Forest_Hill_Co_Case_Study_06.09 - ISSN 1940-204X Forest...

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Forest Hill Paper Company (FHPC) is a small, closely-held paperboard manufacturer that produces a broad line of paperboard in large reels, termed parent rolls . These parent rolls are sold to converters who further process them into containers used for a diverse line of consumer products, such as packaging for microwavable meals. The owners of FHPC have long pursued the strategy of producing a full range of products. As a small company competing against large companies in a commodity market, management believes Forest Hill must offer a full range of both products and services. Thus, Forest Hill’s strategy is to create a niche based on service and rapid response to customer needs. While product diversity within a paperboard plant would not be apparent to a casual observer, subtle differences exist. For example, paperboard differs by basis weight (thickness determined by caliper measurements) for a specified length of product. Additionally, paperboard may be uncoated or coated with an opaque, white clay-based material that masks cosmetic flaws and smooths surface variability. Customers are increasingly concerned with surface variability because an extremely smooth finish is required to accommodate complex printed designs on the completed paperboard container or carton. FHPC produces 20 different grades of paperboard. Some grades are produced in large quantities requiring production runs of several days, while others are produced in smaller quantities requiring runs of only a few hours. Consistent with lean manufacturing principles, the company maintains minimal inventories. Production schedules are driven by two factors: market demand and the theoretically optimal production schedule. The optimal production schedule is designed to reduce waste associated with grade changes by producing successive batches with minor differences in basis weight. COMPETITIVE ENVIRONMENT Paper and paperboard producers operate in a cyclical economic environment, with upswings every three to four years. In response to limited supply during an economic boom, customers often double or triple the quantities ordered. Then, they begin receiving their large orders as the economy, once again, begins to slow. As a result, many customers find their paper inventories exceed current needs and temporarily stop placing orders. To further confound the paperboard producers’ headaches, market share for domestic paperboard has been declining. The most significant contributors to the loss of market share are the trend toward plastic and to more environmentally friendly grades of recycled paperboard. Throughout the industry, companies have made very limited investments to expand capacity. When a surge in demand for paper products occurs, demand will exceed capacity. In boom times the industry experiences steep price hikes resulting in record selling prices for most grades. IMA EDUCATIONAL CASE JOURNAL
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This note was uploaded on 02/07/2011 for the course BUS 209 taught by Professor Z.gougoumanova during the Spring '11 term at American University in Bulgaria.

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Forest_Hill_Co_Case_Study_06.09 - ISSN 1940-204X Forest...

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