Margins-based planning applied to newsprint manufacturing

Abstract

The North American newsprint industry is facing a difficult financial situation due to a major market decline. The application of supply chain management concepts could greatly help this struggling industry by enhancing the cost-effectiveness of operations. In this paper, an integrated tactical planning model based on optimization was used to exploit manufacturing flexibility in order to adapt production to changing market conditions. This model was applied to a real case study of a newsprint mill with overcapacity in its thermomechanical and deinking pulping lines. Results show that by using a margins-based planning model to identify better-adapted operating policies in case of varying wood chips and recycled paper prices, earnings before interest, taxes, depreciation and amortization (EBITDA) can be increased by up to 35%. The benefits of exploiting manufacturing flexibility were found to be more important in difficult market scenarios, highlighting its pertinence for providing more-robust planning approaches. Pulp and paper companies would benefit from using a margins-based planning model to manage the complexity of their operations in the face of market volatility.