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CHAPTER II
LITERATURE REVIEW
This chapter will be the basis of the study because of its significance to lay out the
theories and literatures needed in order to gives out thorough analysis of the subject. To
fully understand the study, it is important to analyze the industry and its structure, including
the flow of the industry’s supply and demand. After the industry can be described, then it is
important to explain vertical expansion, or commonly termed as vertical integration,
especially upstream integration, financial projection, and Supply Chain Management before
finally gives a description about the product.
2.1 Structural Analysis of Industry
Industry is defined as the group of firms producing goods or services that are
close substitutes or identical in consumption to each other (amosweb.com). Another
definition of industry is a market in which similar or closely related products are sold to
buyers (Porter, 1980). Overall, industry can be defined as a group of firms that
participate in a market with similar or closely related products.
The industry structure gives out strong influences in forming the rules of the
competition and the strategies needed to overcome the industry. Competition in an
industry is formed to intensively drive down the rate of return on invested capital. In
economics, markets are divided into four classifications which are differentiated base
on the structure of the industry that serve the market. The classifications are:
A. Perfect Competition
Perfect competition represents a market with lots of participants who sell the same
goods. Usually this applies for commodity goods such as vegetables or meat.
B. Monopolistic Competition
Monopolistic competition is a market with many seller which sell differentiated
items of the same purpose. For example, knifes in one store was made of steel
while others were made of stainless steel or ceramics but all of them are knifes.
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C. Oligopoly
Oligopoly is a market where there are few sellers in the industry. This applies for
Indonesian’s gas station industry where there are only five participants who
involved in the market.
D. Monopoly
Monopoly means that the industry is being controlled by one participant only.
Attempts of eliminating monopoly have been done by many countries to prevent
unfairness to other party. In Indonesia, this practice is regulated, owned and
monitored by the government due to its importance to the people of Indonesia.
(Porter, 1980)
Superficially, this company is participating in perfect competition due to the
indifference of one company’s product to another. To fully understand the industry
structure, further analysis needed by using tools such as Porter’s five forces model,
SWOT analysis and PESTL analysis.
2.1.1 Five Forces Model by Porter
Figure 2.1 ‐ Porter's Five Forces Model (Porter, 1980)
POTENTIAL ENTRANTS
Threats of New
Entrants
Bargaining Power
of Suppliers
INDUSTRY
COMPETITIORS
SUPPLIER
Bargaining Power
of Buyers
BUYERS
Rivalry among
Existing Firms
Threats of
Substitute Products
SUBSTITUTES
Source: Competitive Strategy, Michael Porter (1980)
The five forces model was developed by Michael E. Porter in 1979. This
model identifies the competitive intensity and its attractiveness in the industry.
The five competitive forces, new entry, threat of substitution, bargaining power
of buyers and suppliers, and rivalry among current players, gives a description
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that competition in the industry is beyond the competition described by other
people. Altogether, the five forces determine the intensity of the industry
competition and profitability. Therefore, the goal of the model is to identify and
overcome the collective strength of these five forces and gain the ultimate profit
potential in the industry. The model comprised of 5 forces that describe the
industry’s situation
A. The Threat of the Entry of New Competitors
Threat of entry into an industry depends on the barrier of entry along with
the reaction from existing competitors.
a. Barriers of Entry
There are six major barriers of entry
 Economies of Scale
Economies of scale refer to declines in unit cost of a product as the
absolute volume per period increases. In other words, as the number
of production increase, total cost per unit decreases. In a vertical
integration, there’s an additional economies of scale barrier, which is
operating in successive stages of production or distribution. The
company must enter integrated or face foreclosure.
 Product Differentiation
Product differentiation means that established firms have brand
identification and customer loyalties which created from previous
build up brand equity.
 Capital Requirement
Capital requirements refer to the need to invest large financial
resources in order to compete, especially if the capital’s required for
risky advertisement or research and development.
