Publishing Supply Chain Part Two

Structural flaws in our business will increasingly cause a decrease in the amounts of productive capital invested in our business. Publishers we are weighed down by the inefficiencies within the publishing business and unless we adopt more flexible processes and work more collaboratively with our partners in the supply chain business growth will be stunted.

Our industry continues to benefit from a technology-driven period of change based in part on Y2K and ERP system implementations. IT infrastructure is now more flexible and provides information far surpassing the data and analytics available in years past. Today’s systems are also leveragable; their implementations allow even further opportunities for efficiencies within the organizations where they exist and this has helped drive cost and process efficiencies.

Recently, the President of a large trade publishing house commented that his company had maintained their operating margins over the past five years by squeezing more and more cost out of their operations but he couldn’t see that continuing in the ensuing years. Other publishers have begun to understand that cost structures have been cut about as much as they can and effort needs to be focused externally to achieve margin improvement. Creating efficiencies in the supply chain is the only area where sustainable expense and cost savings can be found.

The elements exist for publishing companies to understand and proactively manage their supply chains. Data warehouse structures now support sophisticated analytical reporting across a broad range of metrics, including the development of models for projecting the sales of new titles based on past performance of an authors previous titles or predicting sales of a new title against titles with similar characteristics. Publishers using the data currently available to them have generated incremental operating improvements from their use but there remain significant gaps in data supply.

Supply chain problems manifest themselves in operational statistics that would not be tolerated in most other businesses. Order fill rates averaging 85% are common; meaning we may be loosing as much as 15% of potential revenue. Counter intuitive to this fill rate percentage, inventory levels are often excessive - absorbing cash, capital expense, and operating costs due to personnel, obsolescence, damage and shrinkage. At fault is a lack of knowledge of key supply chain data elements. For example, most publishers (with a few exceptions) can not see day-to-day demand and stock positions across the supply chain. If this information were available to publishers, they could be far more educated about inventory, printing and supply decisions.

The low fill rates above are not for want of trying. There is plenty of inventory with the publishers, wholesalers and retailers. Nevertheless, a publisher’s annual inventory turns of less than of 1 is common. And let’s not forget returns which average between 25 - 40%. Efficiencies can and have been made within organizations with better planning and forecasting tools. For example, while at Price Waterhouse I was involved in a project which increased inventory turn at a large trade publisher saving them $120million/year; however, this only got them to a turn of once per year. To really drive inventory down and turn up, the publisher needed to know where their inventory was in the supply chain, what was selling and what projected demand was for all their titles down to the level of the locations that held the inventory – stores, wholesalers, retail warehouses, etc.

Access to retail sales data and stock information at each level in the supply chain would enable publishers to make their operations more efficient. Retailers would be able to manage their inventory effectively but most importantly all participants would be better placed to satisfy customer’s requests resulting in improved fill rates. Publishers don’t want to be caught unable to fulfill a title and incorporate a high safety stock level into their printing decisions. Intuitively, better knowledge would lead to more effective distribution and therefore less returns and less need for high safety stock levels. The ripple effect is considerable; high inventory turns means less warehouse space, fewer returns means less freight and postage, processing and write-offs.

Publishing needs to adopt an “Intelligent Publishing Supply Chain” (IPSN) model governed by the demand of the final consumer. This drum beat will set the pace for the entire supply chain and is based on information flow and access across the supply chain. Obviously, a main component of this information flow is demand information at all stages of the supply chain with full collaboration between trading partners. To be effective in driving supply chain efficiencies publishers, retailers and wholesalers will need to establish collaborative practices and common standards across the industry. This will require a significant change in approach and perspective for all the players but the benefits will accrue to all parties. Collaboration across the supply chain is the only meaningful opportunity which will result in increased sales, reduced inventories, and reduced supply chain costs.

What might this IPSN look like? That is for my next post on this subject.

Supply Chain Part One.

Ziping Through Costa Rica (Number 2)

You have the feeling that things are spiraling out of control, but you are of two minds as to whether to stop it. The process itself seems to be controlling matters and, while you have had time to think about your actions, there is something in the back of your head reflecting on the ease with which you seem to have put your life in danger. Those thoughts ran through my head as Luis, our guide, placed the pulley over the zip wire and told me to lift my feet off the platform. Mrs. PND is no wimp; she upped and went first and was now 200 feet away-- speeding 50 feet above the canopy to the second of 15 platforms we would visit in the next hour. Our two guides had clearly come to a conclusion about us immediately and, for whatever reason, they decided we would just get on with it. Hence, the rather cursory and matter-of-fact instruction, which sounded more like he was practicing his English than anything else. He gave the impression he expected us to pay about as much attention as we would to a flight attendant.

