Building an Intelligent Publishing Supply Chain Leveraging technology and communications to improve supply chain efficiency, reduce costs and increase profits Michael Cairns President, RR Bowker February 4, 2004

2 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

3 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

4 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

5 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

6 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

7 Adapted from Information Architects, Richard Saul Wurman, editor, 1994 and Price Waterhouse, 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 Overnight Delivery Distributors Management Direct Marketing Infomediary and Outsourced Service Providers New Environment Fully informed Network model Bi-directional information flow through network

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

9 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 PublisherDistributor Bookstore POS Data Sharing Inventory levels Fill Rates Forecasts Promotional Activities New Product Introduction

10 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

11 Product Planning & Development Retail Catalog - Mail Internet, WWW, Kiosks Suppliers MerchandisingMarketingDistributionCustomer 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

12 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 youre not part of the solution, youre 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

13 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

14 Publisher B A common information framework for all participants PUBlishing NETwork Printer A Publisher A Publisher CPrinter B Printer C Stores Bookseller A HQ Stores Bookseller B HQ Bookseller C Distributor A Distributor B Distributor C Common set of services Common data standards

15 Publisher Supply Network Information Visibility PUBlishing NETwork 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

16 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! PUBlishing NETwork Stores Bookseller HQ Distributor ADistributor BDistributor C

17 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

18 Bowker is working towards this vision Books In Print & Global Books In Print are the industrys 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.

19 Thank You! For more information, please contact: Michael Cairns President R.R. Bowker LLC 630 Central Avenue New Providence, NJ USA