Supply chain management in Forest products industry-case study for Södra Cell Company

YAO PAN

UNIVERSITY OF ABERDEEN，UNITED KINGDOM



Supply chain management in Forest products industry-case study for Södra Cell Company

YAO PAN*

UNIVERSITY OF ABERDEEN，UNITED KINGDOM

【Abstract】 The supply chain plays an increasing significant role in current global business operation process.It is not just considered as a crucial factor for leading the company to achieve their strategic goals，but also assisting firm’s to enhance the competitiveness in its own industry.This report choses the Swedish forest company-Södra Cell as a case company to analysis its supply chain management advantages and disadvantages.It also states the role of supply chain management theory in assisting organization to achieve its strategic goal and marketing strategies.

【Key words】 Supply chain management；Södra Cell；Forest industry

一、Introduction

As Church，Murray and Weintraub(1998)stated that supply chain is a cost center，which offers services for diverse functions in the company，for instance the manufacturing and sales department(D'Amours，Rönnqvist & Weintraub 2008).Therefore，effectively evaluating，controlling and managing the company’s supply chain becomes fundamental and essential steps for the company to get survive and sustainable expansion in current competitive international business environment(Bredström et al.2004).In this report，the Forest products industry was chosen as a target industry for doing the research and analysis.First section includes an industry introduction and market overview.Second part is about supply chain operation process and main characteristics in this particular industry.Afterwards，details of supply chain management illustration and estimation on a case company-Södra Cell，the largest Swedish and world’s leading pulp manufacturer will be discussed.Overall，the report aims to clarify and present main supply chain challenges in the Forest Company and issues that need to be improved and optimized in its future business operations.

Forest products industry overview and its supply chain characteristics

Forest industry can be described as a large network of producing goods that starting from forest wood and ending with diverse consumption products used in people’s daily life.It primarily consists of two business segments：wood products，pulp and paper products(Carlsson et al.2009).According to Hameri and Lehtonen(2001)，the Forest industry is an economically national and regional importance for the Scandinavia countries like Sweden and Finland.During the last decade，owing to the increasing demand in Asia and Eastern Europe，the overall market grown quickly.Many companies in this industry have expanded and operated their business internationally，for instance increasing intense merger or joint venture activity in Asia and the Middle East(D'Amours，Rönnqvist & Weintraub 2008).

However，in recent years，the key-leading players in the industry undertook a serious decline in their profits and faced huge pressure to operate effectively and have competitive breakthroughs. This situation is a result of three main factors：the primary reason is the subsequent drop in demand for wooden goods due to the global recessions，declining readership and advertising shifts to the internet.In other words，the forest producers are not only competing with each other，but also with electronic media companies(e-books，e-invoicing，etc.).Secondly，Asian paper producers have developed to become strong competitors in the European market of wood products.Lastly，the pulp and paper manufacturers are facing intense escalating cost pressure when the production procedures were changing rapidly and supply chain became more complex and product-oriented in the global business market(Bredström et al.2004).

Generally speaking，increasing efficient operation and improving process alignment become important and imperative.One typical option in this industry is to develop better integration and effective control in the supply chain management.(Carlsson et al.2009)The Forest product industry based on a long and integrated supply chain，which normally consist of various interconnected business units according to divergent processes.Different with other industry，the supply chain of forest products is characterized by disassembly of the raw materials rather than having a convergent product(D'Amours，Rönnqvist & Weintraub 2008).In detail，the supply chain network starts from forest -based material flows to primary facilities and secondary facilities，finally distributing to individual customers(supply network).

Södra Cell Company in brief and its supply chain management system

Södra Cell is a subsidiary of the Södra Group，which is an economic association operating forest activity and owned by more than 50，000 forest owners in the southern Sweden.The Södra Cell is one of the world’s leading pulp and paper manufacturers，with a total annual production of 1.6 million tones in the year 2014.The company’s main business is producing pulp of different grades(both softwood pulp and hardwood pulp).The production is carried by five mills，which locate in southern part of Sweden and Norway.The most crucial market of the company is Europe.In recent years there are more related sales to the Asian market.Södra Cell works actively in research and development in order to create and offer best possible values products and services to its customers(Södra Cell annual sustainability report，2014).

