Summary of Conclusions

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 Phase I of the study led Mercer Management Consulting to the following conclusions:

1. Industry Evolution. The single copy channel is ripe for further change, and like other retail industries with similar characteristics, will inevitably continue to evolve in ways that streamline the supply chain and leverage information.

2. Potential Rewards. Total potential rewards are sizable about $420 million per year equivalent to 10 percent or more of total retail revenues. There are bottom line benefits for all trading partners: retailers, wholesalers, publishers and national distributors. These benefits come from both operational efficiencies and category management, and are achieved in two stages:

• Stage One Streamlining. 60 percent of these benefits can be achieved through actions aimed primarily at eliminating duplication and inefficiency in the supply chain, for example, eliminating the duplication of effort on the part of retail store personnel and wholesalers in performing detailed check-in and check out. Some basic category management benefits are also attainable near term.
  
  Achieving these benefits requires that trading partners work cooperatively together to streamline current business processes, applying technology that is available today. This is essentially a clean up stage, involving actions to make the supply chain more efficient and less wasteful, applying common sense to cut through complex and duplicative processes.
  
  
• Stage Two - Scan-Based Trading. Once the basic inefficiencies in the channel have been eliminated, the industry can begin to capture the benefits of Scan-Based Trading in Stage 2. Actions here will produce the remaining 40 percent of the benefits. These involve creating a responsive, market-driven supply chain, in which consistent, highly accurate information based on scanning data is used to drive better business decisions on a continuous basis to build sales and profits through advanced category management. This requires new business practices and new technologies.
  
  Scan-Based Trading includes first, the use of scan data to create a market-driven supply chain that is efficient and that uses information to synchronize the supply of magazines with consumer demand at the point of sale. Second, Scan-Based Trading provides accurate, auditable information that can be used to manage ongoing business relationships between trading partners.
  
  Chief among Stage 2 practices is the ability to read and process issue code data. Issue code is essential to provide the clean data needed for sophisticated category management, as well as an objective, auditable basis for payments, shrink, and inventory ownership.

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