Problems, Challenges, and Suggestions for Reverse Logistics of Publishing Industry in China

Association for Systems AIS Electronic Library (AISeL) AMCIS 2007 Proceedings Americas Conference on Systems (AMCIS) December 2007 Problems, Challenges, and Suggestions for Reverse Logistics of Publishing Industry in China Cansheng Wei Yongjian Li Nankai University Follow this and additional works at: http://aiselaisnetorg/amcis2007 Recommended Citation Wei, Cansheng and Li, Yongjian, "Problems, Challenges, and Suggestions for Reverse Logistics of Publishing Industry in China" (2007) AMCIS 2007 Proceedings 217 http://aiselaisnetorg/amcis2007/217 This material is brought to you by the Americas Conference on Systems (AMCIS) at AIS Electronic Library (AISeL) It has been accepted for inclusion in AMCIS 2007 Proceedings by an authorized administrator of AIS Electronic Library (AISeL) For more information, please contact elibrary@aisnetorg

PROBLEMS, CHALLENGE, AND SUGGESTIONS FOR REVERSE LOGISTICS OF PUBLISHING INDUSTRY IN CHINA Cansheng Wei 1, Yongjian Li 2, Xiaoqiang Cai 1,3 1 Department of Automation, College of Technical Science, Nankai University, Tianjin 300071, PR China E-mail: weicansheng@mailnankaieducn 2 Business School, Nankai University, Tianjin 300071, PRChina E-mail: liyongjian@nankaieducn 3 Department of System Engineering & Engineering Management, The Chinese University of Hong Kong, Shatin N T, HongKong Email: xqcai@secuhkeduhk Abstract: In this paper, we discuss the problem and challenge for the reverse logistics of the publishing industry in China First we present the background of the publishing industry in China through analyzing the statistics data of the past 8 years Then we point out the existing problems and the underlying reasons Finally we propose our solution and suggestions to cope with the existing problems, including optimizing the reverse logistic structure of the publishing industry based on the 3PL, and developing an efficient information system of the reverse logistics of the publishing industry Keyword: Publishing industry; Reverse logistics; System; Optimization; 3PL Background Developing with the economic reforming in China, the demand of books consuming is now becoming much greater than before The market of the book industry is also endued with tremendous developing potential and growing space All these situations can be easily figured out from the statistic data provided by the National Bureau of Statistics of China as shown in Figure 1 [1] Figure 1 shows that a much high rate of the book return to the publishers is leading the book industry in China to an unhealthy situation, in which the rate of book returns reaches more than 40% and low sale takes place frequently It also shows that in Figure 2, although the quantity of the book categories in China is more than that in other countries, its sale quantity is lower than the others Furthermore, the unsuitable management policy of the book reverse logistics reduces the total profit with about 35% So the urgent attention to the book reverse logistics should be quickly paid by the publishers and other related participants in China Obviously, our paper on the book reverse logistics is necessary and valuable in the practice application

22 20 18 16 14 12 10 8 6 4 2 Kinds of publications(thousand) Tons of publicatios Million Tons) 154526 141813143376 130613 170962 190391 208294 222473 48619 52445 29625 33527 37795 41849 23162 24138 1998 2000 2002 2004 2006 Year 20 18 16 14 12 10 8 6 4 2 0 Sale of publications(billion dollars) Kinds of publications Ten Thousand China USA Japan France UK Germany Russia Figure 1 Book industry publications in China Figure 2 Comparison of book industry in different countries [2] Book logistics and reverse logistics The running process of book logistics in China is illustrated in Figure 3 The structure of the market makes the book logistics flow to and from among the publishers, wholesalers and retailers Although the pure sale of the book market in China is about 40 billion on the average each year, the average inventory cost exceeds billion[3] Besides, the in-transit inventory of the book is also huge, and a good deal of the overstock books are returned to the book publishers from the retailers one time at the end of each year, so that many returned books have to be as an input of paper making According to the statistic data from the National Bureau of Statistics of China in Figure 4, the rate of book sale increasing is much lower than that of the book stock cost That is, the total cumulated overstock of books is becoming more and more However, about 90% returned books are now processed as the material of the paper making because most of the book returned are out-of-date overstock Xinhua book store (State wholesaler) Xinhua book store (province or city) Retailer store 1 Book flow Retailer store 2 Other Wholesaler and Publisher (Privately owned) Private distribution channel (3P L) Retailer store 3 Figure 3 Book logistics in China 2

