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Category: Inventory

Remainders in the publishing industry are generally known as any book that is sold at a deep discount to the end customer. (The wholesale price from the publisher to the trade is equally discounted.)

True remainders are only those books that have been taken out of circulation because sales have fallen off and the publisher can no longer justify the carrying costs associated with the book. Remainders may vary from an initial printing that did not sell to the last couple hundred books of a best selling novel that has sold hundreds of thousands of copies. When a publisher has a backlog of a new title to introduce, they may need to cut their losses on slow moving titles by remaindering the balance of stock to free up cash and make room in their warehouse for new items. The publisher will sell the entire remaining (hence the word) inventory to the highest bidder. Once remaindered, the book no longer generates royalties for the author, it cannot be returned to the publisher for credit and it is considered out of print. Years ago, remainders were marked by stripping the spine of the book with green paint. Today, that is often not the case and sometimes they are even in mint condition when they are remaindered.

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returns-processingFor many publishers, processing returns happens a few times a year during “slow periods.” Some publishers will go out of their way to avoid even thinking about returns.

It’s amazing to me how publishing executives will skip the returns department during tours of their facility. I attribute this to flawed thinking – they must believe in one or more of the 3 three myths of returns processing. If they could only separate the truth from the myth and realize the impact of returns, they would never avoid processing returns again.

Myth #1: Returns are junk.

This is the most pervasive, and the largest, myth about returns. When you look at a publisher’s balance sheet, one of the largest assets is the inventory. The reality is that returns are not junk, and not only that, there is real money to be saved in handling them properly. In our experience, less than 6% of returns for associations and 10% to 15% of trade returns are actually defective. Even ‘hurt’ books have value and when processed properly, they can provide the publisher with additional cash flow.

Reducing the number of returns is the best way of eliminating costs. That’s why, when it comes to returns, publishers need to ask the following questions:

  • Why did the client return the book(s) to begin with?
  • Was it the wrong product?
  • Did the book not meet the customer’s expectations?
  • Did a sales rep over sell to one of the bookstores?

Myth #2: When processing product returns, take your time – there is no hurry.

The key to maximizing the value of returns is to process the returned product(s) as quickly as possible. Processing returns slowly creates problems with inventory reordering schedules, accounts receivable, and customer satisfaction with your company.

With print on demand or short run printing, having accurate and up-to-date inventory counts is an absolute must. If your returns have not been processed, you risk incurring unnecessary printing costs plus the carrying costs associated with extra handling of the inventory.

When dealing with trade receivables, how many times has your accounts receivable (A/R) person made a call to an account that is 90 days past due only to hear that the merchandise has been returned? Not only have you incurred the expense of shipping the books and processing the return, now you also have the added expense of the A/R person.

It always amazes me when I hear clients and managers suggest that Ware-Pak delay processing returns in hopes of saving money. They believe they will reduce costs by using the returns staff as flex labor for everything else in the warehouse. However, the amount of ill will that is created with a customer when the return is not processed quickly is immeasurable.

Today, publishers are beginning to think in terms of inventory turns per year, rather than in terms of printing a 10 to 15 year supply. This only adds to the need for timely returns processing. Remember, returns are more like bananas than wine – they will not get better with age. The costs of not knowing your actual inventory levels are much higher than any savings for only processing returns periodically.

Myth #3: You can use your warehouse management system (WMS) to process returns. You don’t need special returns software.

We have looked at a lot of different warehouse management systems and concluded that none of them are robust enough to handle the demands of the publishing industry. Each system seems to lack essential features that publishers need to run their business.

Ware-Pak has developed a returns management application (RMA) that allows us to process 85% of all returns the same day they arrive in the warehouse. Our RMA begins by capturing the tracking number, customer name and address of the return. Next, the return authorization number along with the original carton number, if available, is added with the reason for the return (if stated). Each item is scanned, counted and inspected for damage. If any damage is found it is coded with one or more of the 12 different damage codes. After inspection is completed, any repairs that can be made are taken care of, such as changing the dust jacket, removing stickers, cleaning the outside of the book and removing marks on the pages. The final step in our process is to place the good books back into inventory so they are ready to be resold.

Each Ware-Pak client is different, but generally, a customized file (meeting the individual publisher’s software criteria) is created every Monday and placed at our FTP site to be imported into his or her system with all the returns information. In addition to the electronic file, each client receives the returns label, any returns paperwork found in the carton and a copy of our return order.

Fact: Returns have a great impact on a company’s bottom line.

In some cases, trade returns can be as high as 30%. Managing returns can have a huge impact on the publisher. Processing returns in a timely manner will enhance your customer’s experience, reduce costly inventory ordering mistakes and lower you accounts receivables. Isn’t it about time to ask yourself if your returns processing is “best in class?”

