Streamlining the Printing Supply Chain: A Capabilities-Centric Approach
The fact of the matter is that print is alive and well, and likely to stay so for a long time. As early as the 1980s, many forecasts were predicting reduced printing and related raw material demand (such as for paper and ink) because electronic substitution, primarily due to the advent of the personal computer (PC) and electronic data interchange (EDI), the business-to-business exchange of computerized transactional information. In fact, the opposite occurred. The explosion of information availability, combined with lower costs and individual access to personal printing capacity, dramatically increased printing activity throughout the economy. In the past year, book and magazine volumes in the North American and European economies reached record levels. Resurgent economies in Asia/Pacific and emerging markets have generated new demand and attracted new capacity. The world economy truly is built on a foundation of paper.
What is even more true, however, is that the printing and publishing strategies of the past will not be viable even in the relatively near term. Consolidation of smaller printing operations by roll-up operations such as Consolidated Graphics has begun to reduce inefficiencies in the supply market; new critical mass has been generated at the large player level, as demonstrated by the recent merger of Quebecor and World Color (now QuebecorWorld). In distribution, the number of magazine distributors in the United States has been consolidated by a whopping 80% in the past few years alone. Publishers demand lower costs and higher service, new channel players with new requirements (such as Amazon.com and BN.com) are added with increasing speed across the globe, and consumers demand greater selection, higher levels of customization, and increasing levels of service, all at a lower total delivered price.
Furthermore, there is a new distribution channel to manage. The digital pipeline
is revving up. Print-on-demand technologies are expected to be a feature of
book retail stores and warehouses, providing rapid turnaround even on titles
that may have been out of print for decades. Books, magazine articles, newspaper
stories - all can be downloaded from the World Wide Web, and emerging technologies
such as NuvoMedia's RocketBook and SoftBook's Reader 250 are showing the way
to a world where e-books
become more portable and viable.
In the face of this environment of discontinuous change, the successful printing
company of the 21st century must abandon the long-cherished traditions of the
printer
and move into the realm of full-scale communications company. This
is a tremendous challenge, because the old-school printers must become highly
efficient in the traditional printed material offerings while simultaneously
focusing on growth, innovation, and time-to-speed in the emerging electronic
media channels. One cannot succeed without the other. Traditional print will
languish without direct, effective, and efficient links to the new economy;
the printer has no strategic advantage in electronic media if its existing primacy
in printed materials and publishing relationships is not leveraged.
At the heart of this challenge is one key fact: Supply chain excellence is paramount. The key is to balance the potentially diametrically opposed imperatives embodied by the need for a new 21st century strategy.
The Need for Greater Efficiency
Every cost in the printed material value chain, from the forest to the front door of the end consumer, must be managed to its absolute minimum, while service levels must be maintained or improved. Unnecessary variations, particularly those driven by poor communications across the supply chain, must be eliminated.
The Need for Increased Speed, Variety, Personalization and Flexibility
The velocity of change in the electronic marketplace for media content is unheralded. Users must receive their information in the desired format, via the desired channel, with the expected personalization, and in the desired chunks. This means maximizing flexibility (the potential enemy of pure efficiency) and thinking about methods of compensation that vary greatly from the model of payment for a finished good, which is so common today.
The good news is that technology, particularly those applications that are supply chain-oriented, can actually make these seemingly contradictory objectives work in a fashion that is highly complementary. The trick is in determining the appropriate mix and timing of technology in an environment with unlimited desires, limited resources, and seemingly endless software and hardware options.