Billion(YUAN) 52 50 48 46 44 42 40 38 36 34 32 30 28 26 24 22 20 18 Pure sale of publications Inventory cost of publications 3476 2069 355 2416 3769 2727 4085 2976 4349 4616 4861 50 1932 1998 2000 2002 2004 2006 Year 3435 4814 4491 Figure 4 Sale and inventory of the book industry in China [4,5] Currently, the book reverse logistics flow is as follows: first, the book store submits the return application and the information of the return details to the publisher; then the publisher checks the application and accepts the return application; next, the book store returns back the books with the detail data; finally, the publisher checks and sorts the returned books If the returned books are in a good condition, the publisher will distribute them to the other bookstores for the second time; otherwise, the books in a bad condition will be sold to paper mills The traditional system of the book reverse logistics is Good condition Second distribution Bad condition sell paper mill Publisher distribution center (Artificially sort ) Return application Return books Admission Book store Retailers out-of-date overstock Figure 5 The current book reverse logistics in China shown in Figure 5 Problems of the book industry and book reverse logistics in China Based on the above discussions and the statistic data given in Figures 1, 2 and 4, a number of problems can be identified 3

for the book industry in China First, from the book industry market, the existing problems are as follows (1) In China, the book industry holds a great developing space The categories of the publications, the volumes and the total market sale are now increasing every year However, the pure market sale is now increasing slower than that of the inventory cost The increasing categories of the publications cause the further book return in the future periods, which increases the management and investment risks in the book industry (2) The participants in book supply chain in China hold such weak control capacity to the book logistics and reverse logistics that the whole book industry has to be fed up with the high inventory level and rate of book returns Then, based on Figures 3 and 5, from the book reverse logistics, we concluded the problems as follows (1) The book supply chain structure causes a complicated operating process The book flow is always running to and fro over the whole supply chain (2) The participants of the book supply chain can not carry out the real time scheduling and monitoring the information of the book logistics and reverse logistics information And the supply chain structure makes the information sharing so difficult that the book flow information is scarce to every node which then becomes the lonely information island out of control the book flow information (3) The mode of the book reverse logistic management is dropping behind that of the other developed countries The whole book reverse logistic processes are full of many manual activities, eg, filling the return application form and sorting the return books, etc The dated management and operating technique increase the operation cost of the whole reverse logistics of the book industry and weaken the management efficiency (4) The information system of the book reverse logistics is developing slowly and the book industry did not adopt the advance information technique into the process of the reverse logistics So the bullwhip effect in the book reverse logistics behaves more severe than that in other industries in China Problems discussion in the book reverse logistics in China The modern logistics technique brings the book industry new development chance The information-based modern book logistics and the modern logistics center are doing a good favor to the book industry However, in China, the book supply chain still looks forward to a further effective coordination in the supply chain management In addition, the book industry bubble economy and low-level publications are also serious The book reverse logistics in China now is being faced with some severe problems, which are summed up as follows (1) High book inventory level and rate of book returns From the Figure 4, we can see the high inventory level in book reverse logistics of China And most of the publishers run with a high rate of book return between 30%~40% Furthermore, some kinds of publications hold an amazing return rate as between 50%~60% (2) Inefficient book supply chain management, complicated book reverse logistics procedures and long reverse operation periods Form the Figure 3, we can find that the nodes of book supply chain are operating independently without the information sharing and coordination mechanism The reverse procedures are so complicated that the chance of the second time distribution of the returned books is lost And the inefficient supply chain and reverse logistics lead to a long reverse period (3) High reverse logistics cost and low benefits There are many reasons that cause the above problems in the book reverse logistics We conclude the main reasons as follows (1) Unreasonable supply chain structure in China The wholesale operation is at the middle of the book supply chain Then the wholesaler (middleman), which plays a key role in the book supply chain due to its critical position, connects with both the publisher and retailers However, the wholesalers in China always operate in a small way 4

