CARBON AUDITING CONVENTIONAL AND ONLINE BOOK SUPPLY
CHAINS: AS EASY AS ABC?
Dr Julia Edwards, Dr Sharon Cullinane and Prof Alan McKinnon
Logistics Research Centre, Heriot-Watt University,
Riccarton Campus, Edinburgh, EH14 4AS
Abstract: This paper focuses on the issues associated with carbon auditing conventional and online book supply chains. Any comparative audit requires the establishment of ‘typical’ operations within
both retail channels. Therefore, the respective activities downstream of the point of divergence, where a physical book is destined for either high street or online sales, are examined. From the start point of a publisher’s distribution centre (DC), discussions summarise the treatment of books at each step in the respective book supply chains to the consumer’s home. Typical process stages are identified, and
justification for any assumptions given, thus ensuring a suitably-robust context for the carbon methodology.
Book supply chains; typical; online and conventional retailing; carbon auditing.
Despite books often being considered as discretionary purchases, two-thirds of us buy at least one book a year, and half of us claim that we enjoy reading as a leisure activity (Mintel, 2007). As a result, book sales in 2006 exceeded ?3.5 billion in the UK (National Statistics, 2007a), with the majority of these purchases undertaken at high street bookshops and other conventional retail outlets. Notwithstanding, books are amongst the most popular purchases on the internet (National Statistics, 2007b), and as the online sales channel is set to grow markedly over the next few years, it is important to understand the relative environmental impacts of purchasing a book through either the conventional or online book supply chains.
For any carbon audit to be accurate all links within the respective supply chains need to be established. This paper, therefore, investigates the relative importance of the various book industry partners, and highlights how energy consumption, book distribution and storage issues have been established so that comparative carbon emissions values can be applied to both online and conventional book supply chains.
Parcel Hubs / Retailer’s
Consumers Distributors Wholesalers Publishers
Returns Parcel Hubs / Online Fulfilment Local Depots Sortation Centres Centres Figure 1: Typical supply chains for online and conventional books in the UK
The UK Book Supply Chain
In order to verify a selected carbon auditing methodology, books were selected as an initial product category for examination owing to their homogeneous form and standard handling (there appears to
be no differentiation in the supply chain between fast-moving major titles and the slower-moving minor titles, nor between hard-back and soft-back editions). Equally, as the UK book industry has undergone several prominent mergers and acquisitions in recent years, it was perceived that the supply chain would be relatively straight-forward to establish. In reality the book supply chain remains complex, with many trading relationships involving the main participants: authors, agents, publishers, printers, distributors, wholesalers, retailers and consumers. For example, a diverse range of publishers sell through the retail channel, and collectively they produced some 787 million books in 2006 (The Publishers Association, 2007), making the UK the largest producer of English language books (Goldfarb, 2006). For illustrative purposes, a simplified book industry supply chain is shown in Figure 1.
Key Book Industry Players
Publishers: Publishers select and prepare materials for publication, before selling their books at a discount to the retail market (Clark, 2001). Keynote (2007a) estimates that there are some 44,000 publishers active in the UK, although two-thirds of the market share for consumer sales is held by the top 10 publishers (The Booksellers Association, 2008). The top four publishers (Hachette Livre, Bertelsmann, Pearson & News Corporation) account for more than 50% of sales (Competition Commission, 2007).
Sometimes publishers store and distribute the books themselves, in effect bypassing distributors (Competition Commission, 2007). However, this is only a very small proportion of their overall sales (possibly as little as 5%) and includes direct distribution to libraries and books destined for export, as well as to retailers. Therefore, such a relatively minor distribution channel (direct from publisher to retailer) has been excluded from any analysis. More importantly, publishers’ activities, and the book
distribution from them, are beyond the scope of this study as they are upstream from the point of book divergence (Figure 1). Distributors mark the start of the respective supply chains, where the two retail channels separate.
Distributors: Distributors usually store and distribute books (pick, pack and ship) from publishers for a fee, although it is worth a word of caution here, as the distinction between a publisher and distributor is not always clear, as several companies undertake both roles. Also, a distributor owned by one publisher, may ship books for a number of other publishers (Competition Commission, 2007), adding further complexity to the auditing task. In the UK there are seven main distributors who ship books to retailers and wholesalers (Figure 2). Retailers receive the majority of their books from publishers via distributors (Competition Commission, 2007).
