February 2004 Using Information to Increase Efficiency and Profits Dominique Raccah Publisher and CEO Sourcebooks, Inc.

February 2004

Using Information to Increase Efficiency and Profits

Dominique Raccah

Publisher and CEOSourcebooks, Inc.

2Sourcebooks, Inc.

an independent vision

Optimizing Business Processes with Marketplace Information Developing Advances

Tailoring Time and Resource Allocations for Marketing Programs

Optimizing Inventory

Decreasing Returns

Focus on business processes that have

greatest potential for increasing profitability

3Sourcebooks, Inc.

an independent vision

Developing Advances

Author’s Previous Sales Gauge opportunity

Assumption that market is always there to be expanded

Category Sales Information/Share of Market Data Data now allows us to track and gauge sales results

Using data to help rationalize predictive process

4Sourcebooks, Inc.

an independent vision

Using Information to Optimize Inventory

Goal More accurately match supply with demand

Decrease unsold inventory

Focus on 2 kinds of inventory decisions Reprints

First Printings

5Sourcebooks, Inc.

an independent vision

Sourcebooks Reprints Results 2003

Only reporting about 70% of our list

104 new titles in this part of our list in 2003

111 reprints

1 every 2.3 working days

63 different titles

Of those 111 reprints—5 problematic (or less than 5%)

Significant improvement over 2002

6Sourcebooks, Inc.

an independent vision

What Data Can We Use to Better Manage Reprints? Where’s the demand coming from? (i.e., who specifically needs the reprint?)

Why do we need the reprint? (e.g.,Valentine’s Day)

What is current risk/inventory on hand in channel?

Review sell-in/sell-thru information (weekly sales results) for each account including:

Barnes & Noble Bookscan

Borders

Waldenbooks

AWBC/Books-A-Million

Amazon

Ingram ipage

Baker & Taylor TitleSource II

AMS

7Sourcebooks, Inc.

an independent vision

Other Information We Can Use to Better Manage Reprints

Reorder planning with accounts (both bookstore & non-bookstore)

Modeling different types of books Peak titles

Build titles

Seasonality

Gauging publicity/marketing effects

8Sourcebooks, Inc.

an independent vision

Summary: Reprints

Every printing provides more information that allows you to better model marketplace

Simplest assumption: stable marketplace

Usually not true for books Seasonality

Promotions

Other marketing effects

Saturation

Competitive product

Model marketplace during sales season Use sales model to forecast what reprints might be

9Sourcebooks, Inc.

an independent vision

Sourcebooks First Printing Results 2003 Again only reporting 70% of our list

Spring 2003—57 titles 10 of which were problematic (or about 17.5%)

Fall 2003—47 titles 3 of which were problematic (or about 6%)

10

Sourcebooks, Inc.an independent vision

Our Experience—First Printing Is Riskiest At every printing you have more information that

allows you to better model marketplace Axiom of risky decision-making that the point of maximum

risk is when information is minimal

Print less/plan for reprints Work with printers to decrease print cycles

Print smarter

11

Sourcebooks, Inc.an independent vision

Last Printing Is the Most Expensive Printing You don’t know it’s the last printing

Marketplace shifts unpredictably/model is no longer appropriate

12

Sourcebooks, Inc.an independent vision

Summary: Using Information to Optimize Inventory Print less

Benchmark appropriate level of inventory for trade book publisherMonths of Stock—Inventory on-hand/past 12 months sales

Inventory Days on hand—Inventory value/Accounts receivable

Inventory Turn—Inventory value/past 12 months inventory cost of goods

What are industry-wide “Best practices”?

What is your inventory target(s)?

Feed information into decision-making both first printings and reprints

Use marketplace information to turn off last printing

13

Sourcebooks, Inc.an independent vision

Using Marketplace Information to Decrease Returns Sourcebooks’ returns 2003 down 25%

Much of this decline can be attributed to the effects of marketplace input on inventory management

Can’t make these decisions in a vacuum Use the information in conjunction with your customers

14

Sourcebooks, Inc.an independent vision

Using Marketplace Information to Decrease Returns Analyzing/Managing Customers’ Inventory on

Ongoing Basis Ship less upfront

Assess sell-through and marketing

Ship more often Work closely with vendors to improve reprint cycles

Leads to more backlist-oriented program/more build-oriented strategy

15

Sourcebooks, Inc.an independent vision

Using Marketplace Information to Decrease Returns Working closely with our customers is KEY

They know a lot about their data and what is going on in their market

More accurately match supply with demandWhere you need it; effects of regionality

When you need it; effects of seasonality

Do the research before we approach the customer

16

Sourcebooks, Inc.an independent vision

Using Marketplace Information to Increase Efficiency and Profits Analyzing/Managing Customers’ Inventory on

Ongoing Basis Using information to work more closely with our customers

More accurately match supply with demand

Goal is to serve our customers and the marketplace better

17

Sourcebooks, Inc.an independent vision

Using Marketplace Information to Increase Efficiency and Profits Optimizing Business Processes with Marketplace

Information

Rationalize predictive process—impact advances

Optimize inventory both on hand and in channel

Implications for marketing, operations, production, sales

Decrease returns

Focus on Business Processes with Greatest Potential for Increasing Profitability