Strategically Speaking: 12 Costs to Consider in Outsourcing Distribution
4. Special Services: What are the estimated annual costs for services such as re-jacketing, errata sheets, applying price stickers, etc.?
5. Incremental Freight Costs: Will third-party provider's location increase or decrease the cost to move books from your printer to the distribution center? Does the provider offer in-house POD that reduces your annual freight bill?
This list is by no means exhaustive; the objective is to be sure your analysis considers all significant on-going and one-time costs of the status quo and outsourcing, as well as the working capital implications. Outsourcing to a third-party can offer significant improvements to your cash flow (albeit at a price) that should be carefully considered.
Book publishing is not a cash-rich business, and maintaining a captive distribution operation can place significant demands on limited financial resources. Outsourcing to a third-party provider offers the opportunity to redeploy capital into product development that might otherwise be required to maintain infrastructure that is becoming increasingly archaic as the e-book and print-on- demand become institutionalized.
David Hetherington is director of major account sales for Baker & Taylor's Digital Service Group and an adjunct professor at the Pace University Graduate School of Book and Magazine Publishing. He was previously managing director for strategic business development for Integrated Book Technology, and has held senior positions in finance, operations and manufacturing with some of the industry's largest firms, including Simon & Schuster, Reader's Digest Association, BearingPoint Consulting, Wolters Kluwer Health and Columbia University Press.