Australian Paper Manufacturers

Australian Paper Manufacturers

Introduction

Australian Paper Manufacturers (APM) and Paper Company of Australia (PCA) were subsidiaries of the major Australian Corporations during 1986. APM specialized in producing paper packaging whereas PCA produced fine paper. Production activities were performed using chemical processes. The case mainly discusses how APM and PCA faced with environmental issues concerning the spilling of toxic chemicals produced by these chemical transformation processes. Both, APM and PCA had to implement environmental procedures to prevent contamination.

Pulping Process

When the wood is cut, two types of pulping processes can be used to produce paper: mechanical or chemical. Although manufactures relied on the mechanical pulping, it was discovered that the grinding process broke cellulose into shorter fibers; therefore, creating a weaker paper that quickly turned in a different color making paper a less rigid quality product.

Chemical processes produced more resistant pulp that was used to produce fine paper and packaging. In this process, cellulose is less abused. Two chemical processes were identified. The soda process used caustic soda to add to the wood at high temperatures; and kraft process where sodium sulfate was used as the cooking chemical. The kraft process produced a stronger pulp at a faster rate.

Bleaching Process

After the pulping process, the produced pulp went through the bleaching process. During bleaching, chlorine gas and chlorine dioxin are used to produce a pure white cellulose fiber. Bleached pulp is utilized to make strong and brighter paper that did not discolor.

Problem Description – What is the Situation?

Chemical processes required large amounts of water to flush chemicals from the pulp. In order to fulfill this requirement, companies place their mills near rivers, lakes and oceans. In the Australian Paper Manufacturers case, it is described how during the bleaching process more than 1,000 toxic chlorine compounds called “organo-chlorines” are produced and approximately 10% of these toxic chlorines are discharged from the mill to the rivers, lakes and oceans. Among the most toxic organo-chlorines was dioxin. Dioxin has been found to cause abnormalities in animals and suppress immune systems. This organo-chlorine is also considered bio-accumulative, this means its contamination effects can raise and remain in the body of those who ingested it.

Although APM and PCA argued that studies had not yet provided evidence of harm effects in humans caused by dioxin, they responded to these environmental issues by implementing procedures to prevent contamination. After Greenpeace’s opposition regarding the use of chemicals, APM changed its bleaching process. Instead of producing chemical-bleached pulp, they started to produce oxygen-bleached pulp. APM and PCA remained concerned regarding these contamination issues and also engaged in deforestation and recycling activities.

Decisions – Exploring the problem

APM and PCA procedures to prevent contamination were costly because most of their production activities were changed. APM and PCA tried to introduce less chemically-treated products in the 1970’s, however; consumers did not support the new product. APM and PCA attempts were not easy to accomplish because more than changing their production activities, their real challenge was to change customers’ preferences. The paper industry created a demand for extreme bright paper that only chlorine provided, and now the challenge was to create a demand for ivory-colored paper that is produced using oxygen-bleached pulp.

APM modernized its kraft pulp plant in Maryvale costing approximately $163 million that brought improvements in production capacity, reduction in operating costs, and the introduction of new product lines. From being packaging specialized, APM became fine paper producer. Rapidly, along with PCA, APM became the second largest producer of uncoated fine paper that owned the largest and most technologically advanced fine paper machine.

After some market entry barriers because PCA still controlled 80% of the copier paper market, Ken McRae successfully positioned APM’s products in the market achieving consumers’ acceptance of such new products. “He designed an innovative marketing strategy, restructured the method of distribution, and plotted a careful ramp-up of demand for output.”

Technology was the key for producing high-quality products. APM kraft pulping process provided a stronger pulp compared to the pulp produced by the soda pulping process used by its competitors. In addition, more customized