Are You the Weakest Link?

As I was preparing for this column, I came across the following statement in a brochure prepared by Strategos, strategic planning consultants, that I picked up at an event a few years ago:

“What’s amazing is how often top management is surprised when dramatic external change happens. Why the surprise? Is it that the world is violently turbulent, changing in ways that simply cannot be anticipated? Perhaps. But we call them ‘inevitable surprises.’ Think about it. In retrospect, you could have anticipated most of the disruptions in your industry. You can build this capability into your organization. You can be prepared—before your competition.”

In many respects, publishers, by definition, are on top of trends, change and competition. It is the stuff of what many a frontlist is built on. Yet, publishers can miss the beat by not fully embracing the nature of the businesses that they are really in—the manufacturing business and the content business.

Because we are also a highly collaborative industry, we also tend to overlook competitive threats to ourselves from outside the industry, as well as threats to and among 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? Thus, we can remain unprepared for other threats and opportunities even as we convert to, say, print-on-demand, digital platforms and strategically located physical inventories.

Envision Your Company as a Link

Think of yourself as a link in someone else’s supply chain. Thinking of and diagramming ourselves as both the object as well as a link in many supply chain loops is useful for mapping our present and possible future. Identifying the core competencies that express our primary value proposition for the customers we are trying to reach will help determine how strong a link we are.

For example, it is commonplace to recognize that different skills and assets are required of the four pillars supporting the publishing enterprise (you can, of course, model as many, or as few pillars as you like):

#1 acquisition and development of the editorial product

#2 production and manufacturing (or digital conversion) of the physical product

#3 marketing and sales of the assembled product

#4 distribution of the packaged product

It is also commonplace to recognize that the administrative and process tools for enterprise management are yet another bundle of skills that attach to each of these pillars, generally not identified as such in the supply chain diagram.

A conventional and rudimentary supply chain model might look like this (of course, longer lists of discrete functions and movers can be aggregated):

Function chain: creative + production + marketing + distribution + customer.

Mover chain: author + printer + publisher + librarian + patron.

Process and administrative management is required of all of the functions, but there is also an enterprise function. In a smaller company, it may reside in the hands of a “shirt-sleeve,” or owner-operated publisher who also doubles as editor-in-chief and triples as marketing manager. In a larger company, we find presidents, CEOs, COOs and vice presidents who do not appear in our foregoing models.

So, we need to add an additional element up front:

Function chain: enterprise

Mover chain: CEO

The CEO and publisher may be one and the same, but the supply chain distinction is critical to an examination of threats and opportunities, strengths and weaknesses—to positioning for core competencies.

The Publisher as a Manufacturer and Content Manager

Publishing-industry people usually don’t think of themselves as manufacturers. That is one of the reasons why many smaller publishers don’t necessarily get the best financial advice—since they are likely to engage accountants who specialize in professional, creative or personal services, where fixed assets and work-in-process aren’t significant.

Misplaced self-concepts aren’t qualitatively much different among the larger houses, although financial management is much more sophisticated when it comes to understanding the balance-sheet impacts of inventories, consignment and other fixed assets.

The process reflected in resource allocation, productivity and profitability considerations is the dynamic we know as the supply, or value, chain. If you apply this concept in your strategic thinking—whether it is about your job description or corporate mission—you will dramatically increase your effectiveness and profitability, as well as job satisfaction.

Understanding where you fit in the supply chain, and what core value you add to it—as an individual or a company—can provide a competitive edge. It will also enable you to readjust your sights as trends in the marketplace shift.

For example, publishing professionals engaged in manufacturing and production know that the global outsourcing model is re-locating the value proposition both to outside vendors as well as to those in other countries. It doesn’t mean that manufacturing and production are no longer important, but that their position in some supply chains has shifted.

Printers and book manufacturers know that they are afloat in shifting waters. Frank Romano, professor emeritus at Rochester Institute of Technology’s School of Print Media, said recently that we will probably be settled into a predictable number of printers in the United States in a few years. However, over time they will be using different technologies to bring images to paper, with ink-jet replacing offset in many plants.

Book manufacturers and printers also know that the size and frequency of publishers’ orders, as well as who is placing the orders (e.g., production professionals vs. inventory managers) is shifting. They also know that digital, audio and video versions of content have a growing foothold for the attention of “readers.” Hence, the content publisher no longer sees his print supplier as the sole link in bringing the product to the point of distribution.

A Valuable Metaphor

Notwithstanding these shifting tides, when someone asks, “What do you do?,” the expected answer would be the job that you have or the business you are in. If you were talking to strategic planners, their next question might be, “What is your value proposition?”

The supply chain concept is a metaphor for a host of “value proposition” relationships among the various elements and actors in a marketplace—which includes you and your company. The marketplace can be global or local, it can exist within the four walls of a printing plant, on an Internet network of servers, or seemingly at random among diverse self-contained links in vertical (e.g., trees to bookstore) or horizontal (e.g., bookstore to discount store) supply chains.

Consider UPS, USPS, DHL or FedEx who connect components or finished products from diverse vendors to assemblers or customers around the world; or the trade shop that applies full and spot color to special substrates that become inserts in magazines or books. Each of these “outsource” links rely on their own supply chains, where they are the core, in order to function effectively among many links to their customers.

Publishers Confront the Supply Chain Challenge

Within the graphic arts industry, as well as in commerce in general, trade associations and consultants are increasingly calling attention to supply chain concepts and studying how they can be applied to business operations and long-range plans.

As far back as 2003, at the Frankfurt Book Fair, Michael Cairns—then president of R.R. Bowker and now a managing partner at business strategy consultancy Information Media Partners—said, “The supply chain is the next frontier for operational improvements …. Creating efficiencies in the supply chain is the only area where sustainable expense and cost savings could be found [moving forward].”

Updating his comments on his current blog (http://PersonaNonData.blogspot.com), he wrote in September, just before Frankfurt 2006:

“Many other industries have successfully addressed supply chain issues and have significantly improved all major functional areas in their organizations; some have created competitive advantage from their attention to these supply chain issues. The publishing industry on the other hand is still characterized by vertically constituted monolithic organizations which rarely share information and rarely collaborate with their supply chain partners to common advantage …

The most obvious information-limitation publishers and retailers have is in getting accurate sell-through and channel data. Without real-time or near-time access to information about what is happening in the supply chain, most publishing industry participants are forced to make ill-informed decisions. Large levels of inventory, sales promotions that sell-out before their sale-period ends and uneven product distribution are but a few of the examples of our inefficient supply chain.”

Nielsen Book Scan reports (www.TheBookStandard.com) and The Idea Logical Company (www.Idealog.com) Founder and CEO Mike Shatzkin’s Vendor Managed Inventory (VMI) program are examples of initiatives that deal with this issue.

The Book Industry Study Group (www.BISG.org) is examining the issue this month at the Book Business Conference & Expo, and also at its third-annual Making Information Pay conference, May 10, in New York.

In October 2006, the Frankfurt Book Fair featured once again the International Supply Chain Specialists Meeting, examining supply chain issues. All of the presentations can be downloaded at www.Editeur.org.

In the next issue of Book Business, you’ll get an inside look at how two publishers, a distributor, a book manufacturer and a bookselling chain have successfully applied supply-chain thinking. BB

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.