Grow greener

Description

Established in 1963, Sredna Gora AD has evolved into a major Bulgarian enterprise, originally founded as a state entity producing furniture, windows, children''s toys, and various wood products. Presently, the company specializes in crafting solid wood chairs, bar stools, and children''s high chairs, securing its position as one of Europe''s premier manufacturers of solid wood chairs. With a remarkable 42-year partnership with IKEA and a strategic alliance with the Norwegian company Stokke since 2011, particularly for the production of early childhood chairs known as "Tripp Trapp," Sredna Gora AD has established itself as an industry leader.

The primary goal of the project is to bolster the company''s competitiveness by streamlining production processes and enhancing the management of generated waste. The proposed investment encompasses the introduction of an Ultra Violet Roller Coating Line and a Four-Sided Molding and Profiling Machine. These advancements are poised to optimize lacquering and profiling processes, accompanied by an investment to augment the pellets production line and enhance working conditions.

This project represents a significant value addition for the company, with the creation of ten new jobs in the region serving as a key social benefit. Beyond enhancing competitiveness, the initiative contributes to regional economic growth and underscores Sredna Gora AD''s commitment to sustainable and efficient manufacturing practices.

Summary of project results

Sredna Gora AD was facing a number of challenges that directly impacted its operational efficiency, environmental compliance, and competitive edge. These challenges are increasingly critical in today’s market, where sustainability, resource efficiency, and cost management are key drivers of success. Here’s an expanded examination of each of these challenges:

• Low Material Efficiency and Resource Utilization: Inefficient resource usage reduces productivity, limiting the company’s ability to scale up production or respond to shifts in demand. In addition, increased material costs and waste-related expenses impact the company’s bottom line and limit funds for other growth initiatives. Without improvement, Sredna Gora AD risks falling behind more efficient competitors.
• Underutilization of Waste and Limited Recycling Capability: Disposal of waste not only increases costs but also generates a larger environmental footprint. Moreover, underutilized byproducts represent lost opportunities for efficiency gains and product diversification, such as in pellet production or secondary product lines. Without a more robust recycling system, Sredna Gora AD cannot maximize the full potential of its resources, impacting both profitability and sustainability goals.
• Lack of Green Technology Integration: The company’s reliance on traditional production processes results in higher energy consumption, greater CO2 emissions, and a larger environmental footprint. These legacy technologies are not only less efficient but also more costly in terms of energy usage, making the company vulnerable to fluctuating energy prices. Furthermore, these outdated methods do not meet modern environmental standards, which can harm the company’s reputation among increasingly eco-conscious customers. As stricter environmental regulations emerge, companies like Sredna Gora AD must innovate to stay compliant and competitive. Failing to adopt green technology limits the company’s ability to reduce operational costs associated with energy consumption, while also missing out on opportunities to appeal to markets that prioritize sustainable products. The lack of green technology also places the company at risk of penalties for non-compliance with regulations, which could further strain finances.
• Environmental Impact and Regulatory Pressure: With mounting regulatory pressures around emissions and waste management, Sredna Gora AD was facing a challenging environment. High emissions and poor waste practices not only contribute to environmental harm but also expose the company to potential fines, sanctions, or reputational damage. Failing to address these issues could impact customer perception, as environmentally unsustainable companies often face public scrutiny, especially in markets where eco-friendly options are available. Additionally, meeting regulatory standards can be an opportunity for growth, as compliance can open doors to eco-friendly certifications that are highly valued by customers and business partners alike.
• High Production Costs and Cash Flow Constraints: Inefficient production processes increase operational costs, reduce margins, and place strain on cash flow. For Sredna Gora AD, these high costs mean less flexibility for reinvestment in new technologies, product lines, or market expansion. Additionally, fluctuating material and energy costs can further impact financial stability, making it challenging to achieve consistent growth.
• Implications: Without optimized production processes, the company will continue to experience inflated costs, limiting profitability and hindering reinvestment in essential upgrades. Cash flow constraints also make it difficult to scale operations or pursue strategic market opportunities, reducing Sredna Gora AD’s competitiveness. In the long term, high production costs can prevent the company from offering competitive prices or achieving the economies of scale needed to succeed in cost-sensitive markets.
• Increased Market Demand for Sustainable Construction Materials:  The construction sector, a key growth area, is increasingly focused on sustainable materials due to regulatory shifts and a market-driven push for eco-friendly buildings. Sredna Gora AD faces the challenge of adapting its product lines to this trend to avoid losing market relevance. Without diversification into sustainable construction materials, the company may miss out on new revenue streams and growth opportunities.
• Implications: If Sredna Gora AD cannot meet the demand for eco-friendly products, it risks being sidelined in a lucrative market, reducing its growth potential and overall competitiveness. Moreover, competitors who can meet these demands will likely take the lead, especially in markets that are prioritizing sustainable development. By not adapting to this trend, Sredna Gora AD risks becoming obsolete in a sector where consumer and regulatory pressures increasingly favor companies with green credentials.

The investments made by Sredna Gora AD target three main areas of their production process, each designed to address specific inefficiencies, increase capacity, and enhance environmental sustainability. 