Producing pulp and paper is a particularly cyclical sector and complex process that needs a large variation and integration of different sources and organizations.The Södra Cell’s complete supply chain starts from the supply sources(harvesting，logs transportation)and then passes to production at mills，storage at harbors，distribute to the terminals by ship and ends at distribution to the customers with lorry and train.(Carlsson，Rönnqvist 2005)

In general，owing to the complex process of the supply chain in the Forest products industry，problems in this area cover diverse aspects and caused by various elements.An import factor that will influence the company’s supply chain management is the product range(Carlsson et al.2009).For instance，the components of the Sodra cell supply chain will continually change owing to unexpected orders or specific new product demand.Accordingly，having large inventories become necessary to meet the changeovers in production requirements.However，lack of visible demand or accurate supply forecasting will increase operation costs and caused difficulties in the whole supply chain operation(Bredström et al.2004). Another significant factor affects the company’s supply chain is the escalating cost pressure，owing to the high intense competition，the production of pulp not just need to be high quality but also cost effective.The Sodra cell aims to set out a functional support system to counter the widespread effects of the industry constrains，to improve their decisions on making quality in terms of the production scheduling planning and cost reduction controlling(Carlsson，Rönnqvist 2005).

Supply chain management challenges and issues in Sodra cell

Based on above analysis，it can be seen that there exist several issues in Sodra cell’s supply chain management.In the forest industry，supply chain planning and optimization always considered as the key competitive differentiator.In order to achieve sustain，develop and maintain this competitive advantage，it is necessary for the company to identify its major supply chain challenges and transform them into opportunities through implementing appropriate and efficient supply chain management model(Church，Murray & Weintraub 1998).Consequently，clarifying the supply chain improvement direction，applying functional management steps and aligning supply chain issues into company’s business decision making becomes crucial phases of the Sodra Cell’ strategic business operation.

One of the main challenges of the Södra Cell’s supply chain management is “How to effectively monitor and optimize the production and distribution plan portfolio at Södra Cell?” The issue covers areas from industry supply chain matrix analysis，the company’s supply chain characters evaluation to specific optimized supply chain planning model identification and practical operation process setting.Exploring and solving the issue will assist the company to accelerate cost reduction，achieve the highest product quality while embraces efficient，collaborative supply chain management to maintaining and increasing its customer satisfaction(Gunnarsson，Rönnqvist & Carlsson 2007).Another important challenge the Sodra cell facing in current business operation is the customer-oriented production trend.The particular issues refer to：how can Sodra Cell develop the extended customer relationship through personalization and added value services? The consolidation trend results in larger but fewer customers in the forest products industry.Accordingly，each single customer is crucial.And having on-going development of strategic customer relationship play a key role in strengthening the company’s competitive edge in this industry(Carlsson，Rönnqvist 2005).In Sodra cell，the operational objectives focus on four main aspects：first one is to get continual sales growth based on developing and designing specific products to meet the customer-oriented trend.Secondly，developing the productivity that relevant to the supply chain from a customer perspective.(Sodra Cell Annual sustainability report 2014).Nevertheless，there exist certain difficulties that need the company to overcome in order to achieve these objectives.For instance，under the customer -oriented trend，the company might face to produce limited volume products or very specific wood products to meet the customers’ particular needs in certain periods.This will become difficult owing to the seasonal variation.(Carlsson，Rönnqvist 2005).Overall，these potential issues will require the company to have a more flexible and efficient supply chain system.Therefore，the company needs support from professional consultants who have abundant SC knowledge and possible to provide methods and tools for better controlling and planning its supply chain management issues.