 Switching Cost
Switching cost is the one time cost facing the buyer of switching from
one supplier’s product to another.
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
Access to Distribution
Channel
Distribution channel need to be persuaded in order to secure
distribution for its products through price breaks or cooperative
advertising allowances which reduce profits. Other way to gain access
to distribution channel is to create one.

Policy
Government
Government policy can become a barrier because government can
limit or even foreclose entry into industries with such controls as
licensing requirements and limits to raw materials.
b. Expected Retaliation
The potential entrants’ expectation when entering will also influence the
threat of entry. Conditions that signals the strong likelihood of retaliation
to entry are vary from blocking of access to resources by established firms
to history of vigorous retaliation to entrants.
B. The Intensity of Rivalry among Existing Competitors
Rivalry happens because one or more competitor feels intimidated or sees
the opportunities to improve their market position. Intensity of rivalry can be
termed as “Jockeying for Position” by using tactics such as price competition,
advertising battles, product introductions, and increased customer service or
warranties. Price competition is highly unstable and could harm the company
and industry for the worse. Different from price competition, Advertising
could create a strong brand image, increase demands, and may become a
firm brand reference to potential buyers.
C. The Threat of Substitute Products
Substitute product is a different product that can replace the existing
product, not just a brand difference. This difference is like butter and
margarine, similar function but different product. Such products limit the
potential returns in the industry by placing a ceiling on the prices firms the
industry can charge. Substitutes products that deserve the most attention are
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one that subject to improving their price‐performance tradeoff with the
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industry’s product and products that are produced by industries with high
profits.
D. The Bargaining Power of Buyers
Buyers compete with the industry by forcing down prices, bargaining for
more service or quality, and playing competitors against each other. A buyer
group is powerful if; buyers are concentrated on large volumes, significance
to the fraction of total cost, product is undifferentiated, faces few switching
cost, poses threat of backward integration, and buyers have full information
concerning the industry and the product.
E. The Bargaining Power of Suppliers
Suppliers also pose a bargaining power as the buyers. By increasing the prices
and decrease their quality, a supplier can gain extra profit from their buyers.
A supplier group is powerful if this scenario happens; products dominated by
a few companies, not obligated to contend with other substitute products,
the industry is not an important customers of the suppliers group, supplier’s
product is an important input, has a switching cost involved, and suppliers
group poses threat to forward integration. (Porter, 1980)
2.1.2 SWOT Analysis
According to Thompson, SWOT analysis as tool for sizing up a company’s
resource
capabilities
(strengths)
and
deficiencies
(weaknesses),
market
opportunities, and the external threats to its future well being (Thompson,
2010).
SWOT analysis is commonly used to identify the external possibilities and review
to the internal capabilities. Strengths and Weaknesses used to analyze the
internal capabilities and compare it with Opportunities and Threats as the
externalities that are exposed to the company. Thompson argues that a good
SWOT analysis could be the basis for crafting a strategy that capitalizes on the
company’s resources, aims squarely at capturing the company’s best
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opportunities, and defends against the threats to its well being. Components of
SWOT analysis are:
A. Strengths
Strengths are something a company is good at doing or an attribute that
enhances its competitiveness in the market place. This has to do with the
company’s core competence (a competitively important activity that a
company performs better than other internal activities) and distinctive
competence (a competitively valuable activity that a company performs
better than its rival).
B. Weaknesses
Weaknesses, or deficiencies, are the components that the company lacks or
does poorly (when in comparison to others) or a condition that puts the
company at a disadvantage in the marketplace.
C. Opportunities
Opportunities are the potential chances that the company should be able to
attain by assessing the strengths and weaknesses that the company
possesses to compose the strategy to reach it. The market opportunities
most relevant to a company are those that match up well with the
company’s financial and organizational resource capabilities, offer the best
growth and profitability, and present the most potential for competitive
advantage.