Publishers HQs: Glasgow; London;
Oxford Distributors DCs: Abingdon; Basingstoke;
Chelmsford, Colchester; Glasgow;
Grantham; Littlehampton; Northampton;
Trade Wholesalers DCs:
Retailer-Owned RDCs: Burton-
Online Retailers DCs: Eastborne;
Gourock; Milton Keynes; Norwich
Figure 2: Location of key players in the UK book supply industry
Wholesalers: Trade wholesalers, having a non-exclusive relationship with publishers, generally buy books from a variety of sources and sell them on to retailers (Competition Commission, 2006). From the late 1980s wholesalers have revolutionised the speed and efficiency of book distribution in the UK (Clark, 2001); however, over the last 15 years or so, their numbers have fallen substantially, owing to a series of mergers and acquisitions (Rickett, 2007). The market is now dominated by two main trade wholesalers, based in the south-east of England. Whilst independent book shops make-up around half of sales (Competition Commission, 2007), wholesalers increasingly supply books to the main book chains and online retailers (Anon, 2006), usually supplementing publishers’ supplies when stock
run low. The methodology used here assumes that 22% of all conventional book sales come from wholesalers, based on figures reported by the Competition Commission (Competition Commission, 2007).
It is also assumed that energy consumption within distributors’ and wholesalers’ warehouses is attributable purely to the storage of books, with the number stored and average duration important parameters. For instance, one leading wholesaler stores over 3 millions books within their warehouse at any one time, with each book being held on average for between 60-90 days.
Conventional (Traditional) Retailers: Conventional retailers source over three-quarters of their books from publishers via distributors (Competition Commission, 2007). Generally, retailers are not restricted by contract, so have working relationships with several key publishers and wholesalers, choosing one supplier over another for a number of different reasons (Table 1).
Table 1: Sourcing Books from Publishers or Wholesalers: Logistical Issues
Publisher / Distributor - Higher level of returns - Slow order fulfilment
allowance (can average over (typically 1-2 weeks & few
20% on sale or return basis) offer next day delivery)
Wholesaler - Wide range of books - Returns restrictions (up to
(250,000+ titles available for 5%)
immediate order) - Lower level of discount
- Fast turnaround & delivery than going direct to
(next day delivery 6 days a distributors (up to 20%)
In the conventional supply chain, books can be conveyed to end-consumers via independent bookshops, smaller retail outlets (e.g. tourist shops), supermarkets and various prominent high street retailers. Smaller retail outlets are sourced mainly by specialist wholesalers (such as BookSpeed in Edinburgh), and whilst supermarket book sales maybe increasing (Verdict, 2007), neither of these sales channels (smaller retailers nor supermarkets) represent the typical conventional book supply chain. Similarly, independent bookshops have a minor market share (KeyNote, 2007).
The focus here is on the largest book chains, consisting of multiple branches, that make-up over 50% of the overall book market share (KeyNote, 2007). These establishments include both ‘bricks and
mortar’ specialist retailers (Waterstone’s and Blackwell’s) and those for which books are an important
sales category (WH Smith). Typically, a high street store holds between 50,000 – 70,000 book titles,
compared with an independent book shop’s average 20,000 titles. WH Smith’s can have as few as
5,000 – 10,000 titles (Competition Commission, 2006), whilst some flagship bookstores, especially those in London, carry 150,000 titles (Clark, 2001). Therefore, 60,000 book titles per bookstore appears a representative figure. It has been assumed also that each book has an average 45-days
‘shelf-life’, based on a constantly-replenished book chain store, where peak sales of new releases are usually recorded in the first month after publication (Sorensen, 2007), with retailers able to return a book three-months after initial publication if it is not selling (Book Industry Communication, 2000). Best-sellers (one of the top 5,000 titles in a calendar year) would be typical as these books account for over half of sales by volume (Competition Commission, 2006).
Online Retailers: Online sales have increased year-on-year, as consumers feel able to buy a book without necessarily having browsed that item first. Currently, most ‘bricks and mortar’ book chain
retailers have an online interactive presence, and British consumers are very willing to purchase books online. In a recent survey, 71% of online shoppers had bought books over the web and 88% claimed that they intended to in the future (PricewaterhouseCoopers, 2007). Whilst online book sales
still account for only about 10% of overall sales in the UK (KeyNote, 2007), clearly this share is set to increase over the next few years. A recent report even predicted the demise of the traditional high street bookshop within a decade (APPSSG, 2006).
