1. Khanna Paper Mills Limited
Value Chain Evaluation and Recommendation
Aditi Chawla, Parul Madaan and Akshee Jain
B.Tech in IT and Mathematical Innovations
Cluster Innovation Centre, University of Delhi
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2. Index
1. 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
2
3. Industry 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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4. China’s Model of Growth
Investment led growth
Industry Overview (2/2)
Figure 1: Chinese production of Paper and Paperboard, 2002-2009
Source: FAO and China Paper Online
Focused Government policies
Government Subsidies and Loans
Massive Capacity Expansion
Export-led development
(Refer Appendix A for SWOT Analysis)
4
India’s Model of Growth
Consumption 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 30
Agro 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 Glance
Source: Central Pulp & Paper Research Institute (CPPRI)
5. KPM 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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6. 6
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
Loading
Delivery 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
7. 7
Backward Integration
Procurement 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
8. Recommendations
• Create awareness amongst citizens about segregation and recycling of
paper by:
Hold campaigns and activities in colonies
Meet the Resident Welfare Associations (RWAs)
• Collaborate with NGOs, corporate offices, government institutes to collect
their waste paper
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9. Forward Integration
Stationery
Primary Study
(via interviews)
Secondary Study
(via internet)
Stationery
Business
Organised
Unorganised
Competitor
Study
ITC
BILT
Parameters:
Product Range
Price
Quality
Target segment
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Methodology
10. Secondary 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
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11. Secondary 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
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12. Primary 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
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14. Recommendations (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.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
School
Students
College
Students
Buying pattern for notebook
Within Three
Months
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15. 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.
79
10 10
16
71
0
29
100
Margin Availability Customer
preference
Quality
Purchasing Preference
Local Mid-size + Big
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16. 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)
70%
65%
59%
46%
35%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Availability at
Store
Quality Cover
Design
Social
Contribution
Price
Characteristics of the Product
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17. 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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18. 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%
Quality Price Cover
Design
Availability
at Store
Social
Contribution
Characteristics of the Product
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19. Miscellaneous 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
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Modes of Payment
20. 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%
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Miscellaneous Work (2/2)
Modes of Payment - KPML
21. 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
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Sales increased by ~25% in two months!