Frankfurt Supply Chain

Building an Intelligent Publishing Supply Chain Leveraging technology and communications to improve supply chain efficiency, reduce costs and increase profits Michael Cairns Managing Partner, Information Media Partners January 10, 2008

Where We Are Today
Past decade of information technology investment in medium to large publishing companies:
Focused on improving basic cost structures of their organizations
Investment in updating editorial systems, particularly in educational and journal publishing
Reengineering of publishing operational and financial processes
Investment justified as part of Y2K solution, return has in many cases not met the promise of the investment

An Efficient Supply Chain Will Be Publishers’ Goal
Next area of operational improvement and cost reduction is the supply chain
Leverage investment made in operational systems
Conform to new industry standards for identifying titles (ISBN-13), transaction standards and related metadata required for more efficient supply chain processes
Integrate internal supply chain processes with those of suppliers and customers, to gain efficiencies of sharing information on supply and demand across the supply chain
Only operational area where material expense savings can be made
In context of migrating content to online delivery

Information is the Key Ingredient
Many publishers have in place transaction data warehouses
New operational systems provide cleaner transaction information for data warehousing and analysis
Enables analytics by Customer, Author, Genre, Format, etc.
Tools for projecting sales of new titles based on past performance of similar titles
During acquisition, expected revenue streams modeled to determine advance and other contractual obligations
For production planning: initial printing and subsequent reprint planning
These analytics have made publishing programs more intelligent
Printers, Distributors and Booksellers are also capturing their operational performance data for analytics

Publishing Industry Key Business Issues
The publishing supply chain is inefficient due to the lack of visibility of day-to-day demand & stock positions
Average fill rates no higher than 85% are typical. 15% of sales are missed, deliveries are incomplete, inaccurate, etc.
Excessive inventory levels result in excessive capital costs, obsolescence, damage, shrinkage
Some publishers hold over 300 days of stock
Return rates of 40% are not uncommon in our industry

Visibility of Operational Data is Critical
Real time visibility of POS data, multi-level stock information and fill rates would help:
Publishers
Adapt production to demand
Re-route stock rather than produce additional inventory
Anticipate and pre-empt stock-out situations
Spot and troubleshoot logistical problems
Retailers
Re-route stock rather than order new inventory
Demand driven inventory
All
Reduce costs for returns management
Industry more healthy; Productive use of capital

Adding Intelligence to the Supply Chain Adapted from “Information Architects,” Richard Saul Wurman, editor, 1994 and Price Waterhouse, 1999. Manufacturer Truckers Retailers Customers Distributors Management Truckers
Old Environment
Partially informed
Push / pipeline model
One-way info flow
Database and Data Mining Web Infrastructure Telephony Infrastructure Manufacturer Retailers Customers Transportation
Transportation
Overnight Delivery Distributors Management Direct Marketing Infomediary and Outsourced Service Providers
New Environment
Fully informed
Network model
Bi-directional information flow through network

The Traditional Supply Chain for Publishing Fragmented and Inefficient due to poor flow of information Product Flow Information Flow Demand Patterns Publisher Distributor Bookstore

The Intelligent Supply Chain for Publishing Information & Intelligence Sharing for Effectiveness Product Flow Information Flow Consumer demand drum-beat sets pace for entire Supply Chain Publisher Distributor Bookstore
POS Data Sharing
Inventory levels
Fill Rates
Forecasts
Promotional Activities
New Product Introduction

Why Collaboration in the Supply Chain?
Improved understanding, forecasting and analysis of consumer demand
Improved capability to respond and react to changes
Improved stability, predictability and efficiency of supply chain operations
Improved Fill Rates
Improved on-shelf availability
More effective demand generation activities
Increased Sales
Reduced lead times
Reduced inventories
Reduced Inventories
Smoother SC execution
More efficient processes
Reduction of costs for handling returns
Reduced Costs
Shared visibility across supply chain - Sales (POS), Inventories
Shared measurement of SC performance and identification of issues