Online booksellers (especially Amazon) have been very successful in responding effectively to changes in consumers’ purchasing-behaviour. In the UK, familiarity and the product range on offer have ensured that three-quarters of people use Amazon to purchase books on the web (Royal Mail, 2007), although over half of those who had bought from this company also purchased books elsewhere on the web (Keynote, 2007). Online retailers are seen to offer good prices and convenience to consumers (Mintel, 2007), who can select from a wide-range of books. Approximately 25% of books purchased from Amazon.com in the US come from outside its top 100,000 titles (Anderson, 2006). Therefore, online retailers offer mass market opportunities but for millions of ‘niche-
interest’ consumers, with the ‘long tail’ of book sales being recognised (Sorensen, 2007; Andersen,
Online book sales may offer environmental benefits. Lovins (2001) claimed that, compared with a physical bookstore in the US, online operations carry 14-times more titles, turn inventory 20-times faster and use half the amount of energy per square metre. Additionally, in terms of the ‘last mile’
delivery to the consumer’s home, books are some of the easiest products to transport, as letter-
boxable items of small dimensions sent through the post have only a marginal effect of increasing conventional postal deliveries (James and Hopkinson, 2001). Yet, the majority of books bought online in the UK are delivered via parcel delivery companies rather than the regular postal service. Only last year the Royal Mail lost the Amazon contract worth some ?8bn to one leading home delivery company (Tran, 2007). This almost overnight restructuring of the UK online supply chain illustrates that any carbon audit is very time-specific, with results being dependent on the prevailing supply chain structure at the time of data collection.
Online retailers, having received books from a distributor, typically deliver them as part of bulk mail to their carrier’s sortation centre, where mixed goods are consolidated for onward movement to local
depots (Figure 1). The requirement to deliver to a fulfillment centre, in the main, adds an additional link to the online supply chain compared with the conventional high street route. Nevertheless, direct vehicle movements from book distributors (or wholesalers) to online fulfillment centres or delivery companies’ sortation centre are relatively easy to audit, as they consist of dedicated lorry-loads of books. More difficult to apportion a carbon value to are the mixed load trips where a variety of product types are consolidated from, and for, a number of different companies. One leading parcel delivery firm estimated that books accounted for 5% of B2B deliveries of mixed goods to high street retailers. Such a percentage figure also seems sensible if applied to mixed goods carried for online operations.
Once at a local depot, books purchased online are sorted and loaded onto 3.5-t delivery vans as part of highly-manual cross-docking operation. Meanwhile, books destined for high street bookshops are sent to either the book chain’s own DC (in the case of WHSmith) or a representative carrier’s DC for
onward delivery (in mixed loads) to the shop.
Geographically-specific issues: An attempt to depict typical conditions in any supply chain that is
dominated by one or two big companies, may be heavily-influenced by specific geographical ‘outliers’,
companies, either owing to legacy or opportunity, that are located in areas not expected to offer ideal conditions (Figure 2). To avoid such company-specific bias, average distances for all transport-related movements have been calculated for the component links in each of the respective supply chains (Table 2). For instance, the distance of 170km from ‘Distributor to Sortation Centre’ is the average
distance between a parcel delivery company’s central hub, located in the Midlands and the location of the main book distributors’ warehouses that use that hub. Similarly, the locations of over 50 local depots were considered for the ‘Sortation Centre to Local Depot’ typical distance.
Developing an understanding of shoppers’ behaviour in buying books is essential for any study to
reflect accurately the potential environmental impact of a book purchase. When asked, over a third of adults in the UK have purchased books on the web in the previous 12-months (National Statistics, 2007b), although fewer than one in 10 bought the majority of their books online (Mintel, 2007). Consequently, the high street bookshop remains the most likely location for a book purchase. Even
here though, book buying patterns of consumers are varied, with around 25% of books bought as gifts for others, rather than by shoppers for themselves (Competition Commission, 2006).
