The Future of the BOPP Industry

In the last articles we suggested that the fall of the margins is nowadays structural. We also suggested that the current business models, adopted by the majority of the suppliers, will not allow them to get out of the pond.

Moreover, we observe that the industry is not able to challenge the traditional ‘’modus operandi’’ and is trapped in a vicious circle:

‘’ …Margins fall … Muscles flex …Huge capital invested …Capacity increased…

S&D gets longer … Margins continue to Fall …

Of course some players suffer more than others, some enjoy better performance in raw materials procurement, some leverage state of the art, expensive, production lines (ROI?).

 It seems that the industry only focuses on improving operation cost and not enough on growing profitable and additional revenues. A value based and dynamic setting pricing process is a must.

 We strongly believe that it is time to innovate not only assets but also critical processes and business models. It is a must to develop the right BM for the specific Market Strategy.

One model, not the only one , that could be transforming the industry is a sophisticated ‘’ On Line Business Model’’. In this regard we have in mind very successful examples of BM adopted by few global players active in other industries.

We are proposing an innovative BM that would allow to grow the overall revenue streams meanwhile optimizing fix cost.

This BM would offer more value to existing customers and attract new ones (i.e. Co-Partners) not necessarily buying products from Newco but the services available as members of the IT Network.

So we wonder if Newco should spend 30-40 M € in additional capacity or should consider a much less expensive investment in order to take the lead and stay ahead of the wave transforming the industry?

Newco could build an open IT Network System and make it available to selected players active along the Supply Chain and not only own direct customers. In fact Newco would assume the role of SC ‘’ Integrator’’.

Members would act as a single entity or stipulate Strategic Alliance or JV or simple Supply Agreement with others there including Newco.  

Newco would be responsible for the governance of the Network and assure to keep it at level of best in class.

The idea is to allow Newco to create its parallel market with members audited prior to entrance and committed to respect the rules governing the IT Network.

On the other side members operate in a safe environment, enjoying available services and easy communications among Vendors and Buyers.

 The overall environment is transparent and collaborative, the priority is to satisfy own customers at lowest possible cost.

Newco’s financial results will depend on making members satisfied.

At this stage a simple question to answer is: Why companies should become members of the Network and possibly buy from Newco?

 Which company’s problems Newco would solve, which company’s needs would Newco fulfill? In order to answer we must collect all the necessary data and prepare a simple document for each Customer segment.

This exercise, done by segment (i.e. Converters), will allow to decide if the BMs could be aggregated or if specific ones are a must :

* Converters Segment :

Current Top 1-3 Problems Identified (80 / 20 )

Existing Solutions Adopted

Proposed New alternative Solutions

Key Metrics (Kpi to follow progress)

Unique Value Proposition we can offer (Single ,Clear , Compelling )

Competitive Advantages (If we have )

Once this analysis is completed for all major segments of interest we are ready to prepare one of the form describing the ‘’On Line Business Model’’ and list the key elements for each building block.

In the following picture we report the key elements for each building block  for an hypothetical business. We draw the attention on the specific elements to see how the ‘’On Line Business’’ enable new trading opportunities

In case the Customer Segments are very much apart, as said, it could be necessary to prepare a form for each one and tailor the IT System.

The objective is to identify new Revenue Streams, prepare a tailored and     rich Value Proposition, offer a Transparent and Collaborative working environment, Reliable Processes and a diffused ‘’ Customer Centric Culture’’. This model offer key plus: every customer is identified, a virtual Tag report well defined and recognized its needs, a win-win personalized pricing agreement. The model facilitate opportunities for assets sharing so decreasing the capital invested. Real time communication process build the basis for an agile organization.

The advantage of an ‘’On Line Business’’ is to deliver all this at lower cost than a traditional BM.

In the future, industry players will compete in the development of BMs, the success will depend on optimizing the interaction of Strategy and BM.

A win-win situation: IT Network members enjoy tailored services that reduce total acquisition cost, the IT System administrator (Newco) see recognized the value of its own offer and the investment to make easy to do business within the IT Network.

We do not expect to have clarified 100% the matter, the objective was to simply raise questions and challenge the current status quo. I strongly believe that nowadays Strategy & Business Model are not always aligned. There is not one solution for all but each company should re-evaluate own situation and make certain of full alignment of Strategy & Business Model.