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Thesis for the Degree of Master of Science

 

Year 2002
Maija Dietrich

Profitability and cost model of paper machine operations


The aims of the thesis were to develop a cost and profitability model of three different paper grades in a paper mill and a profitability simulator of a paper mill.

In the literature survey part was studied different profitability and costing principles and methods in paper industry. The survey indicated that costs and profitability models in paper industry form three categories: combined process, cost and profit models, cost and profit models developed by utilising process data and cost models developed on basis of realised costs and accounts (standard costing). A suitable method for modelling paper grade production costs was found. This method combined cybernetic standard costing, bottle-neck costing, activity based costing (ABC), which were extended with engineering approach such as mass balance calculations. Another possible method appeared to be developing a process model combined to a cost model.

In the experimental part cost and profitability model for three paper grades were developed in a case paper mill. In modelling the production process was divided into stock preparation, paper machine and finishing. In each sub process the dependency of resource consumptions on process variables were modelled either with statistical methods or deterministically. Energy consumptions in different process positions were calculated statistically and raw material consumptions deterministically according to recipes and mass balance calculations. In addition to financial key figures, key figures describing production efficiency were integrated into the model.

The development of profitability model of a paper mill included modelling dynamics of marketing, strategy processes, budgeting, production aspects, monetary process and analysis the results (profit and loss statement, balance sheet and key figures). The cost and profitability models of different paper grades were utilised as a part of production process. The modelling of a paper mill processes was carried out by first finding procedures from literature and then specifying and simplifying procedures to correspond real practises in paper industry utilising Delphi method. The simulator, KnowFinance Enterprise simulator was developed successfully.

The practical applicability and significance of the models developed in this study are obvious. Firstly, the developed tools can be used either in training or support for decision making at different mill levels. Secondly, the modelling framework developed in this study can be widely applied for other paper mills. Thirdly, the integration of key figures and data flow at different mill levels accurately describes the state of the company and the causal connections between various factors.


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