Best Practices in Fulfillment and Distribution
Len Kain, vice president of marketing, Dogfriendly.com, knows firsthand how much of a gamble fulfillment can be in the book business. While he’s figured out a system for just the right level of inventory, he concedes it can be a roll of the dice. As a small publisher, he’s learned to play the game of fulfillment and returns to his best advantage—to reduce losses and increase gains.
For him, as for larger publishers and also distributors, developing efficient warehouse fulfillment and return procedures can involve a healthy run of trial and error. So what is working and what isn’t? Book Business interviewed two publishers and two distributors about their best practices, including:
• Len Kain, vice president of marketing, Dogfriendly.com, Pollock Pines, Calif. (small publisher);
• James Clark, senior vice president of distribution, Penguin Group (USA), New York (large publisher and distributor);
• Bill Long, vice president of sales and marketing, The Maple-Vail Book Manufacturing Group, Binghamton, N.Y.; and
• Jack Herr, president, BookStream (wholesale distributor), Poughkeepsie, N.Y.
Len Kain, vice president of marketing, Dogfriendly.com
Dogfriendly.com started as a Web site in 1998. In 2002, it started selling books through the site and progressed to selling books through trade in 2003. Its mission is to publish information on dog-friendly places to stay and dine for people who travel with dogs.
What kind of system do you use for warehouse fulfillment and returns?
Len Kain: … we sell through two wholesalers, our Web site and other online stores. This gives us more control—something we wouldn’t have if we chose to go with a master distributor, which requires exclusivity. Also, we knew we couldn’t afford to use a master distributor since it meant printing huge quantities at huge discounts.
Because we are a small publisher that produces new editions of our titles every couple of years, we wanted to be able to print smaller volumes. It is not like we are publishing novels that will sit in the same form for 20 years. Also, we have five million annual visits to our Web site. To help make order processing faster, we ship out of two warehouses: one in California and another in Kansas.
What challenges do you encounter in fulfillment?
Kain: One … is deciding when to stop sending books to bookstores when we have a new edition coming out. We want to time it just right so the stores run out of our older edition before receiving our new ones.
What best practices help you overcome those challenges?
Kain: … We stop shipping older-version books about four months before the release of our new editions, but we still have four months’ worth of books in our online account. If we do it right, the bookstores will run out of the old edition about two months before our new release. Our goal is to limit as many overstock returns as possible.
How do you handle returns?
Kain: Again, being a very small publisher, we’ve found our own strategic way to deal with returns. One part of that strategy is to avoid having too many returns to begin with.
What advice would you offer others on the best practices of warehouse fulfillment and returns?
Kain: I learned something recently that small publishers can benefit from, and that is to approach a wholesaler with their own terms.
For instance, instead of agreeing to the order of a certain amount of books at a 55-percent discount, publishers can tell them they can order a different quantity at a 50-percent discount with the condition that there will be no returns and an upfront payment. The wholesaler may not keep that book in stock at the stores, but they will be in the database. This means less sales, but [for publishers who can’t afford otherwise], there is no money lost on those books.
It is an important thing for small publishers to know if they are at that point financially.
James Clark, senior vice president of distribution, Penguin Group (USA), New York
Penguin Group (USA) is the U.S. affiliate of the international Penguin Group (www.penguin.com), the second-largest English-language trade book publisher worldwide. Penguin Group (USA) is one of the leading U.S. adult and children’s trade book publishers, owning a wide range of imprints and trademarks, including Berkley Books, Dutton, G.P. Putnam’s Sons, New American Library, Penguin Books, The Penguin Press, and Viking, among others. The Penguin Group is part of Pearson plc.
Penguin Group (USA) handles fulfillment and distribution for a number of other publishers, including Reader’s Digest, The Overlook Press, Library of America, The Monacelli Press and Highbridge Audio.
What kind of system do you currently use for warehouse fulfillment and returns?
James Clark: Penguin Group PGI ships adult hardcover and juvenile titles from Kirkwood, N.Y. Returns … are also handled at this location. Trade paperback and mass market titles ship from Pittston, Pa. DK [Dorling Kindersley, also a Pearson company] titles ship from the Lebanon, Ind. warehouse operated by [sister company] Pearson Education.
What challenges do you encounter in fulfillment?
Clark: One major challenge is the conflict between customer just-in-time strategies, which drives smaller, more frequent orders, and our interest in an efficient shipment.
This has become even more vital recently with fuel surcharges since we pay freight on most orders.
What best practices help you overcome those challenges?
Clark: We have worked with our customers to develop a new wholesale shipping policy. Purchase orders combine for shipping and invoicing, and we ship to wholesalers twice a week.
In addition, we have an amazing and innovative warehouse team that is constantly looking for faster and cheaper ways to do things.
BB: How do you handle returns?
Clark: We try to handle the books as little as possible. A returns processor initiates the credit memo and inducts the books into a sorter. The sorter feeds a carousel, which accumulates full cases of those titles we need to restock. Remaindered titles and books destined for ‘mixed hurt’ [the damaged pile] are channeled via conveyor to a separate build area [for packaging and shipping].
BB: What advice would you offer others on the best practices of warehouse fulfillment and returns?
