Magazine supply optimization: How data-centric solutions are changing the game

In France, press magazineshave always been integral to everyday life. Whether stepping out of a metrostation or walking through the city, the presence of press points of sale (POS)is unmistakable. These kiosks serve as cultural landmarks, offering the latestnews, entertainment, and educational content.

However, the traditionalprint magazine industry is facing several challenges. With the rise of digitalmedia and increasing sustainability concerns, publishers are under pressure toremain profitable while minimizing their environmental impact. In response, wedeveloped AthenIA—our magazine supplyoptimization solution—to help publishers better manage their distribution andresources.

1. The challenges of magazine supply optimization

Magazine supplyoptimization presents unique challenges. Once a publisher delivers a set numberof copies to each point of sale, there are few opportunities to replenish stockduring the sales period because the costs of replenishment usually outweigh thebenefits. This fixed inventory approach creates a dilemma: too many magazineslead to unsold copies, while too few result in missed sales opportunities. Bothlead to financial loss.

Magazines often haveirregular sales patterns influenced by holidays, seasons, and special editions.Furthermore, those sold with extra products (a.k.a. gift-on-purchase), such asa toy with a children’s magazine, have sales highly impacted by these extras.The complexity of managing demand across thousands of POS requires an advancedapproach to supply planning. That’s where AthenIA, our data-centric solution,comes in.

2. AthenIA: A data-centric supply optimization solution

Supply optimization ingeneral, and magazine supply optimization in particular, is complex andchallenging. With AthenIA, we break down the supply optimization process intofour sub-stages to standardize the process and facilitate decision-making ateach stage.

2.1) Demand sensing

The first stage involvesestimating the demand at each POS using historical sales data, market trends,and the characteristics of the POS and the products (the magazines and anyextra products).

One particular difficultyof magazine demand sensing is the variation in the product’s characteristics.When selling sunscreen, the bottles remain the same from week to week. However,for magazines, the content changes with each issue. If the issue is sold withan extra product, the problem becomes even more complicated. Pure data-drivenapproaches usually fall short in this case.

We believe that no oneknows their products better than the Subject-Matter Experts (SMEs). Hence, inAthenIA, we embed their opinions in the model. Specifically, for each issue,SMEs will tell the model two reference products to which they think the salespattern of the next issue will be similar. They can also list abnormalitiesthat should be excluded from the model.

To further quantify thestochastic nature of the demand and the imperfection of the model, we developedan uncertainty quantification technique called Group Conformalized QuantileRegression. Specifically, we divided the POS into several groups of similarsales potentials. We then calibrate the model to guarantee that theout-of-stock rate of each group is below a predefined value.

2.2) Supply optimization

The magazine industry inFrance has a complex cost structure (production costs, registration costs,delivery costs, over-supply costs, commissions, etc.). AthenIA uses the demandestimated in the previous stage, the proper cost structure of the publishers,and their business constraints to balance the costs of overstock (unsoldcopies) and understock (missed sales). This aims to maximize profitabilitywhile minimizing waste. The solution generates multiple supply scenarios,allowing publishers to choose the strategy that best aligns with their businessgoals.

2.3) Business rules and adjustments

Until this stage, theprocess is automatic (with the inputs of SMEs). We add hard-coded businessrules to sanity-check the supply plans and allow supply planners to make manualadjustments based on new market insights or operational constraints. This flexibilityallows the system to be both data-centric and responsive to changingconditions.

2.4) Operating

After the supply plans havebeen generated, planners review and select the most appropriate one. AthenIA’smodular design allows for ongoing refinement of these plans, ensuring theyremain aligned with market dynamics and operational constraints.

3. Benefits of AthenIA

Reducing environmental impact:AthenIA’s ability to accurately estimate the optimal supplies means publisherscan avoid overstocking and reduce waste. This benefits the publisherfinancially and helps minimize the environmental footprint associated withunsold magazines, including the resources used in production and distribution.

Improving profit margins:AthenIA helps publishers distribute the right amount of magazines to each POSby optimizing supply. This reduces the costs associated with bothoverproduction and missed sales opportunities. Ultimately, it allows publishersto maximize their profit margins while balancing supply and demand.

Flexibility and scalability:With more than 90 magazine titles and over 20,000 points of sale in itsnetwork, AthenIA is built for large-scale operations. Its flexible, modulardesign ensures it can adapt to different business strategies and marketconditions, providing a versatile solution for publishers.

4. The importance of human expertise

AthenIA recognizes thevalue of human expertise. SMEs play a key role in refining demand predictionsby providing insights into market trends and product-specific factors. Thishuman-in-the-loop approach ensures that AthenIA’s recommendations are both accurateand actionable, making it easier for publishers to respond to real-worldchanges.

However, it also introducespotential human bias. We have been working hand-in-hand with the SMEs to reducethis risk.

5. A proven impact

Since its deployment in2020, AthenIA has delivered measurable benefits. It has helped reduce theoverall supply of magazines by 10% while simultaneously increasing profits. Byreducing excess supply, publishers can cut costs and minimize waste without sacrificingsales. This improvement in efficiency also contributes to sustainabilityefforts, an increasingly important focus in the print media industry.

6. Looking ahead

AthenIA’s successdemonstrates the potential for advanced data-centric solutions to transformtraditional industries like print media. As the market continues to evolve, tools like AthenIA will play an essential role in helping businesses adapt tochanging consumer behaviors while improving their operational efficiency andenvironmental responsibility.

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While press magazines remain a beloved part of French culture, the way they are distributed isevolving. With solutions like AthenIA, publishers can continue to meet theircustomers’ needs in a way that is both profitable and sustainable.