1

Khanna Paper Mills LimitedValue Chain Evaluation and Recommendation

Aditi Chawla, Parul Madaan and Akshee JainB.Tech in IT and Mathematical Innovations

Cluster Innovation Centre, University of Delhi

2Index1. Pulp & Paper Industry

Global Chinese Indian

2. KPM overview Value Chain

3. Procurement Study of Hubs

4. Stationery Market Research

5. Miscellaneous Modes of Payment

6. Value Addition

3Industry Overview (1/2)

Current Leader: China

Global paper and paperboard demand is 402 million tonnes per annum

Asia produces nearly 177 million tonnes (44%) while; rest of the world produces 225 million tonnes (56%)

India accounts for 1.6% of the world’s production of paper and paperboard

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China’s Model of GrowthInvestment led growth

Industry Overview (2/2)

Figure 1: Chinese production of Paper and Paperboard, 2002-2009Source: FAO and China Paper Online

Focused Government policies Government Subsidies and Loans Massive Capacity Expansion Export-led development(Refer Appendix A for SWOT Analysis)

India’s Model of GrowthConsumption led Growth

Meagre Government Policies Scattered and small size

manufacturing units Out-dated infrastructure Low availability of good quality raw

material(Refer Appendix B for SWOT Analysis)

Total number of Pulp and Paper Mills >800

Wood Based Around 30Agro Based Around 150

Recycled Fiber Based Mills Around 600

 Capacity 13.5 Million metric

Tons   

Consumption Per Capita (in Kg) 10 Kg per capita

   Turnover Rs. 35000 Crores

Figure 2: Indian Paper Industry at a GlanceSource: Central Pulp & Paper Research Institute (CPPRI)

5KPM Overview

Manufacturer of High Quality writing and printing Board and Paper

Based on 100% deinked wood-free recovered paper

Annual Production: 3,30,000 MT

Annual Turnover: Rs. 1500 Crores

Market Share (in India): 4%

(refer to Appendix C for SWOT Analysis)

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Procuring recovered paper from vendors

and stockist

Transported to Procurement Hubs

Quality Check

Inventory Management

Scheduling and Production Plan

made

Transportation of raw material to mill

Paper Production on scheduled machine Packaging

LoadingDelivery to

customer (printers and converters)

After Sales Service

KPML Supply Chain

KPML wants to expand by diving into vertical integration:

Backward Integration: Direct Procurement from households Forward Integration: Step into stationery market

Figure 3: KPML current Supply Chain

7Backward IntegrationProcurement Hub

Domestic - 13 Procurement Hubs• Enough space to maintain inventory • Adequate space for parking of truck• Connectivity to highway• Proximity and reach to suppliers• Grades of paper: ONPE, ONPV, SHB, Duplex, Record

International - New Jersey, USA • To procure good quality recovered paper• To establish close relationships with suppliers, mills and build a

collaborative network of trading partners around the world

8Recommendations

• Create awareness amongst citizens about segregation and recycling of paper by:Hold campaigns and activities in coloniesMeet the Resident Welfare Associations (RWAs)

• Collaborate with NGOs, corporate offices, government institutes to collect their waste paper

9Forward IntegrationStationery Primary Study (via interviews)

Secondary Study (via internet)

Stationery Business

Organised

Unorganised

Competitor Study

ITC

BILT Parameters:Product RangePriceQualityTarget segment

Methodology

10Secondary Survey(1/2)• Product line includes notebooks, pens, diaries, envelopes etc.• Global market for Stationery Products is projected to reach US$169.2 billion by

2020• US market is moving off-shore to capitalize on lower operating costs and cheap

labour.

Market

• Rise in literacy leval has resulted in rise in demand of stationery• Shift from cost focused market to preference for quality products• Rise in presence of organised sector

Trends

• Industry is highly fragmented with few large and medium players garnering major share in different niche segments

• 85% of the market is still unorganised• ITC, Bilt and Navneet are the three major players in the stationery

segment

Competition

• Rise in price of raw materials and the inability to pass on that price to the consumers

• Lack of modern production facilities, unorganised nature of functioning, marginal demands, government policies and international competition lead to slow growth

• With the market dominated by unorganised sector, big players find it difficult to penetrate the market

Challenges

11Secondary Survey(2/2)Characteristic ITC BILT

Target Segment • Professional• Student

• Professional• Student

Product Range • PaperKraft• Classmate• Sathi

• Copier: White & Colour• Notebooks:

Premium Series Natural Series Rainforest Series Youth Series

Promotion • Product Catalogue on website

• TV & Youtube advertisements

• Attractive Tag Line

• Product Catalogue on website

• TV & Youtube advertisements

12Primary Survey (1/2)

Objectives:

To understand buying behavior of the customers To understand how retailers procure notebooks from the organized

and unorganized sectors. To gather information about price range, product range and aesthetic

value offered by the competitors How retailers play a role in influencing the customer demand

13Primary Survey (2/2)

14Recommendations (1/5)

Target Segment

Among the end consumers, KPM should focus on fulfilling the demand of School and College students as they are the most frequent buyers of notebook.

School Students

College Students

0%10%20%30%40%50%60%70%80%90%

Buying pattern for notebook

Within Three Months

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Recommendations (2/5)

Distribution Channel

Approach small retailers with the mind set of giving margins keeping the quality and environment friendly concept as a secondary thing.

Big and medium size retailers are driven by quality, utilize the concept of ‘Go Green’ here

Since most of the retailers prefer to buy through company dealers, KPM should focus on employing dealers who are educated about KPM’s products and exclusively work for the company.

Margin Availability Customer preference Quality

79

10 1016

71

0

29

100

Purchasing Preference

Local Mid-size + Big

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Product Range

Preferred Characteristics:

Include informative sessions at the end pages of the notebook as it is highly preferred by the students. KPM should educate students about recycling and its advantages through these sessions.

KPM need not divide its product on the basis of the end consumer into school and college range.

To reach the school students, KPM should focus on building contracts with Schools by marketing through their ‘Go Green’ concept.

Recommendations (3/5)

Availa

bility

at S

tore

Quality

Cover

Des

ign

Social

Con

tributi

onPric

e0%

10%20%30%40%50%60%70%80% 70% 65%

59%46%

35%

Characteristics of the Product

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Preferred additional (innovative) features:

Page holder at the end page of the notebook Bookmark for division of notebooks Pocket for holding pen A small remark section (blank space) at the bottom of each page Page numbers already printed on each page

Recommendations (4/5)

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Price Range

A lower price as compared to established brands but higher than that of local brands can prove to be a good strategy.

This may give an edge to KPM to enter the market as the consumer will get good quality at a lower rate keeping the brand image intact.

Recommendations (5/5)

74%

61%

44% 44%

24%

Characteristics of the Product

19Miscellaneous Work (1/2)

Mode of Payment

Pros Cons

Advance Payment

• Fast & Reliable: Seller can ask for payment before starting the production process

• Eliminates risk of non-payment• No collateral/credit history needed

• May lose customers to competitors over pricelist pay terms

Letter of credit • Guaranteed payment, lesser risk of non- payment

• Discrepancies in the documents presented by the seller may also cause the issuing bank to void the letter of credit

• Attempts to modify the terms of a letter of credit (in cases of impossible delivery schedules) may cause disruptions in the transaction

Credit (5-60 days)

• Offering credit provides a competitive edge over businesses that don't offer credit

• Increased number of customers for the company due to the flexibility in price list pay terms

• Increased sales or revenues as customers tend to buy more when they don't have to pay on the spot

• Helps in building up the trust relationship with the buyer (helpful in the long run)

• Level of risk involved is higher • Payment cannot be guaranteed• Too much credit to too many customers to get

them to buy, one could experience cash-flow problems (shortage of working capital)

• Extra effort is required for keeping a track of the customer payments and due dates

Modes of Payment

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Product Type Modes of Payment

  Advance Letter of Credit Credit

Paper 11% 6%

67%  

0-10 days: 48%15-21days: 17%

30 days: 2% 

Board 5% 12%

83% 

0-10: 8%15-21days: 27%30-45 days: 48%

  

Newsprint 40% 0.027%

59% 

0-15 days: 36%21-60 days: 23%

 

Miscellaneous Work (2/2)Modes of Payment - KPML

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Value Addition

SWOT Analysis

Stationery Market Insights and Recommendations

Collaboration with Times Group, WWF, Excelsior INDIA

Marketing and Communication Tool Kit Stationery (School Students) Stationery (Corporate) Company Profile

Sales increased by ~25% in two months!

SWOT Analysis - China

Appendix A

SWOT Analysis - India

Appendix B

24Appendix CSWOT Analysis - KPML

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Thank You!