Michael Cairns President, RR Bowker February 4, 2004

1. Building an Intelligent Publishing Supply ChainLeveraging 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. Adding Intelligence to the Supply Chain Management Manufacturer Old Environment • Partially informed • Push / pipeline model • One-way info flow Truckers Distributors Truckers Retailers Management Manufacturer Telephony Infrastructure Direct Marketing Customers • Transportation Distributors New Environment • Fully informed • Network model • Bi-directional information flow through network Web Infrastructure Transportation Overnight Delivery Database and Data Mining Retailers Infomediary and Outsourced Service Providers Customers Adapted from “Information Architects,” Richard Saul Wurman, editor, 1994 and Price Waterhouse, 1999.

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

9. The Intelligent Supply Chain for Publishing Bookstore Publisher Distributor • POS Data Sharing • Inventory levels • Fill Rates • Forecasts • Promotional Activities • New Product Introduction Consumer demand drum-beat sets pace for entire Supply Chain Product Flow Information Flow Information & Intelligence Sharing for Effectiveness

10. Why Collaboration in the Supply Chain? • Shared visibility across supply chain - Sales (POS), Inventories • Shared measurement of SC performance and identification of issues • 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 • Reduced lead times • Reduced inventories • Smoother SC execution • More efficient processes • Reduction of costs for handling returns Increased Sales Reduced Inventories Reduced Costs

11. Leveraging customer information for sales, marketing, and operational purposes Internet, WWW, Kiosks Sales Force Retail Catalog - Mail DATAWAREHOUSE Product Planning & Development Suppliers Marketing Merchandising Distribution Operations Customer Service • 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

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 you’re not part of the solution, you’re 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. A common information framework for all participants Stores Stores Bookseller B HQ Bookseller A HQ Printer A Publisher C Printer B Distributor C Distributor A Publisher B Printer C PUBlishingNETwork Publisher A • Common set of services • Common data standards Bookseller C Distributor B

15. Supply Network Information Visibility Stores BooksellerHQ Publisher Printer Distributor • Available capacity calendar • Printer-owned paper inventory • Publisher-owned paper inventory • Component inventory • Finished book inventory • Inventory in distribution center • Demand forecast projections • Aggregate sales data • Production orders in process • Customer orders to be filled PUBlishingNETwork • POS data • Stock levels in stores • Inventory in central warehouse • New inventory in transit • Inventory in internal-transit • Available inventory • Inventory on order • Inventory in transit • Orders to be filled

16. From Supply Network to Title Availability Marketplace Stores Bookseller HQ Publisher Distributor A Distributor B Distributor C • 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! PUBlishingNETwork

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. Books In Print & Global Books In Print are the industry’s 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. Bowker is working towards this vision

19. Thank You! For more information, please contact: Michael Cairns President R.R. Bowker LLC 630 Central Avenue New Providence, NJ 07974 USA email: michael.cairns@bowker.com