They have no enough capacity to build up a supply chain system and keep control on the information and logistics of the book They also have no power to influence the whole supply chain in order to reach the coordination The unreasonable supply chain causes the inefficient book supply chain management Billion 120 100 80 60 The am ount of book sale The to tal sales of books 1 13 1 3 5 1 07 0 2 99 3 93 9 2 07 3 82 5 3 1 8 478 8 74 7 84 1 2 298 1 40 20 16574 17038 15864 15612 1606 15754 1561 15798 1998 2000 2002 2004 2006 Year Figure 6 The amount of book sale and total sales of book in China (2) Bullwhip effect leads to a high rate of the book return and a high book inventory level Due to the disunity of the information control and scheduling, the participants of the book supply chain have no capacity of controlling the information flow, which leads to the asymmetry of the information and enhances the bullwhip effect Besides, the bullwhip effect is also worsened by the information technique level in the book supply chain which is so out-of-date that the whole industry can not collect and process the book selling information in real time while the book industry now is developing much rapidly (3) Price policy restrains the sale of book Although the sale amount of the books increases slowly each year, the total sale of the books increases surprisingly (See Figure 6) That s to say, the book price is increasing much highly However, the book price is so high that the consumers can not accept it, which then increases the book overstock in the book retailers Due to the book return mechanism in the book industry, the retailers always return all the overstock books to the publishers (4) Low standardization, low informationization and low logistics technique level In China, standardization in book industry has not been carried out successfully The development of the informationization level in different locations and nodes of the book supply chain is imbalance, which makes information sharing difficult And the low level of logistics technique postpones the book returns in the reverse logistics, which reduces the operation efficiency and increases the reverse cost in the book supply chain Suggestions and countermeasures For the book reverse logistics, a majority of book returns is brought about owing to the bullwhip effect, the inconsistent supply chain structure and the inefficient supply chain management If the information sharing, risk sharing and profit sharing are introduced into the book supply chain, the book returns will be decreased evidently Thereby, the situation with a high inventory level and a high rate of book return will be improved In this section, we propose several improvement schemes for the book reverse logistics in China 5

Optimizing the reverse logistics of the publishing industry based on 3PL The traditional publishers have to face directly the book return and the second time book distribution And they also take most of risks in hand all by themselves, which leads to the absoluteness book return from the book retailers and aggravates the whole supply chain operation with the high reverse cost and low profits So, it is necessary to build several large-scale book wholesalers (middleman), which are not only the book jobbers but also a 3PL service supplier The book wholesalers connect the book retailers and publishers with their information systems, which not only take on the traditional book distribution, book storage, book face-lifting and old book treatment, and book reverse logistics, but also undertake information collection and analyse in the book distribution and return process The optimized reverse logistics of the publishing industry is shown in Figure 7 support system Publisher flow System of Publisher Interface flow System of Publisher Book stores POS system Readers Recycle bin 3PL service provider (acts in consideration of publisher's decisions) Returned books flow Second-time distribution Book Retailers Figure 7 Optimization schemes of revere logistics for the China s publishing industry The adoption of third-party logistics improves the reverse logistics of publishing industry in China with the following three aspects First, the 3PL service improves the book return flow management The classical reverse channels of the publishing industry are composed of retailers and publishers And the publishers afford more responsibility and cost for the books returns than retailers With 3PL participating, from the Figure 7, we find that the 3PL provider answers for the book return flow management and takes actions in consideration of the publisher s decisions on returned books More importantly, the 3PL provider can provide more professional reverse logistics management than the publisher, which frees the publisher to focus on its critical activities Second, the information flow management is improved by adopting the 3PL service Due to the outsourcing of books returns, the publishers are forced to improve the information flow to make sure the outside reverse logistics control and coordinate well And the 3PL also needs the information sharing with publishers and retailers to make decisions in time In 6