The first platform is a short drive from the head office and small gift shop and, once up the hill, we were led to a location short of the first platform. Our instructions were simple and presented in decent English—place your arm behind you, pressing on the wire to slow yourself and never grab the wire in front (otherwise you risk mangling your fingers). Then one of the boys attached himself to the practice wire suspended in front of us between two trees and showed us how it worked. We then got up from our seats, thinking we would then get the chance to practice on the training wire. Not so. We went straight to prime time.

Per instruction, up go the feet with knees bent in front of you and you are off-- flying like Peter Pan above the sea of green Monteverde rain forest. It was very cool and we still can’t really believe we did it. There are 15 platforms at Selvatura and a multi-bridge cloud walk. I had reviewed Fodor’s list of zipwire tours but decided based on the recommendation of our hotel, and I think we made the right choice. Most of the ziplines are 30-100 meters long; however, the longest is 400 meters, and runs parallel to one of the suspension bridges we walked across later that day. The wire looked more impressive from the bridge than it did when we sped across, given its height above ground - perhaps 100 feet - and the enormous distance between the platforms at either end.

Since it was just the two of us, we able to enjoy the company of the two boys and Mrs. PND was able to try her Spanish --I think the boys liked her. One had better English than the other and told her it was easy to learn English because Americans keep using the same words over and over again. I thought that comment was rather amusing.

Selvatura is located a very bumpy 20-minute ride above Santa Elena, and their mini-buses pick up customers anywhere in town. Ecology provided the genesis of the zipline tour when scientists recognized that they could study plant life and animals more effectively if they were suspended above or within the canopy. So, for purely scientific reasons--not at all for fun --scientists began zipwireing across nature preserves; word got out and a tourist attraction was born. In Santa Elena, there are at least 10 zip-line tour operators but none of them could be better than Selvatura. Any guide book will have listings and recommendations on each of the better operators. Obviously, safety is a major concern because these tours are a strong attraction for eco-tourism. It wouldn't do for tourists to start falling out of the sky and, at least according to Fodor’s there haven't been many accidents.

The zipline tour lasts about 60 mins. and I think I got to platform 10 thinking we were done. I was already impressed with the length of the tour but, as a parting gift, Selvatura offers something they call the “Tarzan Swing.” Tarzan has no redeeming or scientific value and is designed only to make you scream like an idiot as you step off a small platform and free-fall 30 feet over a ravine. It is really a mini bungee jump. Again, the fearless Mrs. PND went first. Not ever having bungee-jumped, the sensation of nothingness as you fall forward is exhilarating and terrifying at the same time. This wasn't even that high--and I would do it again. When we got back to the hotel, the desk clerk asked in reverent tones, “Did you do the Tarzan?” I think she was impressed, although she might have been worried about my age...

Like the day before, we were eating lunch by 1:30 (this time at Pizzeria Johnny), feeling very satisfied with ourselves. Selvatura also has a 1.5-mile trail which includes 8 suspension bridges through the cloud forest, but we had to rush this since we would have had to wait 2 hours for the next shuttle bus to Santa Elena. We needed our lunch and we needed to get on the road to the beach.

Travel Edition: Hiking Above the Clouds

Top Ten Reasons Beckham Should Stay and Ali G.

Selena Roberts wrote last week that David Beckham should come to the US and give up playing at Real Madrid. I'm not sure this is a good idea. Here are my top ten reasons why. (And if you need to ask who David Beckham is then don't bother reading on).

1. Who will he play with when all the good players are in Europe. Kiss good bye to Freddy.
2. He is still only one free kick from redemption for England
3. Naming his next child Brentwood - or perhaps Malibu - would be too much
4. 10 Boring players are is still a boring team
5. Heaven can wait: Buy a team and play when he turns forty
6. He couldn't carry England how will he carry MLS
7. Playing for MLS he will get about as much action as the ref....at least on the field
8. Posh
9. There will be less admin assistants for the rest of us; ask Rebecca Loos
10. We don't want David in the Movies.

That's it other than the following Ali G video.
Ali-G Interviews Posh Spice and David Beckham

Berlitz: Improve your English

I used to work for Berlitz and they were a very conservative organization who relied on yellow pages and newspaper advertising to generate sales leads. Internationally, the company tended to be a little more adventurous particularly in Germany and Japan. Here is a link to some new style advertising that shows you can teach an old dog some new tricks.

Friday Update: Deals, Deals, Deals

Given all the hype about private equity interest in publishing and media it is interesting that two huge deals come somewhat out of the blue. Wiley has purchased Blackwell which will fit very well with that company and both will be able to leverage their collective expertise around the world. Both Wiley and Blackwell have strong positions in the UK and International markets but Blackwell will definitely get a boost in the US and Australia/New Zealand. This combination will also better support their growth into the Asian and Indian markets. I think it is a perfect deal for both. Obviously, the fact that Blackwell were for sale is not as much a surprise as hearing of the Reader's Digest sale. In the case of Blackwell they have suffered through some family issues and had reorganized about a year ago with new management directed to get the company into shape.

