Articles

Mobilizing Your Organization to Modernize Your Supply Chain

Tuesday, January 31, 2017 By: Carolyn Pittis

PUBLISHED FEBRUARY 2017

by Carolyn Pittis, Managing Director, Welman Digital LLC

Carolyn Pittis

Publishers may falsely assume that there’s no more opportunity for improvement in print supply chain optimization. Yet technologies to do so are available to all, large and small. Do you want to grow sales and reduce your costs globally? When was the last time you evaluated offerings in digital and on-demand printing? Wait, did your eyes just gloss over? Many publishers made the move to new methods of digital manufacturing as a result of the great recession in 2008. Those who took the leap often reported strong gross margin improvement, reduction in inventory levels, and lost sales. But you’ll recall what happened next: e-books took center stage in 2010, and many publishers haven’t since returned to a holistic look at their print manufacturing and distribution. Meanwhile, printed book manufacturers and distributors have invested in new equipment, capacity, and offerings that would be unrecognizable to the buyer of even five years ago.

What Is Print on Demand?

The term print on demand (POD) is typically used to refer to book manufacturing of single units to match actual consumer demand. Using high-speed commercial inkjet printers, it contrasts with traditional offset printing by specializing in low-unit volumes of many titles versus high-unit volumes of single titles. First experimented with on a large scale by manufacturers in the 1990s, POD technology has dramatically advanced for both black-and-white and color printing at high speeds. Now a wider variety of book sizes can be printed in economic order quantities of one, including both paperback and hardcover book types. Print-to-order supply models eliminate publisher inventory costs and risks of over-printing. Book returns from retailers—long a driver of distribution inefficiency and waste—become a thing of the past. Reader needs for format diversity can be met.

Making the Switch from Supply-Driven to Demand-Driven Bookselling

Several market changes increased the need for publishers and retailers to react to consumer demand versus trying to predict it:

Decline of “superstore” shelf space for books: The real estate boom supporting the increase of large retail spaces crested and imploded, accelerating a retail rightsizing that continues to this day.
E-commerce adoption: As mainstream consumers accepted online shopping as viable, the internet began to fulfill an expected promise as the world’s largest mall, and consumers’ expectation of product availability increased with it. There is no more fundamental way to sell books than to convert consumer interest at point of purchase to a sale.
Consumer sales feedback: The increase in consumer point-of-sale (POS) data reached critical mass, insuring that publishers and retailers could see more clearly what was—and wasn’t—selling in real time. With POS data in hand, there are few reasons to oversupply the market and engage in returns guesswork.

How to Make Good Business Decisions About POD

So, why don’t more publishers avail themselves of these opportunities? For many books, the business case for POD is a no-brainer, if not for the initial print run, then for almost all market replenishment scenarios. Four “cultural” issues sometimes prevent objective discussion of the merits of POD, or of the creation of a fully loaded cost-benefit analysis:

Wrong measures: The number of books printed and shipped has long defined success for many publishers, both before and after publication. In the decades before access to consumer pre-publication feedback and actual POS data, this was understandable. Yet for editors, publicists, marketers, or authors, first prints or laydowns often persist as a common benchmark of the relative size of a book or level of a publisher’s commitment. Marketing investments are still often determined by mathematical calculations using initial print runs or laydowns as a key variable (instead of based on the likely annual or lifetime sales of a book). Yet making marketing and manufacturing decisions based on real and changing market feedback is the established best practice in all manufacturing from fashion to automobiles. In these newer models, the definition of success moves from large sell-in to effective and efficient replenishment and sell-through.
Wrong owner: Isn’t POD the province of my inventory or production manager? Publishing houses are often functionally organized. If employees with print authority make decisions solely on unit costs—without taking into consideration likely sell-through levels, inventory and returns costs, and changing consumer expectations about product availability and fulfillment speed—then print decisions may be disconnected from both full economic realities and their impact on consumer experience. When costs cross several different departments, management may struggle to see the full picture quickly and easily.
Fill the warehouse: Publishers often have warehousing capabilities that need to be used at scale to make economic sense. When book retail space was larger, and e-books weren’t mainstream, it made some sense for a publisher to control inventory closely and have direct ability to redistribute it appropriately. With the growth of online retailing, it no longer makes sense for many publishers to own the specialized and increasingly technical functions of warehousing, shipping, and inventory management. These functions are now heavily commoditized and require substantial investment and expertise to do them well at scale.
Unaware of new tech: Publishers may not be up to speed on the latest digital printing innovations. While the historic quality of POD books was visibly inferior to those printed on offset presses, the quality of POD printing and binding has increased dramatically. For paperback and even hardcover books, including books in color, it is now often difficult for most consumers to tell them apart. There are certainly situations where a book’s demand and specs argue forcefully for traditional manufacturing and/or pile ’em up distribution. But the options improve frequently.

How to Change Minds

Here are some tips on how to make this change happen internally once you’ve compiled the information so you can fully see your true costs and opportunities. On inventory:

Create profit and loss statements that fully load in all corporate costs associated with excess inventory to see the full picture.
Shift the internal definition of business success from measures of sell-in to those of sell-through.
Shift your risk focus from minimizing excess inventory to minimizing lost sales.
Educate editors about the full costs of excess inventory, including the actual carrying costs and obsolescence—and the opportunity cost of sales having to dispose of unwanted books.
Share excess stock reports widely and calculate years supply on hand to show transparency of real inventory levels.

On lost sales:

Share reports of lost sales due to stock outs with editorial staff.
Print to demand, and then “flip” titles to POD so that you’re always in stock.
Unbundle mixed media products to increase POD opportunities and increase book assembly flexibility.
Global sales are an increasing number for many publishers, and POD often makes these far-flung business opportunities possible.

Making change happen is sometimes sudden and fun, but other times it is a long incremental slog across years. I’m all for the moonshots, but in order to survive and thrive over decades, a commitment to operational excellence is essential.

Carolyn Pittis is the managing director at Welman Digital LLC and co-founder and COO at VeloScore™. In her 27-year publishing career, Pittis has held a variety of executive positions driving change in operations, digital marketing, web development, digital asset management, sales forecasting, production, and business development. Prior to joining Welman Digital, Pittis served as vice president of operations at Sterling Publishing, a division of Barnes & Noble Inc., and senior vice president of publishing transformation at HarperCollins Publishers.