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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…
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  • 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 1
  • 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 3
  • 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) 5
  • 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 8
  • 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 9 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 10
  • 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 11
  • 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 12
  • 13. Primary Survey (2/2) 13
  • 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 14
  • 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 15
  • 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 16
  • 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) 17
  • 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 18
  • 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 19 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% 20 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 21 Sales increased by ~25% in two months!
  • 22. SWOT Analysis - China Appendix A
  • 23. SWOT Analysis - India Appendix B
  • 24. 24 Appendix C SWOT Analysis - KPML
  • 25. Thank You! 25
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