February 2004 Using Information to Increase Efficiency and Profits Dominique Raccah Publisher and CEO Sourcebooks, Inc.

an independent vision 1 Optimizing Business Processes with Marketplace Information n Developing Advances n Tailoring Time and Resource Allocations for Marketing Programs n Optimizing Inventory n Decreasing Returns Focus on business processes that have greatest potential for increasing profitability

Sourcebooks, Inc. an independent vision 2 Developing Advances n Authors Previous Sales y Gauge opportunity y Assumption that market is always there to be expanded n Category Sales Information/Share of Market Data y Data now allows us to track and gauge sales results Using data to help rationalize predictive process

Sourcebooks, Inc. an independent vision 3 Using Information to Optimize Inventory n Goal y More accurately match supply with demand y Decrease unsold inventory n Focus on 2 kinds of inventory decisions y Reprints y First Printings

Sourcebooks, Inc. an independent vision 4 Sourcebooks Reprints Results 2003 n Only reporting about 70% of our list n 104 new titles in this part of our list in 2003 n 111 reprints y 1 every 2.3 working days y 63 different titles n Of those 111 reprints5 problematic (or less than 5%) y Significant improvement over 2002

Sourcebooks, Inc. an independent vision 5 What Data Can We Use to Better Manage Reprints? n Wheres the demand coming from? (i.e., who specifically needs the reprint?) n Why do we need the reprint? (e.g.,Valentines Day) n What is current risk/inventory on hand in channel? n Review sell-in/sell-thru information (weekly sales results) for each account including: Barnes & Noble Bookscan Borders Waldenbooks AWBC/Books-A-Million Amazon Ingram ipage Baker & Taylor TitleSource II AMS

Sourcebooks, Inc. an independent vision 6 Other Information We Can Use to Better Manage Reprints n Reorder planning with accounts (both bookstore & non-bookstore) n Modeling different types of books y Peak titles y Build titles y Seasonality n Gauging publicity/marketing effects

Sourcebooks, Inc. an independent vision 7 Summary: Reprints n Every printing provides more information that allows you to better model marketplace n Simplest assumption: stable marketplace n Usually not true for books y Seasonality y Promotions y Other marketing effects y Saturation y Competitive product n Model marketplace during sales season y Use sales model to forecast what reprints might be

Sourcebooks, Inc. an independent vision 8 Sourcebooks First Printing Results 2003 n Again only reporting 70% of our list n Spring titles y 10 of which were problematic (or about 17.5%) n Fall titles y 3 of which were problematic (or about 6%)

Sourcebooks, Inc. an independent vision 9 Our Experience First Printing Is Riskiest n At every printing you have more information that allows you to better model marketplace y Axiom of risky decision-making that the point of maximum risk is when information is minimal n Print less/plan for reprints y Work with printers to decrease print cycles n Print smarter

Sourcebooks, Inc. an independent vision 10 Last Printing Is the Most Expensive Printing n You dont know its the last printing n Marketplace shifts unpredictably/model is no longer appropriate

Sourcebooks, Inc. an independent vision 11 Summary: Using Information to Optimize Inventory n Print less y Benchmark appropriate level of inventory for trade book publisher x Months of StockInventory on-hand/past 12 months sales x Inventory Days on handInventory value/Accounts receivable x Inventory TurnInventory value/past 12 months inventory cost of goods y What are industry-wide Best practices? y What is your inventory target(s)? n Feed information into decision-making both first printings and reprints n Use marketplace information to turn off last printing

Sourcebooks, Inc. an independent vision 12 Using Marketplace Information to Decrease Returns n Sourcebooks returns 2003 down 25% n Much of this decline can be attributed to the effects of marketplace input on inventory management n Cant make these decisions in a vacuum y Use the information in conjunction with your customers

Sourcebooks, Inc. an independent vision 13 Using Marketplace Information to Decrease Returns n Analyzing/Managing Customers Inventory on Ongoing Basis y Ship less upfront y Assess sell-through and marketing y Ship more often x Work closely with vendors to improve reprint cycles y Leads to more backlist-oriented program/more build- oriented strategy

Sourcebooks, Inc. an independent vision 14 Using Marketplace Information to Decrease Returns n Working closely with our customers is KEY y They know a lot about their data and what is going on in their market y More accurately match supply with demand x Where you need it; effects of regionality x When you need it; effects of seasonality y Do the research before we approach the customer

Sourcebooks, Inc. an independent vision 15 Using Marketplace Information to Increase Efficiency and Profits n Analyzing/Managing Customers Inventory on Ongoing Basis y Using information to work more closely with our customers y More accurately match supply with demand y Goal is to serve our customers and the marketplace better

Sourcebooks, Inc. an independent vision 16 Using Marketplace Information to Increase Efficiency and Profits n Optimizing Business Processes with Marketplace Information y Rationalize predictive processimpact advances y Optimize inventory both on hand and in channel x Implications for marketing, operations, production, sales y Decrease returns n Focus on Business Processes with Greatest Potential for Increasing Profitability