R.R. Donnelley and the Move to the New Economy
Headquartered in Chicago, Illinois, R.R. Donnelley & Sons Company is one of the largest print-oriented communications companies in the world. Founded in 1864, it enjoys a rich history and reputation in the printing industry. Donnelley operates 55 plants, predominantly in North America, with additional operations in selected markets in Central Europe, the United Kingdom, South America, and Asia. In addition to these production operations, the company provides customer service in nearly 200 locations worldwide. 1999 global revenues of over $5.2 billion were delivered by a workforce of 35,000 employees. As a broad-range provider of print-related media services, Donnelley sees its mission asbringing the written word to life worldwide using traditional and emerging media.It executes this mission via five market-facing business units:
- Merchandise Media serving the consumer and B2B catalogue, advertising, retail insert, and direct mail markets
- Magazine Publishing Services serving the consumer, trade, and specialty magazine markets
- Book Publishing Services serving the trade, children's, religious, and educational book markets
- Telecommunications serving the global directory needs of telecommunications providers
- Financial Services serving the communication needs of the financial markets and health care industries
In addition to these end-market-facing entities, Donnelley also operates another highly strategic business unit, Donnelley Logistics Services (DLS). DLS provides distribution operations support for Donnelley print customers to ensure lowest total delivered cost at a high level of service, and services the needs of customers who are outside the current scope of Donnelley print operations. Donnelley's historical business expansion has been largely evolutionary as print capacity and plants have been added via acquisition and organic growth. This capacity has been largely developed under the business unit framework mentioned previously, and each plant has been run as a profit center.
Corporate functions are relatively lean, and the emphasis has been on ownership and customization at the field level.
This approach has generated strong customer relationships, a reputation for high quality, and a deeply ingrained, plant-oriented corporate culture, not to mention solid economic returns. Yet as Donnelley, and the printing industry in general, move into the new millennium, this approach has also left the company with a host of challenges that are more apparent in the increasingly competitive communications arena:
- System Proliferation: Plant-specific solutions have resulted in hundreds of applications and little commonality from location to location, increasing the cost of rolling out and maintaining systems.
- Customer Integration: Close ties between customers and individual plants have created relationships that are strong and effective, but customization (and associated inefficiencies) remains the rule, not the exception.
- Enterprise Management: Custom processes and systems from plant to plant, along with limited standardization of metrics, have constrained the ability to manage the system as one integrated set of assets, leaving room for further improvements in asset productivity.
- Electronic Interfaces: While Donnelley has taken an industry-leading position in terms of electronic manipulation and production/distribution of content, there is still room to grow into a world-class digital asset management provider.
Addressing these challenges in a fast, efficient, and effective manner will determine whether or not Donnelley emerges as the dominant print-oriented media provider of the coming decade.
Capabilities: Faster, Better, Cheaper
To ensure success in this challenge, in spring 1999 Donnelley launched a program to establish its technology priorities to achieve its world-class goals. EntitledInformation Technology for Strategic Advantage(ITSA), the program was the first enterprise-wide undertaking in the history of the company to examine technology needs and their fit with strategic objectives. The effort included all business units, all geographies (with initial focus on the United States), and strong corporate participation.
Early on, it became very clear that the traditional strategy drives technology
drives development drives implementation
approach to enacting business
change was too antiquated and failed to address the interdependent nature of
strategy and technology in today's economy. The conduct of strategy development
and technology planning must be simultaneous, with constant iterations as the
business moves forward.
To achieve these objectives, the team adopted a distinctive capabilities framework
to guide the effort. The capabilities framework is a methodology which ensures
that only technology that enables the handful of strategic imperatives for a
company is implemented, and that such capabilities are deployed in wave
fashion that allows for maximum net benefit to the company (see Figure 1.0).
Figure 1.0
Why focus on capabilities?
A given technology component rarely generates a business case purely on its own; other technologies, process changes, and organizational improvements must be orchestrated to truly deliver change and business results. On the flip side, when a technology is implemented, it usually provides benefit to more than one single strategic initiative. The capabilities construct enables a company to think about how all of these interdependencies are interwoven, and to focus its resources on those areas that are synergistic and deliver the greatest business value over a given time-period. This process required the team to identify the critical capabilities for Donnelley in the coming years against a handful of key criteria.
The initial activities involved cataloging all of the existing applications across business units (well over a thousand), ongoing technology-related initiatives (over 200 developmental and hundreds of maintenance/enhancement-related), and the strategic objectives of each business unit. Most importantly, the team began collecting strategic plans and business benefits expected to be attained by each business unit over a three- to five-year horizon.
With these facts in hand, the team conducted an exercise in cross-referencing strategic plans (and related business benefit targets) to information technology initiatives (either ongoing or in the works). Using a metric called linked EBIT - earnings before interest and taxes - each strategic effort was analyzed to confirm or deny whether the appropriate technology was existing or planned to support the business benefits targeted. Likewise, technology initiatives were evaluated to validate their fit with the stated strategies of Donnelley and its business units. The linked EBIT metric allowed the team to calculate what impact, if any, individual initiatives had toward achieving business results, and to identify where technology shortcomings were likely to constrain the projected business benefits.