Clark: We are always in the market for a profitable client relationship. So, someone looking to better their warehouse fulfillment can give me a call.
Bill Long, vice president of sales and marketing, The Maple-Vail Book Manufacturing Group
The Maple-Vail Book Manufacturing Group (www.Maple-Vail.com) is a book manufacturing company with four facilities that provide customers with services from prepress through distribution. Its two book manufacturing facilities, The Maple Press Company in York, Pa., and Vail-Ballou Press in Binghamton, N.Y., produce more than 45 million hardcover and papercover books annually in order quantities ranging from 250 to more than 500,000 copies. Maple-Vail operates distribution centers in York and Lebanon, Pa., which comprise more than 350,000 square feet and store more than 30 million books and book-
related products.
What kind of system do you currently use for fulfillment and returns?
Bill Long: All systems which support the fulfillment and returns processes at our three distribution centers were designed and written by our internal IT staff. This has given us added flexibility to modify and improve our systems to meet the needs of our customer base and take advantage of new technologies.
What are your biggest challenges in fulfillment? What best practices help you overcome those challenges?
Long: The greatest challenges we face involve the speed and accuracy of shipments, and keeping current with all current postal regulations and carrier options.
In regards to speed … a number of our customers are looking for time-compression in their order cycle. We operate with a third shift and first shift combination in our warehouses. Many of our customers will transmit orders to us electronically in the evening, which enables us to print the order and begin fulfilling these orders when third shift arrives. As a result, we are able to ship over 92 percent of our orders within 24 hours.
As for accuracy, all pick and pack orders contain a bar code, which contains the contents of each order. As the shipment is packed, the barcodes on the product shipment are read, and our systems verifies that the order is complete and accurate. This has virtually eliminated all picking and packing errors.
In order to keep pace with postal regulations and carrier options, we have several members of our staff who work closely with the local Post Office and representatives from the large mail carriers. This knowledge often allows us to offer cost-savings ideas to our customers.
What are your biggest challenges dealing with returns?
Long: Clearly, the biggest challenge … is that they are received in erratic form with no real pattern or predictability. It is our job to translate this chaos back to order.
At each of our distribution centers, we operate returns areas where returns are processed, and books and other products are neatly returned to inventory or identified as ‘hurt’ items. We keep returns staged by the day they are received, and we operate on a FIFO [first in, first out] basis. Our goal is to process returns in no more than two to three days.
… We have the ability to perform some minor repairs to books based on our knowledge of book manufacturing. In one of our distribution centers, we have a separate area to handle high-volume negative-option book club returns. Here we handle primarily the returns of books, DVDs and videos, and provide our customers with information on the returns we process so they can more effectively market their product.
Can you offer publishers advice to improve their relationship with their distributors, or better manage their warehousing, fulfillment and distribution?
Long: Our distribution business has been built with publishers who recognize that they are better served by using a professional distributor rather than operating their own warehouses. If a publisher has less than 15 million books or book-related products in their warehouse, there are likely to be cost savings available at a professional distributor who has greater economies of scale and is less susceptible to seasonality swings experienced by individual publishers.
In addition, publishers who outsource their distribution can focus on their core business of publishing rather than managing and investing in a distribution operation.
Jack Herr, president, BookStream
BookStream (www.Bookstream.com) is a new wholesale distribution company with a 1,000-square-foot warehouse in Poughkeepsie, N.Y. It sells at consistent 42-percent discount to all booksellers regardless of size, scale or ownership, and accepts orders through R.R. Bowker’s PubEasy online ordering service.
What challenges do you encounter in the fulfillment business?
Herr: Balancing transactional time is our foremost challenge. There is always some downtime between people packing boxes and waiting for work. So we need to figure out how much time it takes to do specific tasks and how to set it up so that there aren’t too many people waiting to do their tasks.
This leads to our second largest challenge, which is the attempt to get all flows in the warehouse through a formal system and to minimize procedures outside our system.
For instance, if we receive a product to scan and notice it is damaged, then what? The undesirable thing to do is to set it aside and deal with it manually when sending [returns] back to the publisher. A good way is to get the system to handle exceptions automatically ….
What best practices help you overcome those challenges?
Herr: I have a long history of logistics for management systems in this business. So, I, along with the help of an independent consultant, designed a warehouse intellectually. By this I mean we designed procedures to make the warehouse work run smoothly, and we purchased the best software we believe exists in the industry … called IPub. We were able to tweak the system to make it compatible with our work and warehouse design. …
What advice would you offer others on the best practices of warehouse fulfillment and returns?
Herr: I have advice on what to do and what not to do. First, visit as many people in the supply chain that you are partners with, and if you are a small publisher, visit your distributor and tour his operation, and understand what he does on your behalf.
If you are a large publisher, participate in industry forums and glean information from inspections, collaborations and Book Industry Study Group (www.BISG.org) committees.
Also, find consultants who are intimately familiar with the book industry and have experience to bring best practices for warehouse distribution. Do not hire consultants without book industry experience; they often trick themselves into believing they know this area since they know other industries, but the book business has unique nuances that only those experienced in publishing can know.
Sharon R. Cole is Philadelphia-based freelance writer serving the print industry.