Paper mill's distribution efficiency to emerging East European markets

Abstract

Purpose – European paper industry has been struggling with margins and profitability for more than decade time period. At typical in markets of west, paper product demand is at long-term decline, mostly driven by continuously increasing internet use. However, in emerging markets demand still exists, and in Europe numerous small markets in east have even some growth available. The paper aims to discuss these issues. Design/methodology/approach – The authors analyse in this research work with longitudinal data (period of 2002-2009) from one large Finnish paper mill and data envelopment analysis (DEA) approach, how distribution efficiency to selected eight East European markets has evolved. Findings – In general distribution efficiency has improved, but this has taken place in step-wise manner rather than being linear year-to-year development (year 2006 found to be the threshold). Reason is mostly in better management of transportation costs, and in particular lower monthly deviation of these costs. It is surprising that case paper mill has been able to manage transportation costs in rapidly increasing energy cost environment so efficiently. Maybe European Union enlargement of 2004 and 2007 has had its effects on distribution efficiency. Research limitations/implications – The research is limited to the deliveries of one paper mill located in Finland. Also East European markets in the early periods of this study were emerging papers markets, and distribution practices were clearly evolving. Practical implications – Based on the study East European paper market distribution should give more attention on transportation cost control, and trying to find solutions to minimize it with low monthly fluctuation. Originality/value – Very few studies exist from East European distribution issues, and particularly that of paper industry. Also used quantitative method of DEA is relatively new in this context and gives valuable insights for the distribution efficiency development.