Reader's Digest has been under pressure for a number of years with a declining market and reduced direct marketing effectiveness. In the past five years or so they have restructured and infused the organization with new management and new thinking which has started to bear some fruit. No telling where this company would have been if it remained on the same path it was seven or eight years ago. The wonder now will be whether RD embarks on an acquisition process to further strengthen its revenue base.

Wiley: Press Release
Blackwell: Oxford Mail
Readers Digest: New York Times

Reading Challenge

So I thought this would be easy...thanks to So Many Books here is notice of a challenge issued by Overdue Books to read five books currently on your bookself. As I noted recently, I did a dumb thing and rearranged the books I have purchased but not read and they numbered over 30. So the challenge is read five books by January. Here is my gang of five;

The Road - Cormac McCarthy. Just picked it off the shelf

The Emperors Children - Claire Massud

The God Delusion - Richard Dawkins

The Big Over Easy - Jasper Fforde

The Power of the Dog - Don Winslow

Travel Edition - Hiking in Clouds In Costa Rica

Our second trip to Costa Rica started with a weather report from the Captain: “I hope you guys are planning on doing some surfing--October is the wettest month of the year.” Actually, we weren’t planning on catching any waves and, about three hours later, we were climbing the hardscrabble road to Santa Elena in Monteverde. As we drove up the mountain road – which rolled, twisted and turned, rising to a point 5,000 feet above sea level-- we marveled at the green pastures and the apparent slow pace of life. Locals looked up in mild interest and smiled as we passed slowly by. We waved affably and tried not to overplay our interest in what they were up to.

Costa Rica is rapidly growing in popularity and, in the year between our last visit and this one, a strip mall with an American-style supermarket – is that “Maxi-Bodega”? – had opened up in Liberia. Liberia is regional capital of Guanacaste and the location of the recently expanded northern Costa Rican airport. We had landed here with the intention of spending a few days hiking in the rain forest followed by five days in the sun. As we de-planed, the likelihood of five days in the sun was dimming but, as we entered the clouds in our approach to Santa Elena, I wasn’t thinking about that at all in anticipation of seeing the rainforest firsthand.

Dusk was closing in as we jolted into Santa Elena and the ground-level clouds made it virtually impossible to see anything. Mrs. PND and I had settled on Hotel Sapo Dorado (she really didn’t have much to do with it) – the name has something to do with frogs – which turned out to be both empty and rustically adorable. Staffers told us that the hotel is usually full between mid-December and April with a mix of European and US guests. Fifteen cabins are spread across a hill above Santa Elena, most with views of the town and the Nicoya Peninsula beyond. Once settled in our cabin (which had an outdoor lanai, two queen-size beds and a basic bathroom), we proceeded to dinner in the hotel restaurant. As we discussed plans for the next day, we were a little worried about the rain but decided we would hike through the Monteverde Cloudforest Preserve.

Costa Rica has an aggressive ecological program and recently designated a large tract of forest in Northern Guanacaste as national park--though they haven’t yet decided what they will actually do with it. It has neither bathroom nor navigable road but, nevertheless, it represents the country’s desire to create yet another feast for eco-tourists. At 8:30 am the next day, we found ourselves hiking through the cloud forest on a route suggested by a park ranger based at the trail head. On the well-maintained trail, we rarely faced any mud or other hazards. I was a bit disappointed about this, since I had bought hiking boots and Mrs. PND only had Nikes--I was looking for a real hike, with real mud. At this altitude, we quickly became short of breath and regularly stopped as we climbed through the greenery. Tall trees covered in epiphytes and wrapped in vines towered above us; others seemed to have succumbed to the stranglehold of the hangers-on and had fallen across the forest floor, taking a chunk of the canopy with it. We later read that winds at this level can be very strong and often result in casualties.

Occasionally, we emerged from the dense forest to stand on the edge of a ridge, where we surveyed the peaks and valleys intersecting the region. Sixty minutes into our hike, we arrived at the Continental Divide, which provided a rest stop as well as an opportunity to look out over the forest toward the Atlantic on one side and the Pacific on the other – or at least we could have, if the clouds had cooperated. The return trip took us over one of the hanging bridges common to Costa Rican parks and reserves, and we resolved to visit another of these reserves the following day. That day’s supposed 3.5 hr. hike took us about 2.5 hrs. and, as we returned to the car, the rain started to hammer down.

The Monteverde Cloudforest Preserve is only 10 mins. from Santa Elena and we were eating a well-deserved lunch by 11:30 that morning. As the rain pounded away, we spent the rest of our day reading in our cabin in the clouds. I plotted our activities for the next day and wondered why we weren’t spending more than two days up there. . .