OVOL Insight

Taking on the Challenges Faced by the Merchants Who Support Paper Distribution with “Paper, and beyond” Initiatives

In the paper distribution business, secondary wholesalers, known as "merchants," sell various kinds of papers including, printing paper, paperboard and communication papers to printing companies, publishers, general companies, government offices, and other paper users.
Printing companies and publishers handle various styles of paper for a variety of purposes, and in many cases, the paper can’t be delivered in the large bulk form in which paper distributors (primary wholesalers), such as Japan Pulp & Paper, purchase it from paper manufacturers. That's why merchants provide detailed services, such as cutting the paper into small lots and delivering it in accordance with the customer's needs.
The Paper Merchant Sales Division at Japan Pulp & Paper supplies paper to merchants in Tokyo and the surrounding areas. We asked Takuo Furukawa, General Manager of the Paper Merchant Sales Department, about the basics of the paper wholesaling business, the challenges it faces, and what Japan Pulp & Paper is working on to solve them.

Takuo Furukawa
Japan Pulp & Paper Co., Ltd.
General Manager
Paper Merchant Sales Department

After a few years in the company, Takuo Furukawa was transferred to the Paper Merchant Sales Department, where he worked in sales and management positions. After 14 years he was seconded to a subsidiary paper merchant, where he was involved in the company’s restructuring. After returning to Japan Pulp & Paper, he was transferred to the Corporate Planning Department. During his 6 years in corporate planning, as he watched demand for Printing and Communication Paper continue to decline Furukawa worried about the tough time his old Paper Merchant Sales Department would face in the future. Then in 2018, Furukawa returned to the Paper Merchant Sales Department as its general manager.

(Job titles and departmental affiliations are current as at the time of this interview)

Backing up Merchants to Ensure the Reliable Distribution of Paper

The most important function of a paper distributor is to ensure that the paper produced by the paper manufacturer gets distributed. In order to build and maintain sales systems to do this, paper distributors support and back up their customers, the merchants, in a variety of ways.

Of course, the Japan Pulp & Paper Group is no exception. One example is the creation and provision of a specialized core IT system for paper distribution through JP Information Center Co., Ltd., a group company that develops IT systems, to support the management of merchants.

Furukawa says, "We were able to implement this initiative because of our close relationship with merchants.” Historical transactions with merchants still support much of Japan Pulp & Paper's sales. The number of employees involved is relatively large within the company, and the company has built up trust through detailed sales activities.

Responsibility to Maintain a Consistent Stock and Supply of Paper

Paper distributors also serve as a link between paper manufacturers and merchants' customers, such as printers and publishers. Furukawa says, “The mutual relationship between paper distributors and merchants ensures the stable supply of paper.” Japan Pulp & Paper provides printers and publishers with information on manufacturers’ production plans and industry trends, while providing paper manufacturers with information on printers and publishers’ paper usage schedules and inventory status. In the event of a paper supply scare, such as the recent spate of natural disasters and sudden incidents, every possible means will be used to ensure that the production of printed materials and publications does not stop.

“The business itself is still much the same as it used to be years ago," says Furukawa. However, in addition to factors such as the declining birthrate and the shift to digitalization, just as with other industries, the paper industry is also struggling due to the recent COVID-19 pandemic. The way we use printed materials is changing due to changes in the way we work and new lifestyles. In the future, we can expect a further reduction in demand, and paper manufacturers may shutdown machines and consolidate their brands. Even under such circumstances, paper distributors will continue to be responsible for providing merchants with a stable supply of paper. “If we don't do that and secure our customers, I don't think we will survive," he says.

Issues for Merchants Revealed by the COVID-19 Pandemic

As high-mix, low-volume paper usage becomes mainstream, Furukawa says that the functions provided by merchants in their detailed response to customers, such as cutting and delivery, will continue to be necessary to meet the needs of customers.

However, the business environment for merchants is becoming tougher as competition intensifies amidst the world's increasingly stringent demands for cost reductions. And while the problem is not limited to paper distribution, the shortage of drivers supporting Japan's logistics network is getting worse every year.

This is compounded by a sharp drop in demand due to the COVID-19 pandemic.
“There have been voices pointing out the problems in logistics for some time, but with more than 100 companies competing in Tokyo alone, no merchant has been able to make any moves to improve the situation. But with the COVID-19 pandemic, it seems that all of this has come to the fore at once.”

In addition to the logistic challenges, many merchants in the Tokyo metropolitan area have been troubled by business succession issues and poor business profitability. Besides the lack of successors, merchants are facing the problem of how to proceed with the succession and continuation of their businesses. The reason for the low profitability is due to the intensified competition resulting from the large number of players in the market, but another reason is that the system itself was designed to make it difficult to grasp the profitability of each customer's transactions. This is something that Furukawa understands having been seconded to a merchant, and why he was so quick to tackle the issue.

Working to Improve the Added Value of Merchants and Streamline Logistics

“With the demand structure dramatically changing, now is the time to create new value and work on further streamlining.” Furukawa feels that there will unfortunately be quite a few merchants who decide to give up on their businesses due to the sudden decrease in demand. There will also be some business owners who will consider business consolidation or major restructuring. “We don't want to make the industry a place where those who are working hard lose money.” With Furukawa taking the lead, Japan Pulp & Paper has begun to take action.
To date, together with JP Loginet, Co., Ltd. a group company that provides logistics services, Japan Pulp & Paper has been supporting merchants to improve their business efficiency through “JP Co-operative Logistics”, an organization that it established to share the logistics, storage, cutting and processing functions that used to be handled by merchants. Recently, it has been exploring ways to further streamline its operations from an IT perspective together with JP Information Center. Japan Pulp & Paper is also discussing with merchants to explore ways to increase the added value of paper, while at the same time getting merchants to review the value of their logistics, storage, and cutting and processing functions themselves. Furukawa asks all merchant business owners to once again sell paper as the valuable product that it is. Because he knows the functions and inner workings of merchants, Furukawa feels strongly that it is his mission to spread the word to help strengthen the corporate structure of each merchant.

Providing "Paper, and beyond Tools” to Support Customers

Japan Pulp & Paper is also trying to accelerate another initiative. The idea is to offer merchants "Paper, and beyond Tools," or non-paper products, as a way to breakthrough a difficult business situation.

For example, software packages that automate the paperwork done by government offices, food and cosmetic trays made from materials that contribute to a reduction in the use of plastic, and such items as electrodeless lamps to replace mercury lamps at printing plants and warehouses. Utilizing the collective strength of the Japan Pulp & Paper group, we provide a wide range of products and services sourced from within and outside of Japan. Basically anything that has the potential to expand a merchant's business without being limited to paper.

Furukawa says that for a long time the culture at Japan Pulp & Paper has been to become the first person merchants look to when they have a problem, even if it's not paper. There is a lot of business to be made in responding to that.

The situation continues to be tough. “I think it's important to keep coming up with new suggestions rather than saying to our suppliers, 'You're in a tough spot,'" Furukawa says. Furukawa returned to the Paper Merchant Sales Department in 2018, just as the COVID-19 pandemic struck. The unprecedented situation, he says, was daunting at first. "But nowadays, I think it was fate that I returned to this position in the Paper Merchant Sales Department at this point in time. Because if I can get through this, I'm sure the industry will change for the better.” laughs Furukawa. Lately, he has slowly but surely begun to notice a more positive attitude about himself.

The information provided herein was current at the time of its announcement.
Please note that this information may be subject to change without notice.
[Published on January 4, 2021]