Tapping the Supply Chain Opportunity
In Part I of this series, I described how supply chain thinking can be applied to business and career decisions. Correctly identifying your “value proposition” is the key to being able to diagram where in the chain of buying and selling relationships you can be most effective. Building on your core competencies, and recognizing that you need to manage your supply chain relationships becomes the business proposition. Chances are that when you first examine your supply chain, you will find that you have been a slave to it, rather than a master of it.
I also noted that by rethinking and realistically recasting your assumptions about the business you are in—the manufacturing and the content business—and your value proposition, you can become the master of your link in the chain.
As a highly collaborative industry internally, we tend to overlook competitive threats to ourselves from outside the
industry, as well as threats to the vendors in the supply chain on whom we depend—prepress houses, server hosts, printers, paper mills, distributors and various editorial and production services, for example. Will they be there tomorrow?
In this column, I explore the process of evaluating the supply chain further and present several examples of how break-out supply chain thinking led to business opportunity among the printing, publishing and retailing segments of the industry.
Managing complexity and objectives
“Each chain is really a series of buyers and sellers of products and services. That means that each link participant has his own objectives and sometimes conflicting objectives,” writes Thomas Craig, president of LTD Management (LTDMgmt.com)—a supply chain management consultancy—in the article “Logistics Process for Supply Chain Management” (World Wide Shipping, July/August 2002).
He suggests the supply chain can be thought of “as a relay race with good speed by each runner and a great handoff and exchange of baton between runners.”
Craig also notes, “The diversity of the participants in the chain can create a complex and long process. All parties must understand how, and especially why, the chain is supposed to function.”
The design of the supply chain should begin “from the end user back through the various product and service providers,” he continues.
An apt example can be found in the “Big Picture” flow chart (above) that Kent Freeman, chief technology officer of Ingram Digital Ventures, presented to the International Supply Chain Specialists Meeting at the Frankfurt Book Fair in October 2006.
Standing out from the pack
Craig provides insight into the ease with which companies lapse into commodity marketing status.
“For years, retailers, wholesalers and manufacturers have tried to define their core competencies,” he wrote in another article in World Wide Shipping called “Three PLs Need to Take It to the Next Level—How to Do It.” “Core competencies were held to be central to the company strategy.” Supply chain management (SCM), however, “was not held to be a core competency,” Craig wrote. “Such companies … failed to realize that SCM is a process that crosses their entire organization and expands into their customers and into their suppliers. Since supply chain management was not held as essential to business success, they looked at outsourcing as a way to reduce costs, not improve their company with supply chain management.”
By evaluating all the links in your supply chain, new strategies can emerge. Craig noted, “The key point is to give customers what they want in their particular industries—be unique. This seems like standard advice, but it is not always practiced in the pursuit of growth.”
This is especially apt for printers as providers to publishers who are becoming more aware that the act of publishing a book is an act of content management, and that there is benefit to placing the “legal” XML and PDF file for the title in the hands of one outsource vendor that will handle the supply chain management of the title in its different formats and revisions.
For intellectual property industries, this is less of a trap. Differentiation is built into the title of every book (although one can look at the textbook sector and wonder about that). Plus, the supply chain management of outsourcing production and manufacturing has long been embedded in management practice (less so for other marketing and distribution functions), although it has been constrained by the limited foresight of outsource providers. It is a more significant issue for book manufacturers and printers.
Book manufacturers and printers are by nature and design conservative in foreseeing and responding to lethal threats. Their technology and equipment fixed-cost investments are substantial. They are the tail to the publishing dog (no slight intended), relying on a pull instead of a push marketplace (fortunately countered by the massive investments of technology providers such as Hewlett-Packard, Xerox, Kodak, Creo and others).
As a consequence, while many possibilities exist for them to become key links in supply chain management opportunities created by today’s multiformat product life cycles, primarily only the conglomerate firms such as RR Donnelley and Quebecor World have effectively extended their reach in this manner.
