Paper360 - May/June 2013 - (Page 16)
SPECIAL FEATURE: ASSET MANAGEMENT
Successful Asset Management
in the Paper Industry from an
OEM Point of View
Second to the owner, the OEM has the strongest interest in
maintaining and improving the profitability of existing assets.
MICHAEL VON GRUMBKOW
he quality of a company’s asset management is the
primary driver of good, long-term equipment performance. All related practices within a mill directly impact
machinery uptime, mill operating costs, and economic
profitability. Second to the owner, the OEM has the
strongest interest in maintaining and improving the
profitability of existing assets.
This article explores the different time horizons of effective asset
management in the pulp and paper industry: sustaining operation,
optimizing operation and investment activities (repositioning or
Sustaining and optimizing operation involves maintenance, repair
and operating (MRO) materials and related services. Repositioning of
existing assets has become more and more common in our industry
Figure 1. Mill operating costs (North American average).
SOURCE: FISHERSOLVE TM © 2006-2013 FISHER INTERNATIONAL, INC.
Figure 2. Investment to depreciation ratio comparison to other industries.
Capital investment to D&A Ratio (3-year average) by industry.
SOURCE: FISHERSOLVE TM © 2006-2013 FISHER INTERNATIONAL, INC., COST DATASET Q4 2012 AND
VARIOUS PUBLIC COMPANY ANNUAL REPORTS AND SEC FILINGS (2012, 2011, 2010).
and requires a different focus in the cooperation between owners
Average operating cost for paper mills in North America are
shown in Figure 1. MRO costs make up less than 9 percent of an
average mill’s overall production cost. Figure 1 breaks out these MRO
material costs by type.
North American paper mills still account for approximately
23 percent of global paper production, while utilizing the oldest
asset base; the average technical age of operating paper machines in
North America, as calculated by Fisher Database, is 31 years. China’s
mills, by way of comparison, operate paper machines with an average technical age of 12 years. The challenge for the North American
papermaker is to sustain production at a high efficiency level through
strategic investment in the proper care and upkeep of their relatively
old existing equipment.
The efficient application of MRO materials will not only keep producers’ papermaking assets in good working condition, but can result
in significant savings in almost all other production cost categories.
To get an idea of where the North American paper industry stands
in its efforts to improve its aging asset base, we examined the ratio
of capital investment to depreciation and the technical age of assets
in the paper industry compared to another industry with significant
challenges in asset management—the airline industry. The technical
age of paper industry assets are much higher than assets of the airline
industry. Furthermore, the airline industry invests significantly more
to improve and maintain the quality of its asset base than does the
paper industry—a three-year average of 125 percent compared to
83 percent respectively.
Figure 2 illustrates this comparison and further elaborates by
adding the oil and gas industry, automotive industry, paper producers based in Europe and Africa, and OEMs to the pulp and paper
industry. In recent years, the North American paper industry has had
the lowest investment to depreciation ratio than any other compared
industry. However, in the last two years the investment level has
picked up significantly within the North American paper industry.
The respective three-year industry average increased by 26 percent
just from 2011 to 2012, and now outperforms the corresponding
number for paper producers based in Europe and Africa.
Figure 3 plots operating income as a percentage of net sales (before
depreciation and amortization) of North American companies in
the airline industry and the paper industry against the technical
Table of Contents for the Digital Edition of Paper360 - May/June 2013
Over the Wire . . . News Summary
The 2013 TAPPI Award Winners
Successful Asset Management in the Paper Industry from an OEM Point of View
TAPPI Journal Summaries
Managing the Risk of Fire and Explosion in the Pulp and Paper Industry
Broadening the Availability of Carbon Fibers with Lignin
TAPPISAFE Through the Eyes of a Labor Attorney
Bleached Softwood Kraft Pulp
What’s New on Paper360.org
Paper360 - May/June 2013