Alexey Panshin, CEO, Giprobum: “The designer’s task is helping the customer understand in as much detail as possible what it is they want”

Large Russian timber companies have lately been purchasing design institutes to make them a part of their groups. Such institutes perform a series of design operations and render other services on renovation and greenfield construction of pulp and paper mills, and also design individual facilities in the timber industry and in related sectors. A recent example is the purchase of Giprobum by Segezha Group. Before being included in this Group, the company was a part of an institute that existed in the Soviet times and designed pulp and paper industry enterprises. Over 70% of pulp & paper facilities in Russia and the CIS countries were built based on designs from Giprobum. 

WhatWood Agency talked to Alexey Panshin, CEO at Giprobum, to try and understand what role such design institutes played in operation of timber enterprises, what challenges can emerge during design, how the problem of staff shortage is solved in the industry, why not a single pulp and paper mill was built in the contemporary history of Russia, and much more.

What is the range of operations performed by Giprobum which you are currently leading?

Giprobum develops design and cost estimation documentation at all stages of creating a project, from the origin of an investment idea to construction supervision during project implementation at the customer’s site. Analyzing technical components of various designs also plays a great role in our work.

We act as the general designer of large-scale investment projects too. We remain liable to the customer that receives the full package of design and cost estimation documentation.

What recent projects by Giprobum would you call the most prominent?

We have just finished analyzing design solutions to assess the technical viability and financial sense of building one of production venues by Segezha Group (which Giprobum is now a part of) in Alabuga Special Economic Zone.

We have recently analyzed design documentation (developed by another designer) for construction of a wood pulp plant in Russia, i.e. a company purchased a completed design and Giprobum conducted an independent expert assessment.

What new approaches, methods and technologies does Giprobum use during the design?

The design institute has now learnt the technology of terrestrial 3D laser scanning. Data received with this technology helped build three-dimensional point models of facilities like a cooking shop and a regeneration shop, as well as 3D models.

Our current priority is learning the Building Information Modeling (BIM). Implementing this technology will accelerate the process of developing design and detailed documentation and improve the precision and quality of the final product. There are numerous utility networks at pulp and paper facilities, and these are virtually impossible to design without conflicts using only CAD tools. BIM makes it possible to verify models for collisions and receive automated reports that highlight the exact network intersection points. You can therefore avoid all mistakes as early as at the design stage, which will subsequently prevent a huge number of problems at the construction stage.

Another advantage of Building Information Modeling is automated work scope and materials calculation based on an information model, which makes it possible to avoid overspending. Some advanced companies report that BIM application saves 3 – 5% of reinforcement steel per capital facility, which translates into thousands of tons of steel in a large facility.

Do you always implement a project through your own efforts alone? Or do you outsource some of the work?

If a project is complicated, it includes dozens of various specialty areas, some of which require narrow specialization, e.g. designing automatic firefighting systems. So it is quicker and more efficient to hire a specialized designer to perform this type of work.

But generally, we are liable to the customer for developing the whole package of documents and for successfully passing the general state expert review with a positive opinion.

Your institute was recently purchased by Segezha Group. Why do you think large groups have been so interested in design institutes of late? 

Giprobum became a part of Segezha Group in 2020. I believe this decision was made because the Group entered a stage of active growth at that time, which would be impossible without implementing a large number of various investment projects. At some point, the shareholders and the management team realized that it made sense to develop in-house design and engineering skills instead of outsourcing them in the market.

Is it worth the effort?

Firstly, it is cost effective because the cost of design operations is always lower than the market price. Secondly, it is often significantly faster: the designer of course prioritizes projects for enterprises within the group. And the third reason is that the accumulated skills from already developed designs remain in-house.

Over the past three years, Segezha Group has developed and implemented over 100 various investment projects. That is why we now have a knowledge and skill base that enables us to develop each next design more efficiently.

What share of all Giprobum orders do Segezha Group’s projects account for?

At the moment, enterprises from Segezha Group account for about 70 – 75% of Giprobum’s portfolio of orders.

What companies are your key customers?

Our key customers are pulp and paper mills: Segezhsky PPM, Sokol Pulp and Paper Mill, Segezha Packaging, as well as plywood mills and sawmills: Onega Sawmills and Lesosibirsky LDK No.1. Many projects require expertise of several enterprises.

Segezha Group is quite a diversified wood processing company, so Giprobum implements not only projects for pulp and paper companies. We also deal with woodworking, wood pellet production and plywood production.

One of the new areas we are launching is production of CLT panels and various products made of them that are used in wooden housing construction. Segezha Packaging is also in quite a specific segment. This creates a good opportunity for Giprobum as a design institute to develop our expertise in several areas.

Could you say that you still focus on pulp and paper mills?

Over the past three years, about 60% of all projects from Giprobum’s portfolio have had to do with pulp and paper mills. These are mostly projects related to upgrading or building new paper and cardboard-making machines.

You also develop designs for third-party companies, while being a part of Segezha Group. Doesn’t the Group mind that it shares its technology insights with competitors?

The companies that ordered design work from us are not our competitors. The wood and paper industry is extremely diverse, and producers of wood pulp never compete directly with producers, say, of corrugated packaging or waste paper. So there is enough space in the industry for everyone. There is no direct competition.

Moreover, there are requests for designing individual production sites from companies that could be called direct competitors of Segezha Group.

When we are talking about industry insights, these are all open secrets. That’s not the point. If we as designers can offer a competitive service on developing design or detailed documentation, any customer in Russia will select us; if not, they will select someone else. And whether we are a part of Segezha Group or another group is secondary.

What key problems do you face during the design?

