Overview of Presentation. My experienceWho are Blackwell Publishing Ltd?OutsourcingThe reasons for moving Journal manufacturing east BenefitsRisksSuccess criteriaThe evaluation processWhat did we learn (i.e. why China may not always be the best option)?Strategies for successConclusions. My
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1. Printing in the Far East A Cost Benefit Analysis John Strange
Group Production Director
12th July 2006
2. Overview of Presentation My experience
Who are Blackwell Publishing Ltd?
The reasons for moving Journal manufacturing east
The evaluation process
What did we learn (i.e. why China may not always be the best option)?
Strategies for success
3. My experience….! Blackwell Publishing (1993 - ): Academic, Scientific and Medical Publishing
Responsible for global production strategy
Books, journals and electronic products
Outsourced ‘composition’, ‘manufacturing’ and ‘distribution’
Pearson Longman (1978 – 1992): Educational Publishing
Responsible for ‘Schools Division’ production strategy
Administration and systems for Group as a whole
Special focus on composition and pre-press
Outsourced ‘composition’, ‘reproduction’ and ‘manufacturing’
Prior to 1978
8 years in a small holiday guide publisher
3 years in sales (printing company)
3 years in works/factory management (printing company)
4. Who are Blackwell Publishing? The world’s leading society publisher and is over 75 years old.
Publish over 805 journals and 650 new books each year
Academic, Medical and Professional subjects
Partner with 665 academic and professional societies
990 staff with offices in US, UK, Australia, China, Denmark, Germany, Singapore and Japan
‘Production’ facilities in US, UK, Australia and Japan
Outsource 100% composition and manufacturing
Overall sales revenue in excess of £200 million per annum
5. Outsourcing What does it mean?
The delegation of one or more business functions (or processes) to a third party, who in turn delivers services to agreed criteria
Some other associated terminology
Offshoring: the utilisation of a third party that is ‘offshore’ (i.e. not domestic), normally to a region where labour costs are lower
Why is it important?
As domestic costs rise (especially labour costs), one is forced to try and locate parts of the world where you can buy services at a lower cost and, sometimes better quality with reduced lead times.
6. Outsourcing (cont’d) Identify – what is really core business and, thus core competence – then focus internal resources on this – which can then deliver:-
Reduced lead times
Similar (or better quality)
Areas that can be outsourced
Technology (support and development)
Some aspects of Finance (e.g. Purchase Ledger)
Rights and permissions
24 x 7 help desks
7. Trends in outsourcing Offshore outsourcing becoming very common (? the norm)
Europe far more experienced than US!!
Concerns about loss of jobs domestically but…….?
Increasing breadth of outsourcing offerings
Vendors beginning to offer end-to-end solutions
8. Reasons for moving Journal manufacturing east? Not just about ‘manufacturing’
Must consider ‘distribution’
Lead times to client subscriber
Looking to identify:-
Existing cost savings within increasingly automated processes
Maintain (at worst) - quality
Within acceptable overall lead times
Ensure appropriate levels of communication etc
9. Evaluation process Process initiated in 2002 with cost comparisons between UK, China (mainland), Malaysia, Singapore
Created RFP (request for prices)
Sent to several suppliers (I had known most for around 30 years and visited all of them)
Key here is to try and identify ‘appropriate’ suppliers (not too large, family owned etc)
Prepare cost comparisons (currency?)
Evaluate the short list of suppliers carefully
Ask tough questions
What is their management team (and experience)?
What are their human resource policies?
Ask them to complete human resources practices profile
Is there likely synergy between us?
10. Evaluation process (cont’d) Do they have the appropriate technology environment/expertise
Take up references
Do they work for any of your competitors (if yes, who?)
What is their turnover/revenue
What is the value of their largest account (not who, but how much)
Do they make a profit (and, will they from your work)?
11. Evaluation process (cont’d) Paper
We wished to buy centrally
Supply to printers
Hold stock locally
Easier to move suppliers (if necessary)
Can change paper grades more simply
100% added value at printers
But - cash flow implications
- some overhead
12. Evaluation process (cont’d) Manufacturing
We to supply print PDFs (from any/all of 6 vendors in India/China)
Very thorough process for training suppliers and, checking
Receipt of files
Inspection copies (initially to UK by courier – 2-3 days)
Finished printed journals delivered to distributor
13. The results…..!
14. Distribution Similar exercise/process – more complex
Receive subscriber electronic files
Output carrier sheets (with addresses on)
Receive printed journals
Collate and polywrap the journals
Thorough web based tracking systems
Monitor lead times to end subscribers etc etc
Did not test this process in China (because manufacturing costs did not warrant it)
15. Why was China not competitive? Approached suppliers in the Dongguan region (in the middle part of Guangdong Province in South China)
Mainly suppliers from Hong Kong set up prior to 1997
Their mindset (2001/02) was mainly geared to long run 4 colour work and, books
Not 128pp mainly mono (although increasing colour) limp bound (notch) STM/HSS Journals
No experience of journals
? Associated overheads would be too high?
16. Why was China not competitive (cont’d) No doubt quality and lead times would be fine
Importing of paper would be OK
Distribution ‘may’ have been a challenge!
So all about ‘specification related purchasing’
Almost exclusively 4 colour (or more) presses
‘square pegs round holes’
17. Strategies for success? Manage the expectations carefully
Need support from Senior Management (CEO downwards)
Will not be a smooth ride (things will/do go wrong)
Not pain free
All about risk management to optimise benefits
Choose carefully what you decide to outsource
Don’t be too optimistic/aggressive
Identify some small/safe wins (then use these successes as ambassadors within your organisation for further expansion)
Manage change (or workflows, culture etc) very carefully
Measure performance; agreed KPI’s
If you can’t measure it, you can’t expect to improve it
18. Strategies for success (cont’d) Don’t allow yourself to be rushed (whatever the CEO says!)
Will need additional overhead costs (travel, training etc)
From the savings!
Visits – go and see for yourself
Once satisfied, share with colleagues
Ensure you have a clear idea of HR policies for all your vendors (proactively share with internal customers)
Documents that you want (Service Level Criteria)
Ensure crystal clear instructions
Holy Grail – true electronic workflows (work aggressively towards this)
Don’t make FedEx/DHL even richer!
Share your strategies
Regular supplier meetings
You are all in this together
19. Strategies for success (cont’d) But there are huge benefits
Can also get
Reduced lead times (on average)
Improved service levels (which are sustained)
20. Conclusions Our choice of Singapore has been a spectacular success, however you measure it
After a pilot project (40 titles), we scaled up to over 430 UK titles, 40 US and 80 Australia titles in 2 years
Strategically Singapore is in an excellent geographical location
Malaysia ‘up the road’
Vietnam, Korea, Indonesia all nearby
China also ‘in the region’
We continue to evaluate alternatives which will include China
They have the capacity, the resources (people, equipment etc) – but do they have the desire (i.e. have they identified this market etc etc – as one they wish to attack…?)