D. Threats
Threats are the certain factor in the company’s environment pose risks
toward profitability, competitive well being, and growth prospects. External
threats may pose no more than a moderate degree of adversity because all
companies confront some threatening elements in the course of doing
business, or they may be so imposing as to make a company’s situation and
outlook quite tenuous. It is up to management to identify the threats to the
company’s prospects and to evaluate what strategic action can be taken to
neutralize or lessen the impact. (Compiled from Thompson, 2009)
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2.1.3 PESTL Analysis
Babette Bensoussan refers PESTL analysis as a tool to map the aspects of
the environment, which are political, economic, social, technological, and legal,
that can affect the competitiveness of industries and companies (Bensoussan,
2008). Meanwhile, John William sees PESTL analysis as a business measurement
tool for understanding market growth or decline (Williams, 2006). Overall, PESTL
analysis can be defined as a tool that analyses the Political, Economic, Social,
Technology, and legal aspect of the macro environment, hence the acronym
PESTL. Each point is listed based on the importance to the evaluator in order to
recognize the potential and threats that each point could deliver.
A. Politic
Political factors include government’s intervention toward the economy. This
intervention can be in form of tax policy, labor law, environmental law, trade
restriction, tariffs, and political stability.
B. Economy
Economy factors affect the purchasing power of potential customers and the
firms cost of capital.
C. Social
The social factors include the demographic and cultural aspects of the
external macro‐environment which affect customer needs and the size of
potential markets.
D. Technological
Technological factors can lower barriers to entry, reduce minimum efficient
production levels and influence outsourcing decisions.
E. Legal
The legal factor is the regulation and rulings for the company. (Compiled
from Williams, 2006)
2.1.4 Supply and Demand Analysis
Supply and Demand is the backbone of theory of economics. To put it
simply, a potential buyer (demand) wants to purchase a product or service by
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come to a market, a place where buyers and sellers communicate with one
another for voluntary exchange (Png, 2009), where this potential buyer could
meet and purchase this particular product from a seller (supplier).
A. Demand
Demand refers to the will to purchase a product or service at a given price
(Berk, 2007). The graph that shows the individual demand, which is showing
the quantity that the buyer will purchase at every possible price (Png, 2009)
is:
Figure 2.2 – Demand Curve
Price
Quantity
Source: Hubbard,2008.
This demand curve’s slope is downward because of the Law of Demand that
states “When the price of a product falls, the quantity demanded of the
product will increase and vice versa, ceteris paribus” (Hubbard, 2008). This
demand curve could shift upward (higher prices for the same amount of
quantity) and downward (lower price for the same amount of quantity) for
several reasons such as:
a. Income
The income that consumers have available to spend affects their
willingness and ability to buy a good. If the income rises, demand of a
good will increase, which makes it Normal Goods. On the other hand,
Inferior Goods is a type of good that increase the number of demand
when the income decreases and vice versa.
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b. Prices of related goods
The price of other goods can also affect consumer’s demand for a product.
Goods and services that can be used for the same purpose are Substitute.
When two products or services are substitutes, the more a person buys of
one, the less that person buys the other product or service. For example:
CD player and MP3 player, LCD TV from different brands, etc. In
comparison to substitute product or service, Complementary products
and services are used together. When two goods are complements, the
more consumers buy of one, the more they will buy of the other. Examples
include compact discs and CD player, washing machine with water and
detergent, and many more.
c. Tastes
Consumers can be affected by an advertising campaign for a product
which affected the consumer’s taste and decision when trying to purchase
a product.
d. Population and demographics
Population and demographic factors can affect the demand for a product.
As the population increases, the demand is also increases. The
demographics of a population, or the characteristics of a population
based on age, race, and gender, can also take effect of the demand. For
example, when a certain area’s population has started to be overtaken by
a certain race, the demand of a product would start to change as a certain
race has their own preferences of a product.
e. Expected future price
Consumers choose not only which products to buy, but also when to buy
them. If enough consumers become convinced that a certain product will
be selling for a lower price three months from now, the demand for that
product will decrease. Alternatively, if enough consumers become
convinced that the price of that product will be higher in near future, the
demand will increase due to the consumers who want to avoid the price
changes.
