John Fogelholm1 and Esa Hämäläinen2

Company/organisation and addresses

1Helsinki University of Technology, Department of Industrial Engineering and Management, Helsinki, Finland
2Metso Automation, PL 257, Turku, Finland


jfogel@tuta.hut.fi and Esa.hamalainen@metso.com


economic steering tool, product costing, budgeting, simulation, rolling financial estimation


The basic usefulness of any mill wide, economic steering software system, specially developed for paper mills, consists in the range, accuracy and requested combination of information, which is required by mill management on different hierarchical levels in their everyday activities. This means in practice, that the different resource consumptions, included in both anticipated and particularly actualized individual production runs, can be combined as required in different combinations and groupings, and the calculated results expressed in monetary terms.


The basic information for decisions concerning future activities in paper mills are based either on strictly historical data from previous production activities, or based on the anticipated behaviour, expressed in either resource consumption or economic terms. The requirements for an accurate enough steering system, and the corresponding parts of the computer program, differ thus substantially from each other in these two cases. See Figure 1.1.

Figure 1.1

Figure 1.1. Computer program basics

There are two main considerations concerning the treatment and utilization of basic historical data. The first concerns the availability of production run-based resource consumption information from different databases, and the other main one concerns the required properties of the computer program to generate reports in almost any required combination. This second requirement has been found to be of crucial importance for mill managers when scanning the properties of alternative computer programs in the market. This aspect of these kinds of programs will be dealt with later.


The fundamental requirement for ex ante purposes, depicted on the right side in Figure 1, and basis for any simulation activities, consists of their ability to anticipate, prognosticate and determine the resource requirements for individual orders, which mostly differ only incrementally from each other, as is the situation in the typically divergent production process for paper products, as far as raw material content, dimensions of the final product to be delivered, and quantities to be produced are concerned (1).

The most important aspect of any industrial application of systems dealing with anticipation, has to be considered to consist of its ability to predict as accurately as possible the resource or economic behaviour of the process under investigation (2). The probably most useful scientific tool to judge the accuracies or calculate the complexities of the various input elements of any industrial process, the systematic treatment of these inputs in the form of a model, and thus also of the final output, has to be considered to consist of the application of variety analysis to any production process under scrutiny, in this the production process of a paper mill. This usually includes the application regression analyses to the basic data required. Variety is defined as the number of possible states of whatever it is whose complexity we want to measure (3). This means that this anticipatory aspect of the actual use of a system, consisting of different input elements and the basic model that converts this data into output information, represents one of the main yardsticks of its concrete usefulness of this aspect of the system. The problem of the inherent variety in each individual resource consumption, and its impact on its actual value to be used, is clearly seen in Figure 2.1, which shows the actual throughput values for different products on a paper machine, and the final values to be used in calculations.

Figure 2.1

Figure 2.1. Throughput values for total product range


One most important prerequisite for simulation activities, concerning the production of different types on paper products in a mill, consists of the requirement of the model to anticipate the individual resource behaviour for the total range of products, which can be manufactured, including the determination of the production path chosen in each case (4). These basic requirements are shown in Figure 3.1 (5).

Figure 3.1

Figure 3.1. Basic information requirements for simulation

All the above mentioned basic data are required to accurately determine the required resource consumptions in the individual production run, which represents the ´foundation`, on which the different calculations required are to be based. (The adjustment coefficient mentioned in the cost model represents the impact on the individual resources, connected to re-cycled trim- and sheet waste).

The optimal steering levels in paper mills, from an economic measuring point of view, are thus found to be as follows (6):

  • individual production run
  • production line (production path)
  • individual mill


In any mill, the emphasis of the need for economic steering information centres on ex post or historical actualised production activities. This naturally depends on the fact, that different decision makers require different configurations of data for different purposes, and managers on different hierarchical levels require sometimes the same basic information in different aggregated forms. This is the basic reason why the potential grouping of ex post steering information, depicted in Figure 4.1, is so important from a utilization point of view.

Figure 4.1

Figure 4.1. Potential groupings of economic steering information

The available ex post information can, and have to be combined and reported in a substantial variety of ways, to fulfill the requirement of the individual potential decision situation of each decision maker. The variety of groupings of required information, termed dimensions in this computer software parlance, covers all main aspects of potential interest of decision makers in paper mills.


The first main application of any computer program, which concerns product costing and its applications, consists of calculating the actualised result of, or simulating the economic result of individual production runs of potential orders on different production paths, taking into consideration the impact of alternative order sizes and product characteristics, as for instance the weight of the product to be manufactured, and the required final dimensions. The result for both situations is shown in the form of these required product calculations in Figure 5.1, The calculation form and the groupings of individual cost elements naturally have to be customized, according to the requirements of the individual factory or mill.

