Evaluating Regional Converting Services to Complete Mill Finishing.

Evaluating Regional Converting Services to Complement Mill Finishing and Logistical Strategies.

David P. Van Hoof and Mark L. Reinhardt

Using regional distribution centers and outside converting arrangements are approaches that have helped mills meet the challenges of shorter press lead times, increasing demand for make orders, and reduced inventories.

Traditional mill-based finishing and logistical operations have been under tremendous pressure to respond to the increased service levels customers have come to expect. An alternate to significant capital investment in new equipment and regional facilities has been the use of outside converting arrangements.

Consider first the objective. Will the outside converting only meet surge capacity needs or will it become a component of a continuing strategy? In the later case, the converter will become an extension of the mill operations. Although the considerations are similar for both outlooks, the integration of the "converting supplier" will vary if the need is merely short term. This paper will explore potential benefits of outside converting and outline the challenges and considerations in establishing a converting supplier.

Potential Benefits

The fist impact of using an outside converter is the increased capacity to support the long or short-term converting needs of the mill. Qualifying an outside converter to assist with surge capacity needs can alleviate backlogs that potentially jeopardize customer service levels. Another variation on this uses outside converting as a "bridge" while awaiting purchase, delivery, and installation of additional equipment. Longer term converting strategies will benefit from the synergies of integrating the converter into the scheduling and logistical operations of the mill.

Mill equipment favors long runs, large volume, and standard stock sizes to drive the inventory pipeline. If the mill can shift some mix of jobs that would otherwise compromise its finishing schedule - rush jobs, small and medium runs, special sizes, cartoning, etc. - then outside converting can support efforts to restore efficient production scheduling. The logistics model in Fig. 1 diagrams various scenarios for serving customers using a regional converter. The advantages noted numerically in the figure can include the following:

Custom and standard sizes can drop ship directly to the customer.
"Quick ship" inventory of finished products from the converter's warehouse can include a mixture of standard and special sizes. This inventory provides the same or next day shipment to the customer.
The converter can supplement replenishment of stock inventory locations - a public warehouse, a merchant warehouse, a printer, etc.
Complete, current, and accurate reports are available from the converter to mill personnel for recapping inventory consumed, shipping details, trim loss, freight, and shipping and delivery dates.

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Having a satellite roll bank to serve certain customers or markets carries inherent flexibility for just-in-time converting for customer demand. The ability to offer special sized and make-order programs with shorter delivery times enhances this flexibility. Extending the mill's reach with timely service to key print markets may be the cornerstone to supporting marketing programs designed to serve customers better. The inventory commitment to a continuing converting strategy will help drive careful site selection and limit the number of converting suppliers to achieve the desired results.

Evaluating Regional Converting Suppliers

Outside converters have traditionally come from second's brokers. Out of necessity to convert their material, these brokers purchased and reworked retired mill equipment. Converters who buy and sell paper and board products limit their service to fill available machine time. While this may suit the mill's surge capacity needs, it can affect continuity and the ability to commit to significant tonnage for the long term. The mill must assess where it fits concerning the suppliers' core business.

Establishing the criteria to evaluate potential suppliers is essential to guide the qualification process. The more strategic the outside converting program, the more integrated the procedures will need to be in the daily administration of business - systems, inventory consumption reports, spoilage and trim loss reports, and roll tracking throughout the converting process.

Before outlining the "qualification criteria", one must define specifically what market segments the program will serve. This will identify the product lines, grades, roll widths, sizes, etc. The analysis will help to quantify the inventory commitment the mill is making to this program.

Is the program designed to serve current business, to launch a new marketing program, or to increase market share? Answers to these questions should add clarity and provide a vision of the program's future. The answers will also help define specific expectations of the outside converter. If it is a long-term strategy, how will one address tonnage and machine time commitments to ensure the necessary confidence for all involved?

In establishing a qualification check list, an ideal approach would be to evaluate key performance areas. The following are important considerations.

Equipment

Can the equipment hold mill tolerances - + 0.79 mm cut off, + .40 mm width and square, etc. - and delivering desired cut quality - tape pulls or microfiche analysis? Can the converter's equipment accommodate the mill roll specifications - four tier skids, roll wrapping and header press, skid press, or carton sealer?

Experience

Does the converter have experience with the mill's grades - C1S, C2S, matte finishes, board, etc.? Do they convert job lot and industrial grades on the same equipment? Do they buy and sell paper? Do they compete with the customer? Do they have experience with ISO-9000 requirements?

Quality

Are ongoing procedures in place to ensure consistency of quality standards - routine width and square tolerance checks using Quick Skan and tape pull tests to evaluate slit cleanliness, microfiche edge evaluation of cut quality, relative humidity testing, light booth for advanced analysis and roll tracking throughout the converting process? Can the converter readily adopt and implement the mill's quality procedures?

Administration

Do timely reports include inventory consumption, roll tracking documentation, spoilage and trim loss reports, invoicing detail, and complete job summary reports within hours of all completed jobs? Is billing based on net or gross weight? Is the inventory computerized? Is the supplier flexible in customizing reports or procedures to meet the mill's unique needs?

Packaging

Will packaging requirements be met - skid specifications to include press ready, mini, and 4-tier skid configurations; skid turner; adequate moisture barriers; label printing capabilities; and bar coding capabilities? Can they meet the mill's desired packaging specification? Will the packaging by the converting supplier be transparent to the mill's customers?

Warehousing

Can the converter appropriately inventory a significant roll bank such as 500 - 2000 tons? What are the costs of warehousing and handling? Do they have multiple locations? Do they have appropriate material handling equipment? If warehousing is not available, what is the additional cost associated with warehousing, transportation, and handling by a third party? Is there adequate insurance coverage? Does a sprinkler system and adequate fire protection exist?

Claims

What will the procedure be to handle converting related claims? Will the converter cover the paper cost or only the converting charges? What about slitter dust, tolerance variations, excessive spoilage, corrective action procedures, and press time?

Background

Are the principles well versed in paper, printing, and the converting business? Can they interact effectively with the mill's technical team, customer service, and customers, if necessary? Have they successfully serviced similar programs?

Summary and Recommendations

Alternative converting and distribution strategies continue to evolve in response to market demands for reduced inventories, just-in-time service, and special size requirements. Geographic proximity to the customers being served has become a key consideration.

Outside regional converting and distribution programs are successfully implemented alternatives to expedite and extend the mill's "reach" in serving its targeted markets and key customers. Defined goals serve as the foundation for beginning the qualification process and realizing the possible synergies.