The Future of the Supply Chain Is (Almost) Here

Imagine this scenario: A pallet of books arrives at a distributor’s warehouse. It is scanned, allowing the system to keep track of the location of every book as the shipment is robotically de-palletized, stored and machine-prepared for shipment to retailers. Arriving at the point of sale, cartons are scanned at the door and all contents entered instantly into inventory, with special-order customers notified automatically that their book has arrived. Customers and employees can then discover with the click of a mouse exactly where a book is located in the store, and inventory, even at the largest bookstores, takes no more than 20 minutes.

It’s not a pie-in-the-sky proposition. In fact, the technologies behind such a system—radio frequency identification (RFID), sophisticated ordering and fulfillment software, robotic palletizers, conveyors and storage solutions—are already available and used to varying degrees by a range of industries, from computer manufacturers to the U.S. military.

So, why not books? It’s coming, analysts say—but slowing the transition is a range of factors, from cost of implementation and consumer concerns to the need for industry standards that encompass a wide range of new tools and options.

Libraries Leading the Way
RFID, the technology behind the EZPass toll system, holds a great deal of promise for building in efficiencies across the supply chain, according to Jim Lichtenberg, president of consulting company Lightspeed and chair of the Book Industry Study Group’s (BISG) RFID working group since 2003.

Leading the way, says Lichtenberg, have been libraries, several hundred of which are already using RFID tags to enable automatic checkout/in and inventory management.

“It allows for better physical management of books,” he says. “A conveyor belt can knock a book into the proper bin. Customers and librarians love it—you have a pile of books, [you] walk up and put them down on [a scanner], and you are instantly checked out.”

Two barriers to adoption in the book trade have proven less of a problem for libraries, he says. The current cost of each individual ID chip—around 15 cents—makes more sense spread out over the life of a circulated book than for a “one-shot deal” retail transaction. In addition, library customers, who have already opted into the system by getting a card, are less likely to have privacy concerns.

In the early part of the decade, fears sparked by new federal antiterrorism laws led to “a lot of nonsensical overdramatizing of what would actually be possible with an RFID tag,” Lichtenberg says. BISG, working with the National Information Standards Organization, responded by formulating a privacy policy dictating that no personal information be included on the tags.

The system already has been proven to work in Europe, where bookstores in Holland and Portugal post signs educating consumers about RFID. (Lichtenberg says personal privacy laws are stricter in the European Union than in the United States, so there is less of a predisposition for concern.)

Lichtenberg believes the cost of implementation needs to come down before RFID is widely adopted on the retail level, however.

“Other industries have better margins, so they have the money to fund it,” he says, “and they’re more technology-friendly. Hewlett-Packard put chips on their computers in their warehouses, so they know where everything is within their four walls.”

Lichtenberg believes the expansion of use in other industries, a continued drop in the price of tags and lessening concerns about privacy will drive widespread implementation by the book industry in the next three to five years.

“If you put those three forces together, and we have an industry that knows it’s under pressure and needs to be more efficient in its supply chain, I think those factors probably make three to five years a lot more realistic than it was three to five years ago,” he says.

“The potential of RFID is total transparency in real time,” Lichtenberg says. “You can imagine how different the book industry would look if you could know where every book is at all times, in real time. It’s a transformative technology, like the Internet was a transformative technology.”

Building in Efficiency
On the production side, the goal of transparency up and down the supply chain has largely been realized through automated workflow systems, such as Transcontinental’s Digital Workshop, Integrated Book Technology’s (IBT) proprietary systems for clients and Publishing Technology’s (formerly VISTA) author2reader suite. These systems work to automate and facilitate the movement of files through editorial development, prepress and production.

“We build workflows behind the scenes, customized to [clients’] work habits,” says Steve Pratt, director of technology at IBT. Internal workflow is facilitated by notifications and updates that alert key people along the chain that a particular point in the process has been reached.

“It’s more pushing than pulling,” Pratt says of the system’s effect on workflow. “How many times along that process does a job have to wait for someone to look at it? Obviously, time is critical. If there is a part of the process that is waiting for someone to look at it, you don’t get the file out there. It’s about getting information to the people who need it to make decisions.”