二、Conclusions

Based on above clarifications，it is noticeable that the supply chain management in the Forest industry is a complex process，which involves many operations and needs different business units’ integrations.Moreover，the current highly competitive market environment drives the pulp manufactures to face intense pressure on escalating cost pressure and effective for productivity(Martell，Gunn & Weintraub 1998).Accordingly，successfully managing and controlling the supply chain is not an easy thing，there exist certain challenges and issues in this world’s leading pulp supplier -Sodra Cell.In order to get continue positive expansion and maintain a competitive position，it is therefore significant for the company to have a powerful and an optimization supply chain system to efficiently manage and plan supply chain process.As Hameri and Lehtonen(2001)stated that great supply chain and effective production system will not just lead the company to increase its operational flexibility，but also enhance the transparency of real time decisions that making under a dynamic environment.Generally speaking，a functional and optimized supply chain system can be considered as a key competitive differentiator to support company transform challenges and constraints into opportunities and get further positive developments in the future.The Sodra Cell hopes to get valuable and effective solutions for managing these challenges and believed that a flexible，cost-effective and powerful supply chain system is a fundament for the company to achieve positive business operation outcomes and sustain development in the future(Sodra Cell Annual Sustainability Report 2014).

References：

[1]Bredström，D.，Lundgren，J.T.，Rönnqvist，M.，Carlsson，D.& Mason，A.2004，"Supply chain optimization in the pulp mill industry--IP models，column generation and novel constraint branches"，European Journal of Operational Research，vol.156，no.1，pp.2-22.

[2]Carlsson，D.，D'Amours，S.，Martel，A.& Rönnqvist，M.2009，"Supply Chain Planning Models in the Pulp and Paper Industry"，INFOR，vol.47，no.3，pp.167-183.

[3]Carlsson，D.& Rönnqvist，M.2005，"Supply chain management in forestry--case studies at Södra Cell AB"，European Journal of Operational Research，vol.163，no.3，pp.589-616.

[4]Church，R.L.，Murray，A.T.& Weintraub，A.1998，"Locational issues in forest management"，Location Science，vol.6，no.1-4，pp.137-153.

[5]D'Amours，S.，Rönnqvist，M.& Weintraub，A.2008，"Using Operational Research for Supply Chain Planning in the Forest Products Industry"，INFOR，vol.46，no.4，pp.265-281.

[6]Gunnarsson，H.，Rönnqvist，M.& Carlsson，D.2007，"Integrated Production and Distribution Planning for Södra Cell AB"，Journal of Mathematical Modelling and Algorithms，vol.6，no.1，pp.25-45.

[7]Hameri，A.& Lehtonen，J.2001，"Production and supply management strategies in Nordic paper mills"，Scandinavian Journal of Management，vol.17，no.3，pp.379-396.

[8]Hameri，A.-P.，& HolmstroK m，J.(1997).Operational speed the opportunity for "nnish paper industry.Paper and Timber，79(4)：244，248.

[9]Martell，D.L.，Gunn，E.A.& Weintraub，A.1998，"Forest management challenges for operational researchers"，European Journal of Operational Research，vol.104，no.1，pp.1-17.

[10]SODRA GROUP.2014，SODRA ANNUAL REPORT WITH SUSTAINABILITY REPORT.[Online]Available：http：//www.sodra.com/Documents/PDF/Finansiellt/eng/Sodra_Annual_Report_2013.pdf [07 June 2015].

[11]SODRA GROUP.2015，[Online]Available：http：//www.sodra.com/en/About-Sodra/Our-business-areas/Sodra-Cell/ [08 June 2015].

中图分类号：F326.25文献标识码：A文章编号：1006-0049-(2016)07-0047-03

Author introduction： YAO PAN(1988.06-)female， Dong minority，Guiyang city of Guizhou province，Master degree，professional direction： MBA(master of business administration management)