Forest Hill Company Essay

1797 words - 8 pages

ISSN 1940-204X
ISSN 1940-204X
Forest Hill Paper Company
Thomas L. Albright
University of Alabama
Introduction
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. ...view middle of the document...

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.
VOL. 1, NO. 2, ART. 4, JUNE 2008
The manufacturing process
Pulp manufacturing begins with hardwood or softwood timber in the form of logs or wood chips. If raw materials are received in the form of logs, the first step in the process is debarking. A rotating debarking drum that measures 16 feet in diameter by 100 feet in length tumbles the logs to remove the bark. After debarking, chippers reduce the logs into one- inch cubes.
The second step in the process is termed “digesting.” Wood chips are cooked at 325 degrees Fahrenheit to break down the glue-like material bonding the wood fibers. Chemicals used in the digestor are reclaimed and reused in future pulp production. Following the digesting process, the naturally brown fibers are washed and screened. A bleaching process converts brown pulp into white pulp. The paperboard manufacturing process begins by mixing pulp with water and chemicals in the first stage, or headbox, of a paper machine. The mixture is applied to a porous wire mesh; formation of paper actually occurs within this step. The wire mesh travels through a press that forces the pulp mixture against the wire to eliminate water within the mixture and to form the desired paper thickness. The material then proceeds to a drying section where it travels across numerous cylindrical dryers that are heated with steam. In the final section of the paper machine, long sections of paperboard (approximately five miles long and weighing ten tons) are rolled up into parent rolls and are removed from the machine. The parent roll is further processed by FHPC’s customers to make various types of paperboard containers.
Sometimes customers require additional processing on parent rolls. For example, food processors often require widths of 18 inches, rather than the standard width of a reel (approximately 12 feet). Thus, reels are loaded onto a rewinder slitter to produce eight reels 18 inches wide from one 12-foot-wide reel. For convenience, Forest...

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