Family owned Edwards Brothers, a book manufacturer based in Ann Arbor, Mich., saw the opportunities for a distinctive supply chain value proposition by managing the book manufacturing life cycle needs of their customers’ titles early in the era of emerging digital printing. In July 2004, Book Business (then called BookTech Magazine), reported that “in addition to conventional production, Edwards Brothers has developed customized printing solutions to meet the unique challenges of several customers. These include remote digital printing operations in the warehouses of Rowman and Littlefield, The University of Chicago Press, The National Academies Press and an overseas location in the United Kingdom in partnership with the National Book Network.” Since then Edwards has opened a facility at Houghton-Mifflin’s K-12 warehouse.
Extending the franchise
It has long been the practice among publishers with efficiently managed warehouse and shipping operations to raise the productivity and reduce the cost basis of their distribution operations by contracting distribution for other publishers. Independent Publishers Group and National Book Network are examples of initiatives that morphed into substantial businesses.
With the advent of the Internet and the digital platform for browsing, searching and selling books, a host of new technologies have emerged to deal with content management, rights protection, content customization, e-book publishing and e-reading devices, standards and best practices, and the various proprietary and open platforms and their conversion needs.
Google’s Book Search and Microsoft’s upcoming Windows Live Book Search (which plans to launch later this year) have upped the ante for publishers entering the digital game. Most smaller publishers see these initiatives as a substantial benefit in broadening their global reach. For major publishers with substantial lists and heavy front list investments, unlimited digital exposure is often seen as eroding their control over copying, sales and unauthorized commercial exploitation.
This has created an incentive for them to take control of their own digital content storage, access and distribution. Two major publishers who have done this are HarperCollins (Browse Inside) and Random House (Insight). Other publishers have reported they are studying similar strategies.
The supply chain implications of these initiatives will play out among retailers, librarians and consumers as they prioritize Web search choices between aggregators such as Google and Microsoft, and e-tailers such as Amazon and Barnes & Noble.
Reinforcing brand value
“Branding is a way to position your organization. It is your organization’s identity …,” wrote Craig in his article “Create Supply Chain Value Proposition With Yield Management and Supplier Management” (World Wide Shipping, March 2005). “Branding should be executable for supply chain management.”
How? “The branding should reflect and embody a value proposition. Value here is not a financial figure, such as sales, profits or assets. Value, for the value proposition, should be something that matters to customers,” he noted. “It should be tangible and should define the benefit and solution that customers will gain with you. It presents why customers should do business with you, rather than with competitors.”
Paying attention to service details is a big part of the customer service job that reinforces branding. The Barnes & Noble brand relies heavily on timely availability of titles ordered by customers. Joe Gonella, vice president for inventory management and vendor relations, laid out five conceptual approaches to the distribution process, any one of which can be chosen to maximize customer satisfaction and resource allocation in getting books to one of the company’s stores. They include:
• bindery drop ship,
• publisher drop ship,
• flow through distribution (books are not stocked into the warehouse; shown on page 34),
• warehouse distribution (same diagram as flow through except books are unpacked and stored), and
• print-on-demand, which can go direct to the store or to the customer’s home.
A flow chart comes alive
The supply chain concept provides infinite opportunities for business and workflow analysis on broadly strategic as well as highly granular levels. It can take place on the back of an envelope while relaxing in flight or as the keystone of a company-wide planning process. It works for large and small companies, and even in job positioning, as a tool for helping set goals, priorities, and allocations of time, resources and effort.
It is the old-fashioned flow chart brought alive and buttressed by standards, best practices, experience and know-how, and by the collaborative involvement of everyone in the chain—by monitoring performance and outcomes, and paying attention to customers and the marketplace.
Eugene G. Schwartz is a publishing industry analyst, writer and editor-at-large for ForeWord Magazine. A former PMA board member, he is president of Consortium House, a management and business consultancy to publishers. He was previously a manufacturing, production and operations executive.
Eugene G. Schwartz is editor at large for ForeWord Reviews, an industry observer and an occasional columnist for Book Business magazine. In an earlier career, he was in the printing business and held production management positions at Random House, Prentice-Hall/Goodyear and CRM Books/Psychology Today. A former PMA (IBPA) board member, he has headed his own publishing consultancy, Consortium House. He is also Co-Founder of Worthy Shorts Inc., a development stage online private press and publication service for professionals as well as an online back office publication service for publishers and associations. He is on the Publishing Business Conference and Expo Advisory Board.