Recently I read an article by Forrester Research, a leading research firm tracking online sales. In the article they reported that in the United States, online sales in 2010 are forecasted to reach $172.9 billion, an 11% increase from 2009. In 2009, it was reported that 67% of the online population made a purchase online. The most popular items being sold online include computers, apparel and consumer electronics.

This got me thinking about what is important to the e-Retailer from a warehousing and fulfillment perspective. The list below contains what I believe to be the 9 essentials for successful e-commerce fulfillment. Today’s entry will be focused on #1 – inventory visibility and synchronization. Over the coming weeks each of the 9 items on this list will be discussed, so make sure to check back. Click on any of the links below to view specific entries.

  1. Inventory Visibility & Synchronization
  2. Real-time Communication of Order Details between Shopping Cart Software and the Warehouse Management System (WMS)
  3. Amazon Integration
  4. Handling Larger Order Volumes
  5. Increased Pick Accuracy
  6. Custom Branding Packing Slips
  7. Integration with Shipping Systems
  8. EDI Integration
  9. Automatic Email Notifications

Inventory Visibility & Synchronization

Nothing can spoil your relationship with your customers like allowing them to place an order for a product that is not available. One of the most important features of having an e-commerce site is to have your inventory accurately reflected in the shopping area so clients can purchase your products. Your fulfillment partner’s warehouse management system must be able to update your shopping cart software with current inventory levels.

Keeping track of your stock with a warehouse management system (WMS) is essential because your inventory can become depleted from many different sources. Purchases and shipments can be initiated by shopping cart orders, salesperson samples, retail store orders, and wholesale/distribution channel orders to name a few.

Since these sources could quickly exhaust supply, it is important to have an automated and regularly scheduled inventory update from the WMS to the shopping cart. Typically, inventory levels are updated once a day or once per week depending on the popularity of the products. This ensures that out-of-stock items are not displayed (or are listed as such) to consumers visiting your online store. By accurately reflecting your inventory on your website, you can manage backorder issues and customer expectations.

Regardless of a fulfillment center’s methodology, you are paying for two things – space and activity. Each 3 PL or order fulfillment operation has its own methodology and payment schedule. Some fulfillment warehouses charge fees to store your books and fees to pick-and-pack and ship the books from the warehouse. Others will charge based upon percentage of sales. One of the best ways to control cost is by controlling your inventory. Whatever the fee structure, you must clearly understand the rates, terms and conditions of the contract.

Looking at pricing proposals from different warehousing and fulfillment vendors can be difficult because each one uses a different methodology for computing their rates. For this reason, reviewing the pricing proposals of warehousing and fulfillment companies should be done with great care and diligence. Here are tips to help avoid some of the challenges of warehousing and fulfillment pricing:

  • Make sure the warehousing and fulfillment vendor has listed ALL costs
  • Beware of monthly minimum charges
  • Determine all monthly fixed recurring charges
  • Ask if the vendor makes margin on freight charges and UPS discounts
  • Double check move-out charges – some warehouse operations add huge penalties for move-out fees
  • Ask for referrals from current customers to ensure that costs don’t change after signup
  • Check the vendor’s BBB rating
  • Make sure that everything is documented in a contract

Want to know additional important considerations when choosing an order fulfillment service? They are now available in a Whitepaper on our website. If you have additional questions, or are interested in receiving this white paper by email, please feel free to contact me directly. I can be reached at (708) 587-4116 or kshay@ware-pak.com

Recently, Ware-Pak completed the annual inventory for one of our clients and I wanted to share the results with you.

During this economic downturn, like many organizations, they have focused a great deal of energy on shrinking inventory, in order to meet market demand while managing the business of satisfying customers’ needs.

When their fiscal year began in August, 2008 the client’s warehousing profile contained 4,045 SKU’s with a total of 1,595,652 units in inventory. Over the course of the year, Ware-Pak processed 60,906 transactions – including order fulfillment, receipt of new product and returns processing. In total, these transactions consisted of 1,914,183 items.

As the economy slowed, the company took actions to reduce inventory. By the end of the year, they had reduced the number of unique SKU’s from 4,045 to 2,340, thus eliminating a total of 1,705 SKU’s from inventory, and experienced substantial savings on their storage fees.

From our perspective, everyone wins when inventory is for active stock and stale merchandise is removed from storage.

On an average day, Ware-Pak processed 239 transactions (order fulfillment, receiving, or returns processing), which consisted of 7,506 units. As you can see, this is a very active account with many transactions happening daily.

When we completed inventory of the product, it now stands at 2,340 unique SKU’s and an inventory level of 782,278 units. Ware-Pak’s inventory management has a positive accuracy rating of 99.81% for the year. When you look at the small amount of errors, 59% were for non-salable items such as pamphlets, marketing materials, packing materials, etc. Only 44 salable SKU’s showed any variance or discrepancy. Given the volume of transactions over the last year, we at Ware-pak are very proud of this accomplishment.

When is the last time you had the answer to the question – How accurate is your annual inventory?


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