1. Investment in UV-Roller Coating Technology for the Lacquering Process

The company invested in advanced UV-roller coating equipment to replace the outdated spray-based lacquering method. This new technology is more efficient, reduces waste, and has a lower environmental impact than the previous system. The UV-roller system is projected to eliminate around 16 tons of lacquering waste annually. By applying lacquer more precisely and with minimal overspray, the process drastically reduces the amount of lacquer needed, leading to cost savings and less waste. This technology upgrade has increase the company’s lacquering capacity by 50%, allowing Sredna Gora AD to handle more orders, improve throughput, and reduce bottlenecks.

2. Introduction of a Four-Side Molding and Profiling Machine

To improve precision and reduce material loss, Sredna Gora AD has invested in a four-side molding and profiling machine. This equipment is tailored to process challenging wood elements, especially longer and thinner pieces, which have been prone to warping in previous production processes. The new machine minimizes the risk of wood twisting and warping, which previously led to approximately 482 tons of unusable wood annually. By ensuring straighter cuts and better alignment, the new equipment reduces defective output, lowering material costs and increasing usable output.

. Expansion of Pellet Production Capacity

To address the high volume of wood waste generated from solid wood chair production, Sredna Gora AD has doubled its pellet production capacity. Previously, the company could only process 2,836 tons of wood waste annually, leaving the remainder to be either burned or sent to landfill. With the new system, the company will fully utilize its wood waste and address growing demand for wood pellets.

 

The project brought substantial benefits to Sredna Gora AD, not only by increasing production capacity to meet contractual demands but also by enhancing environmental sustainability and operational efficiency. The investments target specific bottlenecks, which led to improved processes, waste reduction, and the creation of additional revenue streams. Here are the detailed results based on each aspect of the project:

1. Lacquering Process Upgraded to UV-Roller Coating Technology

• Increased Production Capacity: By replacing the traditional spray-based lacquering system with a UV-roller coating technique, the company boosted its production capacity. This new technology allows for a more efficient, faster coating process, enabling the company to handle larger production volumes and meet increasing customer demand.
• Environmental Impact:
  • Waste Reduction: The new UV-roller coating equipment eliminated approximately 16 tons of lacquering waste annually. This reduction in waste not only reduces disposal costs but also lessens the environmental burden associated with chemical waste.
  • VOC Emission Reduction: The UV-roller coating technology will decrease volatile organic compound (VOC) emissions by nearly 9.8 tons per year. Lower VOC emissions mean a significant reduction in air pollution and a healthier work environment, helping the company align with environmental regulations and industry standards on air quality.

2. Installation of Advanced Four-Side Molding and Profiling Machine

• Reduction of Wood Waste: The introduction of this advanced four-side molding and profiling machine enabled the company to handle longer, thinner wood elements (such as the Tripp Trapp chair legs) with greater precision and stability. The new system prevents twisting and distortion of wood pieces during production, reducing unusable waste. In 2019 alone, approximately 482 tons of wood were wasted due to twisting issues; the new technology is expected to drastically reduce this waste.
• Increased Production Capacity: This new molding and profiling equipment has increased the production capacity of the company by 37%. By minimizing production waste and ensuring that more raw materials can be converted into final products, the company is now better equipped to fulfill larger orders and meet increased market demand.

3. Expansion of Pellet Production Capacity

• Full Utilization of Wood Waste: With the new pellet production system, Sredna Gora AD has doubled its pellet production capacity, reaching approximately 5,900-6,000 tons per year. In 2020, the company generated 5,206 tons of wood waste, but only 2,836 tons were converted into pellets due to capacity limitations. The new system will allow Sredna Gora AD to process all generated waste, eliminating the need to burn or dispose of it in landfills, which are both environmentally damaging.
• Additional Revenue Stream: The production of pellets transforms wood waste into a high-value product that meets growing demand in both domestic and EU markets. Wood pellets, widely used in electricity generation and heating, have become a profitable commodity, and Sredna Gora AD is well-positioned to capitalize on this demand. Increased pellet production is expected to provide a new revenue stream for the company, contributing to overall profitability and creating export opportunities within the EU.

4. Overall Project Impact and Results Summary

• Increased Competitiveness: By addressing bottlenecks and enhancing production processes, Sredna Gora AD will significantly improve its production capacity, enabling it to meet the requirements of its contracts and capitalize on new business opportunities.
• Environmental Benefits: The project introduces a range of environmental benefits, including reduced lacquering waste, lower VOC emissions, and a higher rate of wood waste utilization. These improvements position Sredna Gora AD as a more sustainable and environmentally responsible business, meeting current regulatory standards and potentially opening doors to new environmentally-conscious markets.
• Cost Savings and Revenue Growth: Optimizing waste usage through pellet production and reducing waste in the lacquering and molding processes directly reduce operational costs. These cost savings, combined with the new revenue from pellet sales, will strengthen the company’s financial position, increase cash flow, and support future reinvestment.
• Alignment with Market Trends: The project aligns Sredna Gora AD with key trends in the construction and energy sectors, particularly the demand for sustainable materials and renewable energy sources. By expanding into pellet production and improving wood material efficiency, the company can meet these market demands and expand its customer base both domestically and internationally.