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B. Supply
The definition of supply is the amount of products or services available at the
market for sale (Berk, 2007), or the amount of products or services a firm is
willing and able to provide at a given price (Hubbard, 2008). The law of
supply states “Increase in price case increases in the quantity supplied and
vice versa, ceteris paribus” (Hubbard, 2008). This law of supply causes the
graph sloped upward as follows:
Figure 2.3 – Supply Curve
Price
Quantity
Source: Hubbard,2008.
Like the demand curve, the supply curve is also able to shift left to right for
these reasons:
a. Prices of Inputs
The factor most likely to cause the supply curve for a product to shift is a
change in the price of an input, or any material used in the production of a
good or service.
b. Technological Change
Technological change is a positive or negative change in the ability of a
firm to produce a given level of output with a given quantity of inputs.
Shift from this factor can happen from the increase of production without
any, or minimal, changes from the input.
c. Prices of Substitutes in Production
Firms often choose which good or service they will produce. Alternative
products that a firm could produce are called substitute in production.
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When this substitute in production happens, then the production of the
good or services will decrease.
d. Number of Firms in the Market
A change in number of firms in the market will change the supply that
enters the market. When new firms enter a market, the supply will
increase and also applies when the opposite happens.
e. Expected Future Price
When a firm expects that the price of its product will be higher in the
future, then it has the incentives to decrease supply for the moment and
increase the production later. (Compiled from Hubbard, 2008)
2.2 Supply Chain Management
2.2.1 Definition
Supply Chain has been defined by many that suggest different things.
Mentzer (2001), for example, defined it as “a set of three or more entities
directly involved in the upstream and downstream flows of products, services,
finances, and information from the source to their customers.” Ayers (2001)
defined supply chain as knowledge movement that includes all activities related
to the back flow of product from customers back up to the chain in the form of
product return, reuse and recycling. According to Harland (1996), Supply Chain
Management is the management of a network of interconnected businesses
involved in the ultimate provision of product and service packages required by
end customer. From all of these definitions, we can conclude that Supply Chain
Management is the knowledge and management of the flow (supply network) of
products or services, along with information and money, from the source (raw
material) to user end.
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Figure 2.4 – Supply Chain Model
Source: Webber State University
2.2.2 Significance of Supply Chain Management
Most of the studies of Supply Chain Management stated these
significances:
A. Increase trust and bond between participants within the supply chain.
By applying supply chain management, usually there is a signed agreement
between parties along the supply chain, which include an agreement of more
controlled price. That way, the supplier can be assured of an everlasting
customer.
B. Lower inventory cost.
The application of supply chain management enables the downstream entity
to apply the zero inventories and just in time inventory system. That way, the
downstream entity can press the inventory cost to minimum and reduce the
bullwhip effect.
C. Keep the price competitive.
Combining both points above, the downstream company can lower the cost
down and increase the margin while maintaining the price to stay low.
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2.2.3 Downside of Supply Chain Management
Along with the positive, there will be a negative side of everything.
Studies of Supply Chain Management have identified these downsides:
A. Leak of company’s secret
Since the supply chain management is coming from different entities from a
single industry working together, a downstream company’s secret could be
recognized by the upstream company. Especially if the upstream company
supplied the most important component of the product or services.
