We need to evaluate the mill's APL supply chain and determine ways to improve its profitability. Mr. Winton provided DJS with several recently completed cost analyses which, in his mind, had raised many new questions and forced him to take a different look at his options. After thoroughly analyzing the data provided by Mr. Winton, I have outlined not only the strategic decisions currently facing Montclair Paper but our recommendations for maximizing profit at the facility as well.
Since joining Montclair Paper three months ago, Mr. Winton has felt the need to take a broader view of the company's operations. Previous managers at the facility have focused only on the mill's operations, worrying more about the product produced rather than the customer served. The narrow-minded focus of Mr. Winton's predecessors has left the mill with many problems while falling short of its profit goals.
The sagging profit of the mill can be traced to several areas.
First among the problems is the notion that what the mill is producing is secondary to that it is producing. This short-sightedness means that despite the fact that mill's five machines run 24 hours a day, 365 days a year, the company is spending nearly 30 percent of its total cost on waste due to constantly changing the products that are being produced. Mr. Winton has indicated that the mill's warehouse is filled with approximately 1,500 different products.
Second among the mill's problems is the inefficiency taking place in the converting area. The poor layout of the area means Montclair is adding to its direct labor and machine hours with processes that are of no value to the customer. Approximately 90 percent of the work that takes place in this area is not value-added. Another concern with the converting area is its huge...