Keytree & Hachette: Digitally transforming the publishing world

Hachette UK Distribution is part of the Hachette UK group of companies and is the leading book distribution company in the UK providing comprehensive distribution services to both Hachette Group and a wide number of third-party publishers. Services include order processing and fulfilment for a global customer base, invoicing, cash collection, credit control, inventory management, customer services and returns. Book distribution is an industry where customers (including bricks and mortar bookshops like Waterstones, online retailers such as Amazon plus non-traditional book retailers, e.g. supermarkets) demand faster delivery at reduced costs. It is also an industry where publisher clients expect a cost-efficient service that provides full and up-to-date visibility of the operations conducted on their behalf – giving them the flexibility to control pricing and trading terms.

Hachette recognised a need and opportunity to propel the book distribution industry into the digital world through best in class processes and systems that offer improved services, reduced business risk, increased efficiency and that position Hachette as the dominant distribution business in a competitive industry – enabling and driving continued growth. To address this opportunity Hachette launched a transformational programme to deliver new processes and systems together with a new state of the art automated warehouse – the Hely Hutchinson Distribution Centre. A core part of the programme was the implementation of new Order to Cash processes and systems for taking orders, credit management, inventory management, invoicing, cash collection, customer services, claim and query management, returns and distribution finance.

Hachette took a strategic decision to expand its existing Group Finance SAP Suite for HANA system to deliver the Order to Cash solution and, following a competitive RFP process, chose Keytree to be its implementation partner. Keytree was selected for its renowned expertise in extending SAP solutions, cultural fit and world-class skills in delivering custom, highly intuitive UX. The technology and solutions delivered by Keytree have brought Hachette’s processes and systems up to date meaning they will be able to retire its legacy systems and offer customers and publishers a more efficient and informed service while consolidating warehouses and laying the foundation for continued business growth and increased market share.

Matt Wright, CEO of Hachette UK Distribution, said on the launching of the Hely Hutchinson Distribution Centre, which is underpinned by the Keytree project: “The Hely Hutchinson Centre is the most sophisticated book distribution warehouse in Europe – possibly even in the world – and it will ensure that we can pursue our ambition to become the outright market leader of publisher and customer services.”

Implementing change in the heart of an industry

The intricacies of processing orders are multi-layered as they arrive via a variety of channels – over the phone, through EDI or online. Each order must be analysed on behalf of each publisher to determine whether a trading agreement exists, what pricing and discounts apply, to check stock availability, whether credit limits have been exceeded plus when the customer will accept deliveries and how they want items delivered. An acknowledgement is then sent to the customer confirming what can be fulfilled.

The Order to Cash system then generates delivery information detailing what needs to be picked from the warehouse and when. This information is sent through to the warehouse to pick, pack and dispatch. Once confirmed that the items have been successfully picked, Order to Cash raises a single invoice for the customer, which is subsequently allocated to the multiple publishers that make up the order. The nature of book publishing is that return volumes are significant and a robust and streamlined solution was required for receiving, approving, processing and refunding return requests.

Breaking new ground with the Publishing App

The Order to Cash system has helped Hachette streamline and digitise a broad range of processes but essential to the digital transformation journey is the Pub App – a bespoke application created by Keytree to provide publishers with an easily-accessible window into the distribution data they need to run their business. One of the key reasons Hachette selected Keytree for the project, was due to its extensive expertise and a strong reputation for extending SAP into bespoke business-focused applications.

The Pub App is web-based meaning that both internal and external publisher users can access it from any location using a PC or tablet. The application gives publishers secure access to their data in real-time: titles, stock levels, sales volumes, customers, order status plus links to reports for in-depth analysis. Related data is grouped logically to make the application as intuitive as possible, so for example in the title display publishers can see bibliographic information, stock levels, market restrictions, pricing and sales volumes. This replaces a system which publishers previously needed to access through telephone and email support.

An essential element of the Pub App is functionality for publishers to see any orders that have been blocked due to credit limits. Publishers are now able to selectively unblock orders instantly, replacing a process that previously took three days or more and therefore resulted in delays to customers receiving their orders. The Pub App was designed from scratch in an iterative process with Keytree creating wireframes following a series of workshops to discuss requirements.

Innovation at the core of the Keytree Delivery Methodology

The book distribution industry has some unique complexities, starting with the need to create a single customer order and a single customer invoice that spans products from multiple internal and external publishers each with its pricing, discounts, credit limits, market rights and fulfilment preferences. Items that are blocked by one publisher must not prevent the release and fulfilment of items from other publishers in the same order.

To meet these requirements, Keytree enhanced the SAP order processing functionality to enable checks usually performed at the header level (e.g. credit checks) to be carried out at the line item level. A high volume of returns is expected in the book industry, and industry agreed rules govern what can be returned, when it can be returned and the resulting refund value.

Keytree developed a custom ‘Return’ module to store and apply the rules to any return requests plus dealing with returns that arrive without prior notification. Hachette needs to be able to see the full picture of distribution services, but it is also vital that they can segregate the data and transactions for each publisher. Keytree implemented SAP’s Financial Supply Chain Management functionality at the core of the solution to meet these requirements.

But to avoid any impact on the business, there is an 18-month roll-out programme in place during which each of the publishers will be transitioned from the existing warehouse, systems and processes. To manage this smoothly, Keytree developed a switch framework to enable the new functionality including 70+ interfaces to operate seamlessly alongside the existing systems.

Keytree was selected for its renowned expertise in extending SAP solutions, cultural fit and world-class skills in delivering custom, highly intuitive UX.

Overcoming challenges to create the perfect experience

Hachette had some existing challenges that they wanted to address as part of the Order to Cash implementation. Shipments to customers used to include a paper invoice that was generated ahead of stock being picked. Therefore, if any items were not in stock the invoice would be incorrect, and a credit note had to be issued immediately. This has been replaced by a process where SAP technology issues the invoice by email only once the quantity picked has been confirmed by the warehouse. The process for fulfilling orders directly from a printer to a customer used to be very manual but has been replaced with a simplified and largely automated process.

As the existing Vista system operated in batch mode at the end of each day, it did not provide a live view of data which is vital to provide accurate availability information to customers and publishers. This is no longer the case as SAP works in real-time and takes account of up-to-the-minute receipts, orders, dispatches and adjustments.

Hachette already had an instance of SAP ECC, BW and PI which had been implemented five years earlier to support the Group Finance business. Hachette upgraded the database to HANA in preparation for the Order to Cash project which greatly expanded the use of ECC, added CRM for customer services, replaced the PI interface layer with PO and SAP Gateway was introduced to support the Pub App. The Order to Cash system replaces systems that had served well, but had reached the limit of improvement and could not provide the flexibility, efficiency and visibility to match Hachette’s vision.

Benefits – providing the scope needed to expand operations

The new automated warehouse and Order to Cash solution are firmly in place to support and help move Hachette into the modern digital world. Distribution is a growing and important part of the business and this project is acting as the enabler for this expansion. Processes are no longer slow and difficult to use with tasks and reporting completed in real-time – a massive improvement on the previous ways of working. The rapport between Keytree and Hachette was very collaborative, with both teams working very closely together and the quality of the relationship was maintained throughout the project – clearly demonstrating how the Keytree culture fits perfectly into Hachette.