B. Fragmentation of ownership
Once again, supply chain management is comprised of different companies
from an industry working together as one. That being mention, different
companies also have different goals and visions. This difference could create
clash of interest between participants. (Compiled from Ayers, 2008; Petrovic‐
Lazarevic, 2007; Mentzer, 2001)
2.3 Vertical Integration
2.3.1 Definition
Vertical expansion referred to as an act of expanding a company’s line of
business by creating or acquiring the previous or next step on the product’s
supply chain. In many literatures, vertical expansion is termed vertical integration
since the term integration defined in the English Dictionary as an act of
combining or organizing into a whole. In other word, integration is to organize
different entities, either from a specific company group or not, so that they
combined into one. According to a journal of vertical integration by Paul L.
Joskow, there are many interpretation of vertical integration and there will be no
unified definition of vertical integration due to the market imperfections
(Joskow, 2006). One of the commonly used definitions of vertical integration is
the combination of technologically distinct production, distribution, selling,
and/or other economic processes within the confines of a single firm that
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represent a decision by the firm to utilize internal or administrative transaction
to accomplish its economic purposes (Porter, 1980).
2.3.2 Types of Vertical Integration
According to Michael Porter (Porter, 1980), vertical integration can be
achieved by:
A. Full Integration
Full integration refers to integration from within the company by one entity
fully supplies the other.
B. Tapered Integration
Tapered integration, however, means that the company only produces most
of their requirements and buys the rest.
C. Quasi Integration
Quasi Integration means that making use of debt or equity investments or
other means in order to create alliances between vertically related firms
without full ownership. This type of integration is considered cheaper than
full acquisition.
2.3.3 Strategic Benefits and Costs of Vertical Integration
Vertical integration has its benefits and costs that are important and
crucial. One of benefits of vertical integration, especially backward integration,
most depended on the volume of products or services the firm purchases from or
sells to the adjacent stage relative to the size of the efficient production facility in
that stage. The volume of purchases of the firm who do backward integration
must be large enough to support an in house supplying unit and reap all
economies of scale in producing the input. Excess of production can be sold in an
open market.
Other benefits of integration are; increase efficiency from combining both
operations, costs for internal control and coordination for Just‐In‐Time storage
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strategy can be lowered, lowering cost of gaining information about the supply
market and decreasing the cost from maintaining relationship.
Along with benefit, there’s also cost that goes along with integration.
Costs that involves in integration are; cost of overcoming mobility barrier,
increase in fixed costs, reducing flexibility in switching partners, higher exit
barriers, and many other cost that comes with integration.
2.3.4 Strategic issues in Upstream Integration
Since this study discusses upstream integration or expansion in particular,
then it is important to discuss strategic issues that come with upstream
integration. Very often the specifications for component parts reveal the key
characteristics of the final product’s design or manufacture to the suppliers.
Therefore, the company need to protect their design and specification by
produce the parts internally. If the firm cannot produce the component
internally, then supplier will have a bigger bargaining power and will pose a
threat of entry. Moreover, upstream integration can allow the firm to enhance
differentiation. By gaining control of the production of certain products, the
company can produce a product that’s distinguishable from others. (Compiled
from Porter, 1980; Joskow, 2006)
2.4 Projected Financial Statements
2.4.1 Definition and Explanation
Projected financial statements are tools to estimates the future financial
performance of a business. Projected financial statement can be used for
creating a benchmarking for the future, to estimate the effect of proposed
operating changes, anticipate the firm’s future financial needs, and to estimate
future cash flow.
The financial planning process can be broken into these steps:
A. Project financial statements and use the projections to analyze the effects of
the operating plan on projected profits and financial ratios
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B. Determine the funds needed to support the five‐year plan.
C. Forecast funds availability over the next five years which includes estimating
the funds to be generated internally as well as those to be obtained from
external sources. Any constraints on operating plans imposed by financial
restrictions must be incorporated into the plan.
D. Establish a performance‐based management compensation system.
In order to start creating a financial statement, it’s important to forecast
the sales figures since it is the main source of funds that runs the company. Sales
forecast generally starts with a review of sales during the past five to ten years.
