Paving the way forward in the wood-based panels industry with Operational Excellence
Challenging times will continue for the wood-based panels industry in Europe and North America
Despite the turmoil and constant disruption that the world and the manufacturing industry have faced over the past few years, the wood-based panel and surfacing materials industry has seen a record demand in the past three years, thus achieving a healthy financial performance.
Nonetheless, the world continues to change, and unsettling events have simultaneously created different challenges to the wood panels industry in different global regions, such as high energy costs, economic consequences driven by the climate crisis and high inflation in Europe. This has increased the complexity of global supply chain operations and the flexibility needed to keep up with rapidly changing markets and customer demands.
While economies in the Global South are coming back stronger than before, more mature economies in Europe and North America continue struggling to return to a solid growth path, with low GDPs and increasing housing and production costs.
Despite improvement after the peak in 2022, ex-mill costs for particleboard still prevail at higher levels than in pre-pandemic years, with the expectation to remain at the same levels over the next years. In terms of market structure, while industry consolidation carries on in Europe and the Americas, most investments are more likely to be focused on the Asian markets and fewer investments being made in Europe and the Americas.
MDF production in Western Europe has been losing its cost competitiveness, and industry consolidation is expected to continue globally, driven by capacity shutdowns. In stressed and mature markets where cost competitiveness matters the most, weak capacity utilisation and an anticipated low price level are likely to drive high-cost producers out of the market unless rapid and highly targeted actions are taken.
AFRY’s operations team has been supporting clients in increasing their efficiency and cost savings through the identification, redesign and implementation of process governance and excellence focusing on different levels:
Asset Management
New capacity and modernisation investments will lead to the shutdown of less efficient particleboard assets in North America over the next years. AFRY’s asset management approach has been key for our clients in identifying and planning CAPEX needs for the next 15 years to maintain a stable production rate, reduce OPEX costs, and increase cost competitiveness.
Supply Chain
Mega- and highly integrated sites, an increased share of value-added products, an increased number of references, and more demanding customers have increased the pressure and complexity of supply chains. AFRY’s supply chain approach supports our clients in identifying the optimal (efficient level) complexity of their value proposition and redesigning their supply chains to be more agile and resilient, enabling them to effectively manage complex and demanding value propositions.
Digitalisation
Leveraging its extensive expertise in the wood panels industry and core technological capabilities, AFRY has developed a set of offerings that enable scalable digitalisation of operations. This includes developing a smart digital strategy that supports mills in digitalising according to their performance improvement opportunities and a smart platform that empowers panel producers to make data-driven, timely decisions. AFRY has established itself as a trusted partner, ensuring that digitalisation efforts are focused on areas that deliver real impact to the organisation.
Sustainability
With increased pressures on sustainability, traceability and transparency in organisations, coupled with new mandatory sustainability reporting on the horizon. AFRY has been collaborating with producers to develop the roadmap to net-zero carbon. This involves the efficient use of energy, raw materials and assets while also supporting the necessary changes to track and achieve the performance levels required for current and future sustainability reporting.
Optimisation of costs to maintain or increase cost competitiveness is now a requirement for survival. AFRY’s Operational Excellence projects have been enabling relevant cost reduction in production, maintenance, energy and supply chain through:
- Quick turnaround projects that identify and develop quick solutions for profit leakage
- Operational Excellence production and maintenance diagnostics and implementation to optimise costs and performance with low CAPEX
- Optimisation of supply chain processes and procurement from raw material to transportation as a key initiative to offset the impact of new sustainability guidelines with direct impact on costs (e.g., truck tolls for less eco-friendly vehicles)
- Organisational optimisation to bring the organisation set up to best-in-class levels in terms of structure and fixed costs as well as skills and competencies
Serving a complex raw and surfaced boards value proposing often leads to inefficiencies in the supply chain, either lowering service levels below industry standards or raising cost-to-serve as companies strive to meet promised delivery times. At AFRY, we collaborate with our clients to identify and remove bottlenecks in sales and order-to-cash processes. This ensures optimal internal and external customer service while minimising cost-to-serve impact.
With mature markets and players offering many references and customisation possibilities, sales growth and initiatives can come at a cost to the organisation. AFRY’s commercial excellence approach guides clients through the entire sales journey, from developing a robust sales strategy to managing customer relationships and executing sales. This ensures deals are closed effectively while balancing the best interests of both the client and the internal organisation.
Written by Susana da Costa
