Rapid Paper and Packaging
Hilco Performance Solutions
Illinois-based Industrial Opportunity Partners (IOP) is the current owner and operator of the 129-year-old Midwest Paper mill. In the decade leading up to IOP’s involvement, the mill experienced numerous financial struggles, resulting in its shutdown in September of 2017 and leaving most of its 600 employees at the time jobless. That same year, the mill was sold to new owners traditionally known for performing asset liquidations. Instead of liquidating the mill, however, the new owners reinvested in its operation, converting it from a white paper-only facility to include the production of recycled brown paper for end use in the corrugating packing industry. In January 2020 the mill was acquired by IOP which is aspires to run a profitable operation.
ImpactTransportation Cost Assessment
- HPS performed a rapid cost assessment of Midwest Paper’s transportation cost spend to help IOP understand where transportation rates and costs stood relative to industry standards. The mill had never previously conducted a benchmarking or assessment of this type.
- We determined that the mill’s poor financial history was hindering its ability to successfully renegotiate contracts as vendors leveraged the risk associated with having the mill as their customer to achieve price advantage. The Hilco team’s diligence also revealed that the mill utilized a small, proprietary fleet of tractors and trailers to facilitate shuttling around the mill and short haul trips within the state.
- Our paper veteran transportation experts, further determined that the mill was significantly disadvantaged from shipping by rail to the Northeast region and moderately disadvantaged shipping by rail to the Midwest. As a large percentage of Midwest Paper’s customers reside across these two regions, we recommended immediate issuance of an RFP with carriers to establish lower contracted rates for these two disadvantaged regions in order to deliver timely financial benefits.
- HPS introduced a tailored planning tool, educating the company about the profitability levels of its current customers and products. This effort drove home the critical connection between margin and decision makin.
- Our efforts enabled the company to immediately use this newfound information in the rapidly tightening paper market to execute margin improvement strategies such as price increases and volume restrictions for lower margin products.
- We also created an intuitive forward-looking demand/supply balancing tool to optimize the mill’s machines in the most profitable configuration. Scenario analysis effectively demonstrated that by removing the historical requirement to produce every possible ton, profit could be dramatically improved.
By engaging Hilco Performance Solutions (HPS) on two consecutive occasions to identify opportunities for improvement of Midwest Paper’s bottom line in the areas of Logistics and Sales & Operations Planning, Industrial Opportunity Partners dramatically enhanced its potential to achieve the goal of profitable operation for its Midwest Paper unit in the years ahead.