Leveraging customer information for sales, marketing, and operational purposes Product Planning & Development Retail Catalog - Mail Internet, WWW, Kiosks Suppliers Merchandising Marketing Distribution Customer Service Operations
Buying & replenishment
Customer trends
Return code analysis
Targeted promotions
Loyalty programs
Vendor co-op programs
Customer trends
Assortment planning
Category management
Department adjacencies
Refined logistics
Supporting inventory reduction
Inventory planning
Site selection
Department adjacencies
Category management
Service - support
Return minimization
Buyer satisfaction
DATAWAREHOUSE Sales Force

Technology is only part of the solution, culture plays a part
Booksellers reluctant to share point-of-sale data
They believe they alone own relationship with consumers/readers
Reluctant to share this relationship with publishers and competitive booksellers
Return problem has long been considered a Publisher problem
There are costs for returns for all industry participants
Better information flow, collaborative forecasting through the supply chain can greatly diminish severity of problem
“ If you’re not part of the solution, you’re part of the problem”
The mystique of first printing size
Entwined in marketing of book as key indicator of success
Size alone does not matter
First printing size requirements will change as the supply chain becomes more intelligent
Short-run printing technologies can fill gaps in traditional production
New key performance indicators needed
Net average unit cost for books sold (factor cost of printing and handling returns into cost of units actually sold)

Technology is only part of the solution (cont’d)
Sharing of data across the supply chain requires trust
Aggregated data will be shared among participants
Visibility of detail for own transactions
Visibility at aggregate level only for transactions of others
Sharing of detail is only way to produce meaningful aggregate data for all
Need for an intelligent supply chain facilitator
Bring to table experience of implementing experience with intelligent supply chain integration in other industries
Deep understanding of publishing industry culture and perspectives
Appreciation of both publisher and bookseller points of view
Trusted partner of all industry participants
Create aggregate information for shared industry use from the detailed data of the various participants.

From Supply Chain to Supply Network Intelligent Publishing Supply Network
Common set of services
Common data standards
Publisher B Printer A Publisher A Publisher C Printer B Printer C Stores Bookseller A HQ Stores Bookseller B HQ Stores Bookseller C HQ Distributor A Distributor B Distributor C

A common information framework for all participants Intelligent Publishing Supply Network Publisher A Printer C Bookseller C Distributor B
Common set of services
Common data standards
Publisher B Printer A Publisher C Printer B Stores Bookseller A HQ Stores Bookseller B HQ Distributor A Distributor C

Supply Network Information Visibility Intelligent Publishing Supply Network
Available capacity calendar
Printer-owned paper inventory
Publisher-owned paper inventory
Component inventory
Finished book inventory
Available inventory
Inventory on order
Inventory in transit
Orders to be filled
POS data
Stock levels in stores
Inventory in central warehouse
New inventory in transit
Inventory in internal-transit
Inventory in distribution center
Demand forecast projections
Aggregate sales data
Production orders in process
Customer orders to be filled
Publisher Printer Stores Bookseller HQ Distributor

From Supply Network to Title Availability Marketplace
Allows a bookseller needing to restock a title to post requirement to the network and find quantity/price/delivery date from both the publisher and all distributors who list it
Bookseller systems or IPSN provided services could use rules to determine most cost effective way to meet requirement
Lowest cost source is not always most cost effective!
Intelligent Publishing Supply Network Publisher Stores Bookseller HQ Distributor A Distributor B Distributor C

Conclusion
Future significant cost savings and efficiency gains will come only from industry wide supply chain initiatives
Technology investments can and will be leveraged further
Publishing lags other industries
There are many examples of successful implementations
Industry groups must take up the challenge

Thank You!
For more information, please contact:
Michael Cairns
Managing Partner
Information Media Partners
908 938 4889
[email_address]

Frankfurt Supply Chain

by Michael Cairns on Mar 05, 2008

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