Is Zero Inventory Possible?

In October, the Digital Book Printing Conference brought more than 150 book publishers, manufacturers, and equipment suppliers together in New York City to explore how publishers can take advantage of digital printing to reduce inventory and distribution costs and deliver books quickly to consumers. The event was produced by NAPCO Media, IPG’s parent company.

From left to right: Mike Herold of Ricoh, John Conley of Xerox, Francis McMahon of Canon Solutions America, Marc Johnson of Hewlett-Packard, and Jeff Tabbit of Kodak

Improving internal IT infrastructure and metadata are critical if publishers hope to incorporate digital printing technology at scale, said Yvette Nora, director of global procurement at Reed Elsevier, during one of the day’s panels. Those capabilities will help publishers deliver book files directly to book manufacturers for quick, one-day turnarounds. Nora spoke from experience: 95 percent of Reed Elsevier’s science and technology division titles are produced on-demand and she is working to grow that to 100 percent.

In another panel, Bill Barry, sustainability and vendor partnership consultant for Macmillan, highlighted a challenge facing widespread digital printing adoption—the difficulty of producing large-volume titles digitally. Large-volume titles, i.e. bestsellers, still drive the majority of revenue for large trade publishers. Until digital printing can provide greater efficiency and cost-savings for these books, there is less incentive for the big trade publishers to print their books digitally.

“Zero inventory” was the buzzword at the conference. Throughout the event, book manufacturers and publishers posed the following question: is the zero inventory model, in which manufacturers print and distribute all titles on an on-demand basis, achievable for book publishers?

The question sparked a substantial debate. Advocates, including many manufacturers, insisted the technology to print all titles on demand, without inventory, exists today. They added that it’s simply a matter of publishers trusting that the systems and technology for a zero inventory model will gain widespread use in the industry. Detractors cited a laundry list of concerns, from infrastructure limitations that preclude the dissolution of warehousing to the fact that production of some titles, particularly bestsellers, cannot be fulfilled by the on-demand, zero inventory model.

Making Print on Demand Work

Ultimately, the viability of the zero inventory model seemed to boil down to the type of books a publisher creates and the unique market factors affecting different segments of the industry. Nora said that zero inventory is very achievable for her company and for many in the education space. First, the demand for print titles in the education and journal space dropped significantly with the rise of ebooks and online publishing, said Nora. The drop in print units made printing on digital toner more affordable.

The second factor that moved Reed Elsevier towards a POD model was actually a sales issue. Reed Elsevier is a global publisher and many books weren’t reaching international customers fast enough. The solution was to print titles on demand in the countries where they were needed most, instead of printing them in the U.S. and shipping them overseas, which took weeks. Inkjet technology played a significant role in making this initiative work, and brought Reed Elsevier’s POD program into full force in 2012, said Nora.

“We have tracked the cost savings through our business case for POD, and we’re pleased to see that we’re saving the 30 percent that we were expecting,” she noted.

Large trade publishers, on the other hand, face a different set of challenges than educational publishers. Macmillan’s Barry explained these issues during a panel titled, “Battle of the Business Models: Is It Realistic to Get Down to Zero Inventory?” He said that legacy assets such as warehouses, which many trade publishers earn revenue on through third-party distribution, have created significant hurdles to adopting a POD model.

“As the print inventory shrinks with the rise of ebooks, you aren’t able to just collapse the warehouse,” said Barry.

He added that the current revenue model for trade publishers, where the top 20 percent of titles earn the majority of revenue, isn’t suitable for POD. These titles are the blockbuster bestsellers, and POD still does not make sense for these long runs.

“Ultimately, I don’t think zero inventory is achievable in my lifetime,” Barry said, “however I think there is 1/6, 1/8, or 1/10 of titles that would make sense for POD for some very compelling business reasons. But the top of the list, the bestsellers, will always go out offset.”