Equally, few shoppers make dedicated trips for books, choosing to browse a bookshop as part of the wider shopping experience. This is emphasised in a recent study, as ‘often buying books on impulse’
was the most common response from consumers when they were quizzed on their book buying behaviour; whilst ‘browsing bookshops as a break from shopping’ also featured high on the list of
responses (Mintel, 2008). As a result, characteristics associated with general shopping behaviour have been applied within the book-buying context e.g. assuming an average shopping distance to a bookstore of some 7km, a figure indicative of shopping trip for an unspecified purpose (Department for Transport, 2007).
Table 2: Characteristics of the various distribution links with each supply chain Distribution Channel Distance Vehicle / Mode Vehicle Fill
CONVENTIONAL, VIA DISTRIBUTOR
Distributor to Sortation Centre 170 Articulated lorry 100% full (100% books)
Sortation Centre to Local Depot 270 Articulated lorry 100% full (5% books)
Local Depot to Retailer 55 Rigid / van 50% full (5% books)
Retailer to Consumer 7 Car n/a
ONLINE, VIA DISTRIBUTOR
Distributor to Fulfilment Centre 330 Articulated lorry 100% full (100% books)
Fulfilment Centre to Sortation Centre 275 Articulated lorry 100% full (50% books)
Sortation Centre to Local Depot 430 Articulated lorry 100% full (5% books)
Local Depot to Consumer / drop 1 Van 50% full (5% books)
WHOLESALER TO CONVENTIONAL
Wholesaler to Sortation Centre 330 Articulated lorry 100% (50% books)
Sortation Centre to Local Depot 270 Articulated lorry 100% full (5% books)
Local Depot to Retailer 55 Rigid / van 50% full (5% books)
Retailer to Consumer 7 Car n/a
WHOLESALER TO ONLINE (BULK)
Wholesaler (bulk) to Fulfilment Centre 500 Articulated lorry 100% full (100% books)
Fulfilment Centre to Sortation Centre 275 Articulated lorry 100%full (50% books)
Sortation Centre to Local Depot 430 Articulated lorry 100%full (5% books)
Local Depot to Consumer / drop 1 Van 50% full (5% books)
WHOLESALE TO ONLINE (1-TO-1)
Wholesaler to Mail Centre 30 Articulated lorry 100% full (5% books)
Mail Centre to Delivery Office Rigid 100% full (5% books)
Delivery Office to Drop Point 5 Crew Bus 50% full (<1%)
Postperson to Consumer 1 Walk/ mail pouch 100% full (<1% books)
; Packaging: Matthews et al (2002) in their US study indicating that over a quarter of a book
parcel’s weight was packaging, and three-quarters of online shoppers think that retailers
should cut down on excess packaging when sending goods (Royal Mail, 2007). Nevertheless,
packaging has not been considered in the audit process here for two reasons. First, one of
the leading UK wholesalers indicated that packaging accounted for only 8-12% of a typical
parcel’s weight for one-to-one home delivery. Secondly, packaging is also a concern for high
street retailers receiving book consignments. One leading high street book retailer recently
announced the restructuring of their book supply chain partly to minimise its use (Neill, 2007).
Therefore, as packaging is not an issue in one retail supply chain more than the other,
packaging issues in neither are considered.
; Returns: In 1999, KPMG estimated that book returns cost the trade ?100 million. Since then,
there has been a push to adopt the Returns Initiative within the industry (Book Industry
Communication, 2000). Yet, there remains the potential for substantial stock wastage within
the sector, owing to loosely-applied returns policies. High street retailers usually buy books on
a sale or return, with little incentive to resist new stock because they carry very little supply
risk. Typical returns from conventional book retailers can be upwards of 20%; if a book is not
selling three months after publication a retailer may chose to send it back up the chain, via a
central DC to the publisher. Therefore, a typical returns rate of 20% is assumed for the
conventional supply chain. Online operations typically do not generate book returns. More
usually, a customer may cancel a web-based purchase shortly after placing the order, with a
distributor / wholesaler unable to prevent the book being sent up the supply chain.
Nevertheless, no attempt has been made here to audit the consequences of this particular
This paper has outlined the structure of the online and conventional book supply chains in all their complexities, although what initially seemed to be a simple supply chain turned out to be a lot more complicated than was originally envisaged. The next stage of the project will be to assign carbon values to each section of the supply chains and extend the analysis to other product groups.
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