The results were revealing. The connection between strategic imperatives, economic objectives, and technology initiatives was unclear and/or tenuous in many cases. Cross-business unit leverage of common processes and technologies to support differing business unit- and plant-specific needs was less than optimal. While the information technology and operations personnel involved in business and technology change were working feverishly and producing quality results, the list of initiatives (viewed for the first time from a total enterprise perspective) was longer than could likely be completed in a reasonable period even with double or triple the resources. Prioritization was based on factors that varied dramatically from group to group within the company.
The results of this assessment, combined with a cross-business unit analysis of business value and commonality of need, enabled the team to establish the critical capabilities on which Donnelley should focus its developmental efforts over the coming years. Economic impact was evaluated by not only looking at the typical business case factors (revenue enhancement, cost containment, and asset productivity), but also by examining the tremendous value produced by leveraging the rollout of a capability in an enterprise-wide fashion (better, faster, cheaper).
Using a capabilities framework to reprioritize its activities (see Figure 2.0), Donnelley was able to achieve consensus across executives at both the corporate and business unit levels - critical to making large-scale transformational change happen. In addition, ongoing and planned work was reprioritized and nearly 90 initiatives were either eliminated or deferred, freeing financial and human resources to focus on the truly strategic capabilities. Finally, an integrated program management office featuring integrated information technology, operations, and finance participation was chartered and given the authority and accountability for ensuring that current and future development initiatives are in sync with enterprise capability priorities.
Figure 2.0
Why focus on capabilities?
Reliable Planning and Scheduling: Flawlessly Executing The Basics
At the heart of the Reliable Planning and Scheduling (RPS) capability is the need to provide a relatively frictionless process for executing basic supply and demand planning activities at the plant level. It is the foundation upon which not only improved efficiency will be built (directly and in support of other capabilities such as Unified Supply Chain Network), but a key requirement to enable more growth-oriented capabilities, such as media-independent services. To achieve the targeted results in the committed timeframes, Donnelley must
execute rapidly, efficiently, and with a high level of quality. This means that
certain new cultural norms must be adopted. Strategy development must be quicker
and more flexible with greater allowances for course corrections during rollout.
Process and system development must be executed with much greater emphasis on
commonality of core components and customization only to the extent that it
is rewarded by improved business results. Capability and application deployment
must be released in waves
which rely heavily on pilots and seeding the
organization with new skills and best practice demonstrations. The challenge
in any organization with even a short history of firmly established operational
and cultural experiences (much less one with a long history) is that everything
seems unique enough to require customization, whether it be technology, business
processes, or relationships. In the case of RPS at Donnelley, closer examination
suggested that only a few critical components (be they process, technology,
or organization) required high levels of customization, and these were predominantly
in the areas closer to the customer interface. This left a set of core components
that could be developed in a much more customized fashion. The conceptual curve
below illustrates the relative need for customization in each major area of
RPS (see Figure 3.0).
Figure 3.0
The RPS curve
As Donnelley rolls out the first wave of RPS, there are three primary applications that will form the basis of the technology to be deployed: plant-level planning and scheduling, roll-level inventory, and transportation management. In 2000, Donnelley will design and pilot each of these technologies with accelerated deployment across the enterprise, anticipated to begin by mid- to late-year.
Plant-Level Planning and Scheduling
Obviously, Donnelley currently executes well in this area; it's at the core
of the company's success. However, the wide variation in approach across the
55 plants, combined with the dramatic improvement in technology options in the
market, suggests the need for a new, improved approach to RPS within the
four walls
of Donnelley's plant network. One of the packaged solutions
which Donnelley is investigating for adoption across the company is Prograph,
which has already had demonstrated success within several Donnelley plants.
Founded in 1986, Prograph's mission is to provide innovative, personal computer-based
custom software and management solutions for the printing and publishing industries.
Headquartered in Pittsburgh, the company is a leader in this particular software
vertical. Other large customers include QuebecorWorld, Brown Printing, Perry
Judd's, AARP, Computerworld, Inc., Rodale Press, and Time Inc.
