ICT and e-Business in the Pulp, Paper and Paper ... - empirica

Pulp, paper and paper products
(fourth party logistics) 120 providers in order to focus on their core business (e.g.
production, marketing). In this case, the bargaining power of logistics companies will
certainly increase, as switching costs are high. Particularly if logistics are completely
outsourced (e.g. to a 4PL), the decision is practically irreversible. This is a general risk
involved with outsourcing.
Bargaining power of customers
The bargaining power of customers can differ considerably by industry and type of
products. On the one hand, certain customer segments depend critically on supplies from
the paper industry, for example the publishing and printing industry. On the other hand,
the increasingly global dimension of competition opens up new options for buyers to
switch suppliers.
A good example to illustrate the distribution of power between P&P companies and their
customers is a visit of representatives from leading German publishing companies
(including Axel Springer, Holtzbrinck and WAZ) to Moscow to explore opportunities and
conditions for paper imports from Russia. 121 The strategic objective of this visit was that
publishers were trying to become less dependent from their current suppliers in the EU.
Paper producers had announced plans to consolidate the production capacity, 122 which
could lead to an increase in prices. Paper prices are a very important cost factor for
publishers. Russia has vast resources in forestry, but the quality of most of the paper
production does not yet comply with Western European standards.
Thus, while bargaining power of customers from the publishing industry may not be high
in the short term, due to their dependency on paper as a raw material, their position may
become stronger in the medium and long term, as the quality of paper from Russia and
Asia increases. While there is certainly a dynamic trend towards internationalisation (see
Section 2.2.3), this development is not substantially linked to ICT and e-business.
Obviously, ICT facilitate the data exchange within different branches of internationally
operating companies. In this sense, ICT is to some extent an enabler of international
trade, which then increases the bargaining power of customers; but it would be extremely
far-fetched to establish a causal relation between e-business and customer power in the
P&P industry.
For companies in the converting industries, the bargaining power of customers tends to
be much stronger. For example, a major factor determining the implementation of RFID in
the packaging industry is customer demand (see Section 4.3.3). Particularly if customers
are very large companies, for instance from retailing, the food, pharmaceutical or
cosmetics industries, they can exert considerable pressure on packaging solution
providers. The case study on VPK Packaging is a good example illustrating how new
customer requirements forced the company to rethink its business processes.
120 Unlike a 3PL, a 4PL is not asset based, but typically uses 3PLs to supply services to customers.
Thus, a 4PL can be regarded as a process integrator on behalf of its customer, while not
owning the warehouses or trucks.
121 "Verlage hoffen auf Altkanzler", in: Der Spiegel, No. 51/2005, Dec. 2005, p. 93.
122 CEPI points out that a reduction in capacity was not foreseen, but rather a consolidation in the
development of new capacities, i.e. a slow-down in the capacity progress (comment received
from Mr Bernard Lombard, 5 October 2006).
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