A new report available from Moore & Associates, Atlanta, finds a correlation between paper mill inventory practices and average prices paid for their fiber.
“We have developed a strong correlation proving what we have suspected through the years—the mills that hold longer inventories pay lower prices for recovered paper,” says Bill Moore, co-author of the new study. “The converse of this hypothesis is also true; that mills holding the shortest inventories typically pay higher prices for their recovered paper.”
The report, entitled “An Analysis of Recovered Paper Inventory Practices,” uses the Moore & Associates Fore$ightSM price database and statistical analysis to verify the correlation between OCC (old corrugated containers) and ONP (old newspapers) purchase prices and inventory levels.
According to Moore, the supply on hand of OCC/ONP at mills has declined markedly from the early 1990s, as the mills adopted JIT or “Just In Time” inventory practices, following suit with other manufacturers.
“While for most manufactured raw materials, holding less inventory saves a company working capital and thus improves its bottom line, for recovered paper, the JIT principal does not hold up,” says Moore.
Moore cites examples when weather conditions and other unexpected events caused quick upturns in price. Mills with adequate inventory could wait for prices to subside, but JIT mills had to stay in the market, causing their average purchase price to escalate.
“Armed with this report, a company can perform an analysis of the value of the working capital for inventory versus the savings that could accrue based on the buying flexibility longer inventories give,” says Moore.
Those seeking more information on the study can contact Moore & Associates at (770) 518-1890 or visit its Web site at www.MARecycle.com.