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July 24 2006 05:37 PM

The newsstand distribution environment is facing serious problems today, especially multiple handling of magazines and long cycle times. There is obvious room for improvement.
 
Despite complications caused by wholesaler consolidation in the mid- to late 90s, if publishers, wholesaler and retailers all focus on solving the problems of the industry together, they will all benefit with decreased cost, increased information sharing and reduced cycle times. Working together will help them reach the ultimate goal: getting the right product into the right stores in the right quantities at the right cost. But sometimes, despite the best efforts, there are major breaks in the newsstand supply chain.
 
Problem: Many Touch Points
There are currently too many touch points in the distribution chain: the publisher contracts a printer to produce the magazine; the printer sends the magazines to a breakup agent; the breakup agent separates the bundles; the wholesaler picks up the magazines for delivery to newsstands and supermarkets for purchase by the consumer; and finally, the wholesaler is also responsible for picking up any unsold copies and destroying them.
 
While it is necessary to have various players move the publication from production through distribution, the more times the publication is handled, the higher the costs associated with it. One idea for reducing some product handling is to eliminate the duplication of effort on the part of retailers and wholesalers in performing detailed check in and check out. Together, the industry should determine which group will handle the task and stick to it.
 
Another idea to reduce handling is to create �store-ready� bundles at the printing plant (much as �carrier-route� bundles are created in the plant for subscription distribution). Magazine bundles would be aggregated from multiple printing plants and created based on store quantity, again resulting in reduced handling costs for the publisher.
 
Problem: Lack of Information Sharing
The magazine distribution industry somehow managed to miss the last decade�s enormous gains in information technology. There is still a widespread problem with slow or inaccurate data transmission between the publisher, wholesaler and retailer.
 
Because there is no one electronic system (like EDI) to transmit data among the various parties along the supply chain, companies have to manually track information of all types through multiple systems. They are tracking vital information on sell through, consumer demographics and scan data � on systems their grandfathers would recognize.
 
Newsstand distribution needs to implement an electronic information system for all parties involved in the distribution of newsstand material. By adding a feature to the system that would allow scan-based trading (i.e., capturing data by title and issue at every point in the supply chain until it is delivered to the newsstand shelf), product could be tracked through the entire delivery system. Such a system would allow everyone to see where there are delays or failures in the supply chain.
 
Problem: Push vs. Pull Market Dynamic
A major factor impacting the current newsstand distribution environment is that newsstand product is �pushed� by the publisher through the system to the newsstand. Instead of a �pull� environment, based on customer demand, publishers usually send many more copies to newsstands than consumers actually purchase. Because of this overabundance of copies, there is a very low sell-through rate for magazines.
 
Then, in addition to the printing, production and distribution costs associated with delivering the publications to the retailers, the publishers are now absorbing the cost of returns. After paying all the costs to get the magazines to the newsstand, the publisher is now paying the costs of return logistics as well as the cost to destroy unsold copies.
 
An approach that could bring needed improvement to the system is to create a pull market scenario. All parties involved would benefit � less cost and effort overall to publisher, wholesaler and retailer. In a push supply environment, the publisher would be able to accurately predict the number of copies needed and produce those copies based on consumer demand. The retailer would pay only for what was sold in his store. The wholesaler would benefit because he would not have to transport numerous extra copies to newsstands, only to later transport them back to the warehouse for disposal.
 
There are other benefits in allowing consumer pull to drive the industry. One of the most exciting is the fact that a pull supply chain provides a link to demographic data. New launches can be better targeted to consumer needs.
 
By working together to implement a pull environment based on consumer demand, publishers, wholesalers and retailers could implement a new concept: the cost-to-serve model (CTS). The CTS model requires each party to pay only for services actually performed, a perfect complement to a pull supply chain environment. But in order for CTS strategy to add value, it is essential that the process flow be streamlined so that each party is producing and performing only what is needed.
 
Electronic data sharing is a key tool of the CTS model; the up-to-date shared information would bring about a graduated distribution system. Publishers could defer printing or local distribution on a portion of volume forecasts in order to obtain sales data prior to making additional print or distribution expenditures. Publishers could send over copies on an as-needed basis. Using real-time sales data could result in just-in-time delivery for the retailer, saving all parties time and money.
 
Problem: Long Cycle Time
Currently, there is an average 21-day lag time between production of a magazine and its on-sale date. The lag is built in to cover time for shipping and handling. It reduces the time publishers can sell ad space for the magazine by three weeks for each issue. That�s a major hit to their potential revenues. Compressing the cycle time would increase the amount of time a publisher could devote to generating ad revenues, helping to keep a publication viable.
 
One of the ideas to reduce long cycle time is to eliminate some steps in the current process. At present, much time is spent physically verifying magazine count and cover price. This could be done electronically through a scanning system at the whole-saler, allowing a real-time data exchange between publisher, wholesaler and retailer. Again, reducing cycle time allows the publisher more time to sell ads, increasing revenues.
 
The industry has done a good job of identifying the problems we face; now, it is incumbent upon us all to develop systems that resolve these problems. Together, we can preserve the health and well-being of the industry as a whole.
 
Linda Carlisle is director of Brand Development for R.R. Donnelley Logistics, responsible for print and package logistics and expedited services. She may be reached by phone at 800-800-SHIP or via the Web at www.donnelleylogistics.com.
 

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