Figure 5.1

Figure 5.1. Example of required production run calculation

The basic model has also to take into consideration the calculations of different trim and sheet and other wastes, and to calculate their economic impact, together with all main cost elements of the required set-ups, or grade changes, as indicated in the figure above.


The range of different types of reports of actualised production activities has to be substantial. It has to cover results of activities, expressed in both monetary and input element-based figures, covering both individual production runs, and aggregated production runs for arbitrary monthly time periods.

One typical report required in monetary terms, comparing planned activities with the actual results, is shown in Figure 6.1. These kinds of cost difference reports are of interest, particularly to the production managers, to whom productivity problems belong.

Figure 6.1

Figure 6.1. Production cost difference reporting

For the marketing decision makers, the information of the sources of profit contributions of actualised production runs from different customers, groups of customers and sales areas is of crucial importance. The report in figure 6.2 represents typical information in graphic form of this kind of required information.

Figure 6.2

Figure 6.2. Customer profitability reporting


One of the most important practical applications of the anticipatory aspect of these kinds of simulation models and calculation systems, except calculating the economic result of potential and actual production runs on different alternative production paths, and the impact of alternative individual resource consumption inputs, consist of making resource budgets for future time periods, during which the breakdown of the product range are to be determined. This application is of apparent economic significance, as it saves a lot of time for managers in charge of budgeting. This particular calculation is shown in the screen shot of Figure 7.1, where the total consumption is calculated, based on the individual calculations of the product runs included. The same screen shot is used for showing calculated material budgets both for the total mill and for the individual machines, for the different production runs, for different customers, for different countries and for different types of products, etc.

The same screen shot can thus be used for showing both anticipated and realized total material consumption. In Figure 7.2, a breakdown of the situation in different markets, the corresponding order sizes and the total required production quantities, is calculated and shown.

Figure 7.1

Figure 7.1. Resource consumption-based budgetary simulation and calculation

Figure 7.2

Figure 7.2. Simulation of required total raw materials

The calculations of anticipated results depicted above represent different aspects of simulation activities, required by paper mill management.

An accurate industrial simulation model and the corresponding computer programme should also be utilized to make comparisons of the impact of different production elements on the profitability of the total mill, the individual paper machine, the individual product, or the whole production process. A typical example of this is the situation where a material supplier , like those of wires and retention chemicals, claims that its products have superior characteristics, which could be utilised to increase the profitability of the mill. In a case like this, the economic impact of this new product can easily be assessed.


A mill-wide total integrated economic steering system discussed above, requires a substantial investment in the required interfaces between itself and the required data files in Figure 8 1, in comparison with a corresponding "Stand-alone"-version for simulation, pricing and budgeting purposes. Any mill, slightly hesitant to decide to develop directly a mill-wide system, should consider starting with a "Stand-alone"-development phase.

The system outlined above, DNAemico, incorporating the scientific requirements for its optimal development and use mentioned above, is in actual use in Finnish paper mills and one company headquarters since 1997. All of the mill-installations are of the Mill-wide type.

Figure 8.1

Figure 8.1. Required reporting and simulation configuration


DNAemico (Economic Mill Control) is a MS-Windows NT based software product and it is a part of the Metso Automation's MetsoDNA (Dynamic Network of Applications) product family.

Basic information for the required calculations in a mill-wide system can thus be gathered by on-line interfaces from a variety of systems and data bases, including sales and order handling, accounting and invoicing, material management, production and recipe management systems.

The shared pool of information is managed in flexible SQL databases in a client-server network. With DNAemico it is easy to configure even complex production paths consisting of rewinding, coating, calandering, sheeting, packaging and transport.

The final screen shots and configurations in actual mill applications will naturally have to be tailor-made, owing to the specific requirements of the individual mill. The basic configurations are however, basically similar to the one shown above.


1. Fogelholm, J. Cost Function Modelling in the Paper Industries. Report No.11. Helsinki University of Technology, Department of Industrial Engineering and Management. 2000. ISBN 951-22-5009-8

2 Fogelholm, J. The Utilization of Cybernetics in the Steering of Complex Production Processes.  in Computing Anticipatory Systems: CASYS´98 - Second International Conference. Ed.: D. Dubois. CP 465, American Institute of Physics. 1999 pp. 543-554. ISBN 1-56396-863-0

3. Beer, S. The Hearth of Enterprise. John Wiley & Sons. 1990. ISBN 0-471-27599-9

4. Fogelholm, J Product Costing in the Paper Industry. Journal of Cost Management. 11/5, 1997, pp. 42-46.

5. Fogelholm, J. Cost Models for the Paper Industry. PaperAsia. 15/1, (1999b).pp. 27-30.

6. Fogelholm, J Economic Steering on Different HierarchicaL Levels in Paper Mills. Paper Technology. PITA 2002 43/4, pp.51-54.


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