Figure 7, the information support system consists of the publisher s and 3PL s information systems that are connected by an interface support, where all the information flows will be shared in this system The bullwhip effect can be effectively weakened, which decreases the return rate and inventory level of the book returns Third, the participation of 3PL optimizes the organization of the book reverse logistics The whole reverse logistics are leaded by 3PL provider through integrating the return information and return flow into their scheduling The organization structure makes sure the process of book returns can be coordinated well between the publisher and retailers through the 3PL provider participating Data Layer Database Function Layer Collection storage dealing transfering Output Layer WWW Explore r WWW Explorer Operation Layer Log in Search Inquire Manage Log in Search Inquire Manage Figure 8 The information system structure system of reverse logistics of publishing industry The information system of reverse logistics in the publishing industry aims at collecting, analyzing, dealing with, transferring, sharing and displaying the information of reverse logistics This information system helps the participants of the book supply chain to predominate the information related to all the aspects of the whole supply chain in real-time Then the decision-makers can make decisions effectively and reasonably based on the real-time information process due to the reasonable use of reverse logistics resources So the information system should be composed of the function modules as follows (1) collection The information collection is the necessary and important function for the book reverse logistics Due to the characteristics of the publishing industry that the publications are always updated in real-time and the new book categories are also necessary to appear rapidly, the book reverse logistics will bring lots of information related to the reverse process The function of information collection can record all the information and translate them into a special format that the system can deal with (2) Data storage All the information data, collected by the collection function, should be stored in the information system provisionally or 7

timelessly for further analyzing and dealing purposes Then the historical information data can be searched, inquired or shared by the nodes in the book supply chain So the information must be supported based on a large-scale database (3) Data analyzing and processing The function of data analyzing and processing support sorting and triming the information data in database through some statistical methods and decision-making methods Then the function programs translate the data into the valuable information as decisions-making references (4) transferring and sharing The most important action in the information system of reverse logistics in the publishing industry is to enhance the effectiveness of the logistics information transferring and sharing among the whole book supply chain participants Then the function module is very necessary to realize the effective information transferring and sharing (5) Display The information system aims at making the information using conveniently for the participants in the book supply chain So the display function is for the participants of the book supply chain to search and inquire the data and display all the data in form of report forms, words and graphs The information system, based on a B/S application mode, deals with the information by storing the data in a centralized database server The system is easy for any mode in the book supply chain to upload the data and information The modules of the system are composed of a master control system and several subsystems The master control system is composed of a main control program process interface with the subsystem, checkout program, system protection and backup aid interface, etc The subsystem deals with the subsystem main control program, interface, data input, dealing, output, etc The modules of the system are shown in Figure 9 The main modules are composed of the system management module, management module of book reverse logistics, dynamic information processing module, reason and statistics module, finance and cost control module, information collection and analysis module, etc system of reverse logistics of publishing industry System management Management of reverse logistics Dynamic information of handling Reason and statistics analyzing Cost control collection and analysis Log in Authority Inquire Handling mannagement Returns management Book return Inventory check Sell to paper mill Second time distribution Inventory for sale Reason of book return Statistic data analyzing Other situation analyzing Statistics reports form Benefit analyzing cost control Distribution information Benefit analyzing cost control Figure 9 The modules of the information system of reverse logistics of the publishing industry Conclusion 8

In this paper, we first present the background of the publishing industry in China And we collect the statistic data of the book industry to have a glance of the market size of the book industry in China and the difference between China and other countries Through analyzing the book logistics and reverse logistics structures, we conclude the existing problems and the reasons in the book reverse logistics in China Then we propose our suggestions and solutions to the problems to improve the effectiveness of the book reverse logistics, further to decrease the returned book inventory and the rate of the book returns Some other problems are still necessary to be dealt with in the practical applications of the publishing industry in China Especially, the actuality of the publishing industry in China limits the large-scale middleman s development We also think that the 4PL logistics information service company will change the embarrassing place of the publishing industry in China How to use the 4PL logistics information service to improve the publishing industry in China is our interesting research field in the near future References [1] NBSC The statistic data in the website, National Bureau of Statistics of China wwwstatsgovcn, 2007 [2] Luo ZichuThe comparing of publishing industry in China and the other countries Wuhan University Journal of Natural Sciences Volume 6 PP 108-122, 1997 [3] Tan weifengthe reasons of large-scale reverse logistics of publishing industry in China and the optimal measures Market modernization PP 6-8, 2006 [4] The website of publishing of the People s Republic of China wwwchinapublishcomcn, 2007 [5] General administration of press and publications of the People s Republic of China wwwgappgovcn, 2007 9