It often happens that the very first stage is developing the terms of reference that the customer issues to the design firm. Sometimes this is a quick or even a formal stage. At the same time, we believe that extremely detailed and meticulous preparation of the terms of reference ensures project success in the future, which means not wasting any extra time, no rework and no return to previous stages. That is why developing the initial terms of reference is an extremely important step.

The problem occurs when this stage is purely formal and hasty. It often happens that the customer doesn’t entirely understand what they want: “I want I know not what. And you, the designer, must help me understand what it is I actually want.” This happens all the time. So the designer’s task is helping the customer understand in as much detail as possible what it is they want.

Another challenge is the skills of designers themselves. From a business viewpoint, the key success factor of design is skilled human resources. I mean people who really possess unique competence in designing specific areas. The second factor is how interaction between employees is organized within the project.

Correspondingly, if you have enough skilled employees and interaction between them is organized correctly, you will most probably do well as a designer. Unlike in production, you do not depend on raw materials, the sales market or technologies. Everything here is determined by the intellectual capacity. Yes, the software you use matters a lot, but it can be purchased.

I should note that the above problems are typical for design work in general, not only at Giprobum.

You have mentioned that having skilled human resources is very important for any company. Does the industry face the problem of a staff shortage, specifically with designers?

Yes, of course it does. And not only with designers. There is generally a problem with the availability of skilled personnel, specifically in the pulp and paper industry.

Why do you think there is such a staff shortage? Are you able to somehow solve this problem?

Since the late 90s, when the industry as a whole was in dire straits, a degree in engineering and technology was not very promising as a career path. When pulp and paper companies started developing, staff training couldn’t catch up with the speed of the industry development.

As for designers, this area requires even narrower focus. Educational institutions do not teach specifically design for the pulp and paper industry. Most of the current Giprobum employees have Construction Engineering backgrounds but they were not taught to design using specialized software. They usually learn these skills in practice.

Now, however, the design business requires it, so many educational institutions provide training specifically in Computer-Aided Design systems, including design for the pulp and paper industry. These are trends of literally a couple last years.

The problem of talent shortage in design for the pulp and paper industry is solved in various ways: either through retention and continuous advanced training of in-house employees, or by headhunting high-performing, experienced designers in other design institutes, including our competitors. There aren’t many design firms specializing in the pulp and paper industry: literally 5 – 7 companies in the Russian market. Sometimes we find practitioners in the operations who can be taught design. Sometimes we find versatile designers in other industries beyond pulp & paper production. For instance, it doesn’t matter to a professional who designs the power supply which industry to work in.

Why do you think no pulp and paper mills have been built in the contemporary history of Russia?

Besides various challenges with providing infrastructure, financing and other, the reason is often more mundane. Even an industry-specific investor always has a choice: investing $2 billion in building a wood pulp plant producing a million tons per year, or investing the same amount in another project where the ratio of risks, deadlines and return on investment will be more propitious.

It so happened that over the past 20 – 30 years, other alternatives looked more attractive to investors in most cases, rather than investing in a new pulp and paper mill. That is why no such mills have been built.

The payback period of a pulp and paper mill is usually at least five years. You assume enormous risks, you need many things to turn out just right, especially concerning logistics. There are very many factors at play, including even the availability of skilled employees who will work at this mill. This is indeed a daunting task.

What do you think about the idea of building small-capacity wood pulp mills producing 100,000 – 200,000 t per year? Can such an initiative be implemented in Russia with proper quality?

I think it can. Logistics issues are not so critical for a small production facility like that. The downside, however, is the lack of economy of scale: the smaller the production output, the more difficult it is to return the investment in the project.

Such small production sites, so-called Brownfield projects, are usually launched using already existing infrastructure. Then specific capital expenditure per ton of future product may be low enough to return the investment in such a project under the same circumstances. So everything depends on specifics, we need to consider it on a case-by-case basis.

How did the current economic situation caused by the sanctions-related restrictions affect the operations at Giprobum? Are there fewer orders in the industry this year?

We haven’t yet seen the number of orders declining, although we think such a scenario is possible. This is balanced out by the fact that there are still quite a lot of projects.

It is no secret that key producers of equipment for the pulp and paper industry are in Europe. Their equipment is no longer available after the sanctions-related restrictions were introduced, so Chinese engineering companies are now intensifying their efforts, as they see a window of opportunity opening.

Chinese producers are slightly behind the most advanced European designs in a number of applications. However, China learns very quickly, so we think it will take some time for Russian investors and customers ordering designs for the pulp and paper industry to either reorient towards Chinese equipment producers or rely on the revival of the domestic machine-building industry. It is all very complicated but this is the challenge of our era.

By the way, our management team and shareholders expect that Giprobum will not remain a mere design institute but will become somewhat of an engineering center. We are now developing new disciplines that concern replacement of conventional European equipment vendors with other companies from either friendly countries or Russia.

What would you answer to indignant ecologists who usually protest against building large pulp and paper mills?

This is an ambiguous subject. We need to look at the details on a case-by-case basis. It often happens that environmental issues associated with building new plants, specifically pulp and paper mills, are raised for reasons that are far from noble. They may serve political purposes or competitive struggles.

A reference book of best available technologies, including those in the pulp and paper industry, has existed in Russia since 2015. It is now being reviewed. We also participate in this work.

The reference book stipulates strict requirements at the legislative level. Each new project must comply with the requirements of the best available technologies. This is already a safeguard guaranteeing that every next project will definitely be no worse and no more dangerous in terms of environmental impact than an existing or a previous project. The government controls this.

The ESG agenda is extremely popular now. In my opinion, the environment mustn’t be considered in isolation, without taking into account how the project affects other components of people’s lives, such as employment, development of the territory through additional tax revenues, development of infrastructure and other.

The environmental aspect itself can be interpreted and used for either good or bad purposes. So you need to go into details of each specific case and understand the interests of every stakeholder.