficulty of service of IT. However, the renewal is needed to obtain future development opportunities.

Another modernisation dilemma is how to manage the critical resources and total system spending level during the investment period. Parallel staffing of the ongoing critical operations and timely execution of the new system puts a great deal of pressure on both funding and specialist staff availability. Healthy options are therefore needed to minimise the effects of classic up-front investment models. To a great extent, IT cost efficiencies are driven by the utilisation of standard solutions and commodity type services, thus enabling a long lifecycle of the new system architecture.

* This article was researched by a group of TietoEnator’s forest industry experts and reported by Heini Pertta, Communications Manager, TietoEnator Forest.

** TietoEnator has developed a partnership delivery model, called Core Application Modernisation Partnership (CAMP). This model is an innovative combination of the accumulated experience from partnership services and from global solutions for the pulp and paper industry.