10 Tips for Inventory Management
For many publishers, managing inventory is a method of trial and error. While computers can analyze sales data, deciding how many books to print at the outset and when to reprint is often based on instinct and knowledge gained from having been around the block in the industry. Some executives, however, rely on both computers and know-how to keep more precise tabs on their inventory. As one expert told Book Business, inventory management is not an art or a science, but a mix of both. Here are 10 tips that offer the best of both worlds.
1. Capture your sales data and analyze it—regularly.
Inventory control is concerned with the accuracy of inventory counts. Material control relates to the quality of the inventory. A publisher must understand both. Publishers must make decisions regarding how much inventory they want to keep on-hand and how much profit they want/need to make on each book.
“The next step is to create the systems to capture as much information as possible and analyze this information in a number of ways,” explains Bob Liss, vice president of operations and administration, Berrett-Koehler Publishers in San Francisco, Calif., which publishes nonfiction books in many subject areas, including human resources, personal development, leadership, business ethics and economics. “It’s not enough to look at average monthly or yearly sales,” says Liss. “What if 80 percent of your sales came from a single order? What if sales were high for the first three months of the year and then fell off, or vice versa?”
2. Keep tabs on your customers.
Encourage your salespeople to stay in constant contact with the customer to see how a book is performing in the marketplace. Anticipate customers’ needs and listen to them. “Good customer feedback is key,” says Marcus Leaver, executive vice president, chief operating officer, Sterling Publishing Co., New York, N.Y.
3. Combine strong relationships, communication and service with good inventory analysis.
Leaver is a firm believer that good inventory control is a mix of good customer relationships and solid data analysis. “When both groups are in sync, you can get it right 90 percent of the time. You will never be right 100 percent of the time, but you can get close.”
4. Consider print runs carefully.
Avoid big print runs at the outset, before you are in tune with the marketplace. Talk to book buyers. Liss bases the quantity of his first print run on trade advances and prepublication purchases by authors. “Usually it is in the 1,500 to 2,000 copy range,” he says. “Occasionally, it will be more if we believe that the book is a potential best seller, and we don’t want to lose momentum by running out of books. Sometimes we order extra inventory because the title has limited potential and we expect the first buy to be our last buy.”
5. Keep inventory low, prices right and profit high.
Overestimating the print quantity in the first or second reprint can be a publisher’s biggest mistake, according to Liss. “If you reprint too soon or too much, you end up recycling and/or writing off a bunch of inventory.”
Carolyn Sakowski, president, John F. Blair, Publisher, in Winston-Salem, N.C., agrees. Sakowski, whose company publishes books on the Southeast, has seen publishers make the mistake of printing large initial quantities in order to keep the unit price down. “If you have 10,000 books in your warehouse that aren’t selling, you really haven’t kept your unit price down at all. On the other hand, I’ve seen publishers print small quantities, but not take into consideration all the costs other than printing that will be involved when they are setting their retail prices. It’s a balancing act to price the book to cover your costs, but not to price the book out of its market.”
Liss suggests weighing quantity needs at various intervals—three months, six months, one year, two to three years—versus per-unit cost, with the goal to keep inventory low, but profit high. “Our trade books average a 25-percent return rate. So if we run out of books early on, we need to factor in that returns will begin to come in soon; we just don’t know when or how many. We look at sell-through at individual bookstore chains versus their inventory position. We check with our authors and large customers to determine projected needs. We analyze month-by-month performance through all our marketing venues.”
6. Know when to reprint and when not to reprint.
According to Sakowski, a mistake easily made by many new publishers is going back to press too soon. “Since we’re primarily a regional press, we have a feel for how similar books have sold and frequently use those figures to set initial print runs. New publishers have to learn about returns and false demand created by computers when stock is not available.”
It also helps to have good relationships with your printer if you need to move quickly on a reprint, Sakowski advises. Another consideration is cash flow.
7. Avoid pulling inventory from other stores.
In the event that Sterling runs out of books at one location and needs to move them to another, it does, but it tries to avoid shuffling books regularly from place to place. “Freight is pretty expensive, so we try not to move inventory around,” says Leaver, who strives to know which outlets will be running low before it happens.
8. Invest in a good software system.
Sterling relies on a proprietary in-house software system to track inventory, while Berrett-Koehler and John F. Blair use Acumen. The investment and maintenance fees of any software program may seem high at first, but Sakowski says it pays off in taking a lot of the guesswork out of inventory management.
When Sakowski is running low on inventory and needs to consider a reprint, she gets reports from Acumen that show where every copy of a book was sold. “We start with the major wholesalers and chains to see how much inventory is just sitting there. We also call the chains if they’ve made large initial buys to see how their sell-though is going,” she explains. “We have, on occasion, requested that overstock be returned to us. … If it looks like the sell-through is good, we then have to rely on our gut feeling about how long the demand will continue,” she says.
9. Reconcile inventory at least monthly.
Berrett-Koehler does not own a warehouse, but sells through a fulfillment warehouse in Williston, Vt. All inventory movement is tracked through reports and is reconciled with Berrett-Koehler’s available inventory every month. “Trying to reconcile inventory once or twice a year is extraordinarily difficult in trying to determine what went wrong and when. It’s much easier to do when dealing with one month’s worth of activity at a time,” says Liss.
10. Don’t overcomplicate matters.
Leaver believes that inventory management “is really an extension of marketing. It’s all about having a keen idea of what’s going on in the marketplace,” he says. “If you take large positions without analyzing the raw data, you’ll get things wrong. You need to look at the raw data and speak to the people. … If you rely on an off-the-shelf system, you’ll get it wrong. If you rely on anecdote, you’ll get it wrong.” It’s a balance of both, he says.
Cheryl Dangel Cullen, president of Cullen Communications Inc., has written 15 books on effective marketing, printing and graphic design. Contact her at www.CullenCommunications.com or (815) 469-5309.