By using a present value equation of
݁
ܲ‫ ݁݊݁ܲݑ݊݁ܲ݊݁ܲ݊݁ܲ ݐ݊݁ݏ ݁ݎ‬ൌ
ி ௨௧௨௥௥
௥௔௔௨௥
,
ሺଵା௥௥௧௥௥௥௦௧ሻ௥௥
ೌ ௥
After this, the percentage of growth can be derived from there.
Once sales have been forecasted, we must forecast future balance sheets
and income statements using the percent of sales method which comprised of 4
steps, which are analyzing
the historical ratios, forecasting the income
statement, forecasting the balance sheet, and raising the additional funds
needed. Analyzing the historical ratios is needed to view the company’s
performance data and compare it to the industry or rival as a comparison. In
forecasting the income statement, the data inside the income statement will be
forecasted using corporate goals and trends. The same set of rules is also applied
for forecasting balance sheet. In this final step, raising the additional funds will
be needed to replenish the shortage by taking short term loan.
Alongside with present value, the projected financial statement can be
used to find the Net Present Value and Internal Rate of Return of a project. Net
Present Value (NPV), as defined by Jerry Weygandt in Accounting Principles book,
is referred to a value taken from discounting net cash flow to their present value
and comparing it to the capital outlay required by the investment (Weygandt,
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2002). Berk and DeMarzo has defined NPV, in a simpler way, as the difference
22
between the present value of a project or investment’s benefits and the present
value of the costs (Berk, 2007). Therefore, to find the NPV of a project, the
formula is:
ܲ݁݊ܲ݁݊ܲ݁݊ ൌ
ܲ݁݊݁݊݁݊ ൌ
௥
Σ ܲ݁݊ܲ݁݊ ܲ‫݄݊݁݊݁ܲ ܽݎ‬௥‫ ݓ‬ൌ Σ ܲ݁݊ܲ݁݊ ܲ݁݊‫ݎ‬௥ܲ݁݊ܲ݁݊ܲ݁ ݁݊‫ܥ ݐ‬௥‫ݐݏ‬
ܲ‫݊݁݊݁݊݁ܲܫ ݄ ܽݎ‬௥‫ݓ‬
ൌ
ሺ1
݁ ݁ ௬௥௔௔
௔ ܲ݁݊݁݊‫ݐ݊݁ݏݎݐ‬ሻ
௥
ܲ‫݊݁ܲ݊݁ܲݐݑ݊݁ܲ ݄ ܽݎ‬௥‫ݓ‬
݁ ݁ ௬௔௔௥
ሺ1 ௔ ܲ݁݊ܲ݁݊‫ݐ݊݁ݏݎݐ‬ሻ
Weygandt also provide the definition of Internal Rate of Return (IRR),
which is the rate that will cause the present value of the proposed capital
expenditure to equal the present value of the expected annual cash inflow
(Weygandt, 2002). In other word, IRR is the interest rate that sets the net
present value of the cash flow equal to zero (Berk, 2007). The formula for IRR is:
ܲ ܽ ݄ ܲ‫ܫ‬௥‫ݓ‬
‫ݎ‬
ܲ ܽ ݄ ܲ݁݊‫݊݁݊݁ܲݐݑ‬௥‫ݓ‬
‫ݎ‬
݁݊ܲ ݁݊݁݊ ൌ
0
ൌ ௥
݁
݁ ݁ ௬௥௔௔
݁ ௬௥௔௔
ൌ
௥
ሺ1 ௔ ܲ݁݊݁݊‫ݐ݊݁ݏݎݐ‬ሻ
ሺ1 ௔ ܲ݁݊݁݊‫ݐ݊݁ݏݎݐ‬ሻ
2.4.2 Downside of Projected Financial Statement
Projected financial statement is developed using controlled parameters
that previously defined. These parameters are defined using the historical trend
and the company’s expectation, which contradict the fluctuating nature of the
market. Therefore, due to the imbalance between expectation and reality,
financial projection can’t be the source of information but can be the company’s
benchmark that must be attained. (Compiled from Weygandt, 2002; Berk,2007)
2.5 Corrugated Carton Box
2.5.1 Definition
Corrugated carton box, or corrugated carton board, is the product of
Wirajaya. It consist of, at least, 3 layers of paper which formed by a piece of
paper with a wavy contour (fluted paper or medium) glued inside two smooth
surfaced papers (kraft liners or liners). Corrugated carton box normally used for
packaging use because of its rigid properties and inexpensiveness. Nowadays,
corrugated carton box are using recycled papers from used carton boxes. To
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recycle a paper, it must be derived from similar product to preserve the quality
of the paper. For example, paper used for corrugated carton box were taken
from recycling old corrugated carton box while bleached papers used for daily
office activity were recycled from another bleached papers.
