Latest / The Productivity Podcast with Fexingo: Output, Efficiency, and Long-Term Economic Growth / How a Small Finnish City Became the Most Productive Paper Producer on Earth
Transcript
- Lucas: So, the global paper industry has been in decline for about fifteen years now. Print newspapers, magazines, office paper — demand keeps dropping roughly two percent annually. Most analysts have written it off as a sunset industry. Luna: Right, and you'd expect productivity to stagnate too. When a market shrinks, companies usually just cut costs and hope for the best. Lucas: Exactly. But there's a counterexample that doesn't get enough attention: a paper mill in a small Finnish city called Kuusankoski. It's owned by UPM, and over the last five years it's become the most productive fine-paper producer on the planet. Luna: Wait — a paper mill in a declining industry, in a country with high labor costs, and it's the most productive in the world? How? Lucas: By doing something most manufacturers in shrinking industries don't do: they invested heavily in both automation AND their workforce at the same time. Between 2020 and 2025, the Kymi mill increased output per employee by 40 percent. Their operating margin hit 18 percent in 2025 — triple the industry average of 6 percent. Luna: That's a huge gap. What did they actually change? Lucas: So the mill had been running the same basic processes since the 1990s. They had a lot of manual quality checks, paper breaks that caused downtime, and a traditional shift-based workforce. In 2020, UPM dedicated about 60 million euros to completely modernize the mill. Luna: That's a big bet on a product category that's shrinking. Lucas: It is. But here's the key: they didn't just buy robots. They redesigned the entire production flow. They installed over 200 sensors throughout the process—from pulp quality to moisture levels to web tension. Those sensors feed into a real-time control system that automatically adjusts the machine parameters. Luna: So fewer paper breaks, less waste, more consistent quality. Lucas: Exactly. Their defect rate dropped from 1.2 percent to 0.3 percent. But that only works if the people running the plant understand what the system is doing. So they also retrained every single operator — not just to monitor the system, but to troubleshoot and optimize it. Luna: That's the part most companies skip. They buy the tech but don't invest in the people. Lucas: Right. And the Kymi mill took it a step further. They introduced a profit-sharing model tied directly to productivity improvements. If the mill beats its annual output target with the same or fewer inputs, a portion of the savings goes back to the workers. Luna: That creates ownership. People start thinking like operators of the whole system, not just cogs in a machine. Lucas: And it worked. In 2024, each employee received an average bonus of 4,500 euros on top of their salary. That's significant in a region where the average manufacturing wage is around 38,000 euros per year. Luna: I'd imagine that also helps with retention. The paper industry has an aging workforce — younger people don't exactly dream of working in a mill. Lucas: Exactly. Turnover at Kymi dropped to under 3 percent annually, compared to an industry average closer to 12 percent. They have operators with twenty years of experience who are now also data analysts. That combination is hard to replicate. Luna: But is this model replicable? Most paper mills in Europe or North America are owned by big corporations that might not have the patience for a five-year transformation. Lucas: That's a fair question. UPM has a track record of long-term thinking — they've been in paper for over a century. But what's interesting is that the Kymi model is now being studied by other manufacturing sectors. A German automotive parts supplier recently sent a team to Kuusankoski to study their approach. Luna: That makes sense. The principles — deep sensor integration, real-time control, worker retraining, profit-sharing — they're industry-agnostic. Lucas: And it's not just about high-tech either. One of the simpler changes they made was to shift from three eight-hour shifts to two twelve-hour shifts with longer weekends. That gave workers more consecutive days off, which improved morale and reduced fatigue-related errors. Luna: So productivity isn't always about buying more machines. Sometimes it's about how you schedule people. Lucas: You know, it's interesting — we spend so much time on this show talking about high-growth industries. But there's a real lesson here for mature sectors. The Kymi mill proves that even in a shrinking market, you can build a highly productive, highly profitable operation if you're willing to rethink everything. Luna: Speaking of rethinking things — one of the reasons we can dive deep into stories like this is that this podcast doesn't run ads. We keep it ad-free because we think that makes for a better experience. Lucas: Yeah, and if you find that valuable, and you want to support that choice, there's a simple way to do it: buy me a coffee dot com slash fexingo. It's not a subscription, no pressure, just a way to keep the show going without commercials. Luna: Exactly. And it really does help. Now, let's get back to the mill — Lucas, you mentioned the shift to twelve-hour shifts. Was there any pushback from the union? Lucas: There was initially. Finnish unions are strong. But UPM negotiated a trial period, and after the first year, the majority of workers voted to keep the new schedule. The key was that they tied it to the profit-sharing — longer shifts meant more consecutive days off AND higher potential bonuses. Luna: So it wasn't imposed. It was a trade-off that workers agreed to. Lucas: Exactly. And that's maybe the most important lesson from Kymi: productivity improvements stick when the people doing the work see a direct benefit. It's not just about efficiency for the company's sake — it's about sharing the gains. Luna: What about the environmental side? Paper mills are energy-intensive. Did the modernization help there? Lucas: It did. The new sensors and controls reduced energy consumption per ton of paper by 18 percent. And because defects dropped, there's far less waste going to recycling. The mill also shifted to using more renewable energy — they're now at 85 percent renewable for their power needs. Luna: So it's a triple win: higher output, lower costs, smaller environmental footprint. Lucas: Exactly. And that's a narrative that's often missing from discussions about sunset industries. The assumption is that these sectors are just going to fade away. But Kymi shows that with the right investment and the right culture, a legacy industry can still be a world-beater. Luna: I think the broader takeaway is that productivity isn't just a tech story. It's a people story, a process story, and a culture story. Lucas: Completely agree. And the numbers back it up. Kymi's total factor productivity growth over the five years was 3.8 percent annually. For context, the average for Finnish manufacturing over the same period was about 1.2 percent. Luna: That's a massive gap. So what's next for the mill? Can they sustain this? Lucas: There are diminishing returns. They've already captured most of the low-hanging fruit. But they're now looking at ai driven predictive maintenance and more advanced real-time optimization. The goal is to get operating margins above 20 percent. Luna: If anyone can do it, it seems like this team can. Lucas: Yeah. And that's the thing about productivity — it's never a one-and-done. It's a continuous process of small improvements. Kymi is a great example of what's possible when a company commits to that process, even in a declining market. Luna: Alright, that's all for this episode of The Productivity Podcast. We'll be back next week with another deep dive.