Systems can, for example, be customized to allow preflight reports to go out at a certain point in the process, which cuts down on the time needed for someone to physically go to an FTP site and pull a file. Automated reporting also can be extended up and down the chain, from raw-materials tracking to automated stock-management and ordering systems, as is the case with the author2reader suite.

“Like many other publishers, we are looking to automate tasks that don’t have a value added by someone doing that task manually,” says Michael Weinstein, vice president of global content and media production at educational publisher Cengage Learning. “This doesn’t reduce quality, but allows that person to add their value where it’s really needed. This is a big change for many long-time publishing people.”

According to Weinstein, in addition to preflighting, soft proofing and utilizing software that enables shared knowledge between various departments’ workflow systems, Cengage also has realized production efficiencies through standardized software coding, scripting to verify code consistency, automated page make-up, and scripts that allow easy re-use of archived content. “Aside from creating what you think is the most efficient way to work internally, you must choose the right partner vendors,” he adds. “These vendors must understand what you are trying to do and be able to work with software and workflows that you choose; but they must also be nimble enough to respond to the unexpected ups and downs of your volume.”

The Importance of Standardization
From RFID to file management and emerging forms of digital production and distribution, standardization of data platforms is a key element in building new efficiencies into the supply chain.

“We’ve done a lot of work over many years, standardizing the way product information is communicated between trading partners,” notes Michael Healy, executive director of the BISG. “That goes back 10 years to the development of [Online Information Exchange (ONIX)], which is an XML expression of product information. We did that to standardize the way in which parts of a book can be described. By embedding that standardized expression in XML text, I’m enabling computer-to-computer communication and attempting to minimize touch points where humans have to intervene.”

Another example is electronic data interchange (EDI) messaging, where the goal is to facilitate machine-to-machine communication for purchase orders, order acknowledgements and invoices.

“For us, the end game is all about enabling the automation of these business communication messages,” Healy says.

Healy notes that standardization is especially important as the industry moves toward a digital supply chain. Publishers looking to share content safely and securely must be able to deal with multiple trading partners (booksellers, wholesalers, etc.), which has led to recent industry initiatives such as the establishment of the .epub file format as the standard for e-books.

“I think there’s this mistaken assumption that because you’re talking about the movement of digital content, that somehow it’s going to happen automatically in a more standardized way, and of course that’s not true,” he says. “These standards have to be built for the digital supply chain just as they were built for the physical supply chain.”

On the physical level, standardization guidelines (and a BISG certification process) for shipping carton labels are already having a huge impact on the speed and accuracy of incoming materials processing, Healy says. The importance of these type of standards will only increase as the industry moves closer to adoption of RFID.

“Inevitably, people focus … on the magic of the chip,” Healy says of the radio technology. “But without the standards that enable it to be read and interpreted and acted upon, it’s just a dumb piece of silicone.”

A Critical Need
Building in efficiencies across the book supply chain takes a high level of coordination—and investment. The tipping point, Lichtenberg says, will occur when it becomes more expensive not to build in efficiencies than to hold out on making changes.

“The supply chain is too inefficient; it’s just too costly, especially given the efficiencies that everyone else has come to expect [in other industries],” he says. “The second problem is the question of the ‘long tail.’ People want to be able to search and find, so how do you manage that? The third thing is the competitive situation. As with [the rise of] Amazon.com, if the industry isn’t careful, it’s going to find itself in another pinch,” he says, referring to the ever-increasing percentage of books being sold outside of bookstores.

This, along with the growing use of RFID across the retail landscape, is just one example of the competitive pressure that will be brought to bear, Lichtenberg says. In the meantime, he adds, margins will continue to be squeezed as book sales move to the discount chains, making the general drive to efficiency even more important.

“[Finding ways to cut costs] has never been more critical than in the difficult trading conditions we find ourselves in,” Healy says. “If we can drive costs out of the process, then in difficult times, we’re doing a great service for our industry.”