Building an Intelligent Publishing Supply ChainLeveraging technology and communications to improve supply chain efficiency, reduce costs and increase profits

Michael CairnsPresident, RR Bowker

February 4, 2004

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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

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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

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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

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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

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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

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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

Adding Intelligence to the Supply Chain

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

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The Traditional Supply Chain for Publishing

Fragmented and Inefficient due to poor flow of information

Product Flow

Information Flow

Demand Patterns

Publisher Distributor Bookstore

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The Intelligent Supply Chain for Publishing

Information & Intelligence Sharing for Effectiveness

Product Flow

Information Flow

Consumer demand drum-beat sets pace for entireSupply Chain

Publisher Distributor Bookstore

• POS Data Sharing• Inventory levels• Fill Rates• Forecasts• Promotional Activities• New Product Introduction

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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

IncreasedSales

• 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

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Product Planning & Development

Retail Catalog - MailInternet, WWW,

Kiosks

Suppliers

MerchandisingMarketing Distribution Customer ServiceOperations

• 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

Leveraging customer information for sales, marketing, and operational purposes

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Culture: Era of ‘Gentleman Publisher’ is over

Booksellers historically 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 Print run intertwined in marketing of book as key indicator of

success First printing size requirements will change as the supply chain

becomes more intelligent Short-run printing technologies can fill gaps in traditional

production

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Can facilitation provide the answer?

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. 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

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Publisher B

A common information framework for all participants

PUBlishingNETwork

Printer A

Publisher A

Publisher C

Printer B Printer CStores

Bookseller AHQ

Stores

Bookseller BHQ

Bookseller C

Distributor A Distributor B Distributor C

• Common set of services• Common data standards

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Publisher

Supply Network Information Visibility

PUBlishingNETwork

Printer

Stores

Bookseller

HQ

Distributor

• 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

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Publisher

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 Publishing Network provided services could use rules to determine most cost effective way to meet requirement

Lowest cost source is not always most cost effective!

PUBlishingNETwork

Stores

BooksellerHQ

Distributor A Distributor B Distributor C

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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 in other industries of

successful applications of supply chain strategy Industry groups must take up the challenge

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Bowker is working towards this vision

Books In Print & Global Books In Print are the industry’s authoritative title data sources. Bowker data is incorporated in business processes throughout the global publishing supply chain.

Over its 11 year history, Pubnet has helped establish the data & EDI standards for the publishing industry. Pubnet is the e-commerce solution of choice for over 3,000 U.S. booksellers.

The Bowker acquisition of PubEasy makes its role in publishing industry e-commerce truly global, providing 11,000 booksellers in 110 countries with 24/7 customer self-service to over 3000 publishers and imprints.

                              

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Thank You!

For more information, please contact:

Michael CairnsPresidentR.R. Bowker LLC630 Central AvenueNew Providence, NJ 07974USA email: michael.cairns@bowker.com