Magazine article Management Review

Pulp Friction: Rising Paper Prices Are Triggering Layoffs, Rationing and Headaches - and Not Just in the Publishing Business. but There Are Strategies for Coping with Usage and Costs

Magazine article Management Review

Pulp Friction: Rising Paper Prices Are Triggering Layoffs, Rationing and Headaches - and Not Just in the Publishing Business. but There Are Strategies for Coping with Usage and Costs

Article excerpt

Rising paper prices are triggering layoffs, rationing and headaches and not just in the publishing business. But there are strategies for coping with paper usage and costs.

In the movie Waterworld, a futuristic look at the Earth after the polar ice caps melt and swamp every inch of dry land, Kevin Costner drools over a great treasure--a jar of dirt. Had Costner been playing a manager at just about any U.S. business in 1995, the jar of dirt most likely would have been a pack of ordinary white paper. For everyone from purchasing agents to publishers, once-cheap and plentiful paper is quickly becoming the commodity to die for--and the stuff that can determine whether a business will rise or fall.

Paper costs are the business hot button today because of all the bodies left behind by the massive spikes in prices in 1995. The 110-year-old Houston Post shut its doors in mid-year, blaming skyrocketing newsprint costs. Newspapers were expected to end the year paying more than $740 a ton for newsprint, versus $560 a ton in January 1995.

Fingerhut Cos. Inc., a $1.8 billion direct-marketing firm based Minnetonka, Minn., sends out 558 million catalogs yearly. The company eliminated 200 positions in 1995 as part of a $50 million cost-reduction program to cope with rising paper and postage rates. "We cannot just pass increases on to our customers" explains Chairman Ted Deikel.

And New York's Adelphi University began rationing paper, forcing professors to "give shorter tests and fewer handouts," one instructor complained.

Dog-eared-Dog World

Just talking about subjects like paper rationing is enough to rankle the best of managers. Some say they are afraid to talk about target goals for reducing paper usage, fearing that paper companies will simply hike prices even more to match proposed cuts.

The U.S. Justice Department has stepped in to investigate potential anticompetitive practices in the newsprint industry, but that may take years to complete. A spokesperson for the U.S. Justice Department would not elaborate on whether the investigation focuses on price fixing.

Some analysts say the market is pushing paper prices higher in a cyclical fashion, and that as paper companies spend their profits on more machines to spew out tons of paper, prices will be pushed back down. Widespread demand combined with a lack of new paper-producing capacity has paved the way for producers to continue to raise prices.

In the meantime, many businesses are scrambling to cut paper usage in every way. "Our purchasing agents are wringing their hands," says Maureen Burke, recycling coordinator for Bell Atlantic. "Some analysts are projecting that paper costs are going to go up 70 percent next year. That's a far-out projection, but that'll just tell you how nervous everyone is"

Tactics used by Bell Atlantic to reduce paper use may smack of Big Brother, but they are regarded as a model for other businesses. Several times a week, many of Bell Atlantic's 65,000 employees get recorded messages on voice mail that say things such as "Do you really need to make that copy?" or "Think before you use more paper" Almost all departmental newsletters have gotten the ax to help meet the goal of reducing paper usage by 30 percent. In January, customers will get phone bills printed on two sides of the page, designed to save an estimated 40 percent in paper and postage costs.

A Bell Atlantic task force regularly does scenario building in which employees offer suggestions for coping if paper rationing became company policy. There's no more shiny--and expensive--paper in the corporate annual report, and it's much smaller and printed on recycled paper. Savings: $1 million a year since 1991 in postage and paper costs.

Some changes have been intolerable, Burke noted. The Bell Atlantic telephone directories, which are sent to 19 million customers in six states and the District of Columbia, use smaller print and cheaper paper. …

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