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In recent years, the market for specialty papers has experienced a decline in demand and a growing emphasis on price. But Appleton Papers Inc., one of the industry's leading suppliers, has found a better way to compete: through improved customer service.
That approach might seem unlikely, in a business driven by customers' obsession with cost. But Appleton, with just over 3,200 employees, is no typical manufacturer. It has relied heavily on electronic data interchange (EDI), a technology usually associated with much bigger companies. It is 100-percent worker-owned. And the e-business portion of its IT department, consisting of just four people in the U.S., plays a much broader role in company affairs than might be expected. All of these factors have shaped Appleton's approach to communicating with customers.
With net sales of more than $1bn in 2005, Appleton is an old-line company with at least one big advantage. Formed in 1907 in Appleton, Wis., the company is the world's largest producer of carbonless paper, used in business forms. In fact, it is the only maker of the popular NCR Paper brand, which it helped to develop back in 1954, in partnership with The National Cash Register Co. Appleton makes a variety of related items as well, including thermal paper, security products and flexible plastic packaging materials.
As sole provider of the NCR paper, Appleton has a distinct edge over its competition. But the company is by no means assured of business. Customers have alternative sources of similar product, and rival suppliers pose a constant threat. What's more, the market for much of Appleton's product line is shrinking, as users shift away from specialty items or abandon paper altogether. Last year, the company saw declines in operating income from technical papers, thermal papers and coated stock (although net sales in some key areas increased). Meanwhile, manufacturing costs continue to rise.
Although it is nearly a century old, Appleton hasn't been stodgy in its approach to technology. It embraced EDI for communicating with customers in the early 1990s. The system then was tied to a mainframe, according to Kevin Pahnke, systems assistant specialist with Appleton. Around 2002, it migrated to IBM AS/400 hardware and the Gentran Server platform of Sterling Commerce. Sterling, which began life as a value-added network for EDI, has added over the years a broad range of software and services related to business-to-business communications.
It was a case of a paper company trying to eliminate paper. With the help of EDI, Appleton began transmitting manifest information electronically to carriers, along with pickup notifications and banking transactions.
EDI was a big improvement over manual processes, but it had its limitations. For one thing, it wasn't a real-time system. Messages traveled in batches, and were usually deposited with a VAN, which then provided the information to its intended receiver. The system was too slow and expensive for some customers, who wanted more flexibility in their communication methods.
A New Solution
Customers began asking for something more. They especially wanted an alternative means of exchanging data, says Pahnke. That's when Appleton began looking into a more advanced Sterling product, the Gentran Integration Suite for File Transfer (GIS).
Using a VAN with batch processing, it might take an hour and a half to transmit data to or from a customer, Pahnke says. GIS, which doesn't require a VAN in the middle, allows for buyers to submit orders directly within a minute.
That capability fits in well with changes in the industry. Appleton's customers, consisting of printers, merchants and paper converters, have themselves become obsessed with cost. A tiny difference in the price of materials can make or break a printer's job bid. Moreover, the pace of business is speeding up. Buyers like to wait until the last possible moment to place orders, says Pahnke. The absence of a traditional VAN means that they make later cutoff times.
|"It's clear that we made the right choice. I keep getting requests for new opportunities we wouldn't have been able to satisfy before."|
- Kevin Pahnke of Appleton Papers
|Appleton at a Glance|
|The company: Appleton Papers Inc., a maker of specialty paper and packaging products, including carbonless and thermal paper.|
Headquarters: Appleton, Wis.
Top executive: Mark R. Richards, chairman, chief executive officer and president
Number of employees: 3,200
Recent financial results: For first half of 2006, net sales of $538m, versus $515m in the year-earlier period, and net income of $6.8m, versus a loss of $5.3m.
Supply chain challenge: Cutting the cost of order processing while improving customer service, in part by reducing its reliance on traditional electronic data interchange.
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