Stermon Mills

The reality we face today is that we are a comparatively small plant that can’t compete on costs with the bigger paper manufacturers such as International Paper and Georgia Pacific. The bigger companies, themselves, are even facing tough times as they are over supplying the market with their economies of scale and decreasing the price on standard fine paper. There is no way, with our overhead and labor costs, that we can compete with these companies on cost alone. We have to re-tool ourselves to be flexible and give customers what they want. We have old, costly machines and a mostly inflexible workforce. In order to survive, we need to change the culture around here to become more flexible, both with machines and workers.

We have had a few different options for flexibility improvement suggested by our task force. The first option would be very costly for us. It would involve spending $3.1 million to upgrade machine number 4 to be more automated and therefore able to handle a variety of different grade jobs more effectively. We would expect to see a 7% premium on these special jobs that we could produce on Machine #4 but only be able to produce these specialty jobs 30% of the time. I would say that while this sounds like a great investment, it might be wiser to concentrate more specialty jobs onto Machines 1 to 3 that are smaller and can be quickly changed with the “fire-brigades” manually.

Another costly option suggested would be a $5.05 million upgrade to Machine #4 that would improve its yield on less frequently produced grades such as 15lb to 24lb paper. I have reservations about this as well because we know that Machine #4 is set up to do 20lb Xerox paper the best. Other companies have machines that are set up specifically to do 15lb and 24lb paper best so we would have a hard time competing with their specialized machines after our costly upgrade. Instead I would argue for the “fire-brigade” strategy that workers on Machine #3 use to quickly change grades. I am sure it may take a little longer with the larger Machine #4, but probably would be more effective than the money spent on automating this process.

Another option suggested was to rely on the workforce adapting to new ways of working.