Prograph's applications provide packaged solutions specific to the printing environment, one with a very complex make-to-order process. Specifications for some printing jobs are very intricate, with trim size, varying signature lengths, paper stock, and complex binding with geographic and demographic versions. Prograph captures the specifications of the job and can readily accept EDI transactions from the customer to reduce information entry. Prograph systems also handle the complicated problem of supply chain planning in a make-to-order environment such as magazine printing, where each time the product is made, the product is different and there are frequently multiple versions. Elysium systems will collect data on the press regarding counts, waste, quality, and so on (see Figure 4.0).
Figure 4.0
Prograph Application Suite
Several Donnelley plants have been using Prograph systems for customer service and scheduling for a number of years, while other plants have independently begun researching these tools. Prograph's Toolbox module can also provide customer information management functionality. The scheduling suite can meet many of the distribution requirements planning, demand planning, master planning, and workflow/scheduling requirements. Finally, the Elysium shop floor systems can fulfill the shop floor data collection need. Current development and deployment activities related to Prograph will be coordinated across Donnelley under the ITSA umbrella.
Roll-Level Inventory
In the printing industry, paper inventory is one of the largest cost components and one of the most significant quality issues from both a product and service perspective. Paper stock is sourced from a variety of suppliers, in a variety of grades, colors, and brightness, and may frequently be provided and owned by the publisher. The complexity can be quite daunting, particularly when integrated with the planning and scheduling functions. There are a number of software providers in the marketplace that address this topic, and one of the primary candidates Donnelley is investigating for enterprise-wide use is AbitRol.
EDIWISE is a wholly owned division of Abitibi-Consolidated Inc, a large paper making company. Their flagship product, AbitRol, is the cornerstone of a paper management system designed to enable printing facilities, such as newspapers, to manage the flow of paper product through their operations, from placing orders to handling shipping manifests, via the electronic exchange of information with their paper supplier(s). AbitRol is currently used by over 160 pressrooms and commercial printers across North America, South America, and Europe.
As with Prograph, different plants, business units, and groups within Donnelley have been working independently toward a paper management solution. Recent efforts by corporate information technology to integrate these efforts under the ITSA program and implement a complete end-to-end paper management solution across all plants have united these individual projects. An end-to-end solution for Donnelley would include: inventory management and tracking, consumption, waste management, EDI, and the ability to integrate bar code scanners. Additionally, key to the objective of more reliable planning and scheduling is the ability to collect paper quality information directly off the press and to exchange this information with paper suppliers to improve materials performance. AbitRol is expected to meet most of Donnelley's needs for paper management.
Transportation Management
While transportation management does not technically meet the inside the
four walls
descriptor, it is an integral component of satisfying customer
needs under the reliable planning and scheduling umbrella. Superior performance
is absolutely critical, particularly in time-sensitive printed material categories
such as magazines and consumer catalogues. From a software perspective, this
is a very crowded field. Donnelley has elected to pilot i2 Technologies' RHYTHM
Transportation Optimizer as part of RPS.
i2 was founded in 1988 on the principle that manufacturing planning could not only be executed faster, but based on the real business goals and conditions of the enterprise. Since then, i2 has consistently developed new intelligent planning technologies for every phase of producing, delivering and selling goods and services, including solutions that support intelligent e-business and e-commerce.
Donnelley's complex distribution network requires simultaneous optimization of inbound transportation to printing plants, outbound direct to selected customers and/or their distribution centers, and transit through the DLS network of consolidation facilities that flew into various postal delivery insertion points (such as bulk mail centers, sectional center facilities, and destination delivery units). This means that Donnelley must interface not only with a variety of suppliers, customers, and third-party transport providers, but, extensively with the U.S. Postal Service as the largest private postal customer. i2's Rhythm module is being piloted to establish its ability to operate in this complex environment.
Donnelley's first step is to model its environment within Rhythm Transportation
Optimizer as a proof-of-concept
within. Donnelly plans to integrate
i2 with its custom-developed, legacy Freight Management System (FMS). FMS will
still be used to plan and manage the transportation, with extracts being fed
to i2 for optimization, then loaded back into FMS for execution. Under the RPS
umbrella, this will complete the cycle of end-to-end planning integration within
Donnelley.