2.5.2 History
Since the invention of paper in China around 250 BC, paper has been used
as a writing media. Some attempts to use paper as a packaging material has been
done, from thickening the width of the paper to the creation of a corrugated
paper by Edward C. Healey and Edward E. Allen which patent was approved in
1871. All of these attempts then perfected by Oliver Long in 1874 who joined the
corrugated paper with two liners glued to the side which become the corrugated
cardboard that we know today. In 1890, Robert Gair invented the precut
paperboard boxes due to an accident. This invention eases up the creation of
corrugated carton box that every factory uses.
2.5.3 Corrugated Carton Box Production Process
The production cycle of corrugated carton box contains two different line
of production, the paper making production line and corrugated carton box
production line.
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a. Paper Making Production Line
Figure 2.5 – Paper Making Process
Source: Compiled from Different Sources
The paper making production, as described in the picture above, is processed
through several major steps, pulp making process, fourdrainier process, and
cutting and rewinding process. Firstly, in the pulp making process, used
corrugated carton box is inserted into the pulper bin to be destroyed and
transform it to pulp. After the process is finished, the pulp is pumped out of
the bin to the fourdrainier process. Fourdrainier process is composed of four
different processes that are described in the picture. Pulp is poured and
filtered in the roller and then pressed and stretched in the wet press process.
In the dryer process, heated air is used to draw water out of the paper while
the paper is stretched further. Calender section is a process where further
smoothing and stretching is applied. Different settings in this section can be
applied to differentiate the paper’s surface and thickness, thus producing
liner and medium paper that could have different weight, thickness, and
quality. Before sent to the corrugated carton box producer, the paper is
rewind and cut to be rolled into several uniformed and smaller, yet
manageable, finished products which are rolls of liner and medium paper.
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b. Corrugated Carton Box Production Line
Figure 2.6 – Process of Making Corrugated Carton Box
Source: Compiled from Different Sources
After the paper making process is finished, the new paper, both liner and
medium paper, then sent to the corrugated carton box producer. The
corrugated carton box production line is starting with turning smooth
medium paper into fluted or corrugated medium paper. After turning
medium paper into fluted medium paper, then the medium paper is placed
and glued in between two liner paper to form corrugated carton board. In
this form, corrugated carton box maker could process customization for each
of their customers. Customization could be in form of exterior printing, pre‐
cut dimension, or even the shape of the finished product.
Figure 2.7 – Sample of Different Form and Sizes of Corrugated Carton Box
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2.5.4 Significance in Today’s Application
Corrugated carton box is being used to this day as a packaging material of
all sizes. From big name companies to small scale companies uses corrugated
carton box as packaging tools that help transporting goods locally and
internationally. Following the growth of the world’s economics, demands of
corrugated carton box are increasing of which signals an everlasting industry
lifecycle. Even though it is sometimes considered as a tertiary object, but its
usefulness has made corrugated carton box become a daily necessity to
humankind. (Compiled from Wikipedia, 2010; Wirajaya, 2006; CIC, 2009;
Boxboard Containers Magazine, 1998)
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