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Posts Tagged ‘fulfillment for publishers’

3 Myths of Returns Processing in the Publishing Industry

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?”

The Cost Driven Reasons Publishers Outsource…

Over the last couple months I have been discussing the important reasons why publishers, large and small, choose to outsource their warehousing and order fulfillment services. There are a number of benefits that publishers see when they choose a third party vendor such as Ware-Pak to handle their outsourcing. You can read about these benefits in the following blog entries:

  1. Organizationally Driven Reasons
  2. Improvement Driven Reasons
  3. Financially Driven Reasons
  4. Revenue Driven Reasons

I have two topics left to discuss, the first being the Cost Driven Reasons for publishers of any size to outsource their fulfillment to a third party vendor.

When publishers outsource, they experience the ability to reduce costs due to a superior provider’s performance and the provider’s lower cost structure. Typically, a publisher who performs their own warehousing function is paying a premium of 20% to 30% for this service. This does not even take into account the savings that a third party warehouse can achieve by combining the shipping activity of 50 or 100 different publishers in order to reduce overall shipping charges.

Turn Fixed Costs Into Variable Costs
One of the most difficult areas in business is the change fixed costs into variable costs.

For example:

If you own your own warehouse, and orders for the day are down, can your labor costs be reduced? Probably not. You cannot simply tell your employees to go home. They still expect to be paid for 40 hours each week. In this case, what typically happens, is that someone will find some type of make shift work for them to do. The employee stays busy, but the cost per order just increased.

If you reduce inventory levels will your rent go down? No, it is also a fixed cost. Your employees will not manage the inventory as aggressively as they should because there are no real benefits to the organization.

Stay tuned – the final entry of this series will discuss Employee Driven Reasons. The combination of these “Why Outsource” blog entries will be available as a white paper shortly. If you have additional questions, or are interested in receiving this white paper, please feel free to contact me directly. I can be reached at (708) 587-4116 or kshay@ware-pak.com

Why Publishers Outsource… The Revenue Driven Reasons

Last week, one of my blog entries discussed the financially driven reasons why publishers may choose to outsource their warehousing and fulfillment services. Today, in Part 4 of this series on “Why Publishers Outsource,” I will talk about the revenue driven reasons that large and small publisher benefit from outsourcing order fulfillment services to a third party vendor, such as Ware-Pak.

When it comes to revenue, there are really three main benefits to publishers who outsource warehousing and fulfillment:

  1. Gaining market access and business opportunities through the provider’s network. As a publisher you may want to ask yourself these three questions: Does your warehouse assist in selling more books? What markets do you actively sell to? What markets do you need help with?
  2. Expansion can be accelerated by tapping into the provider’s developed capacity processes and systems. When a publisher experiences growth, warehouse space can become an issue. The ability to process orders in a timely manner can hinder that growth. Whether it is sales of one million, five million, ten million or twenty million items, publishers should know the capacity their systems can handle.
  3. Sales and production capacity can expand during periods when expansion could not otherwise be financed. As a business runs its cycle, different departments will put pressure on the investment capital that is available. By outsourcing warehousing, all available capital can be devoted to the development of quality books.

My two remaining entries for this series discuss the cost driven and employee driven reasons for publishers to outsource their fulfillment operation. The combination of these “Why Outsource” blog entries will be available as a white paper shortly. If you have additional questions, or are interested in receiving this white paper, please feel free to contact me directly. I can be reached at (708) 587-4116 or kshay@ware-pak.com

Financial Reasons Why Publishers Outsource

Over the past couple of weeks I have been discussing the various reasons that publishers, large and small, choose to outsource order fulfillment services. So far I have talked about the organizational reasons and the improvement driven reasons for publishers to outsource, as well as the ways outsourcing can enhance the overall effectiveness of the organization.

In this entry I will be discussing the financially driven reasons for publishers to outsource warehousing and fulfillment services.

Outsourcing fulfillment services allows you to reduce your investments in assets such as buildings and equipment, which will help free up those dollars for other purposes. It often helps to stop and think about whether your are better off with a building or with the development of additional titles for sale; whether you want to make your money selling books or as a landlord. Another important question to consider is: are you charging your warehouse market rates or is your publishing division carrying the expense of the warehouse?

Let’s be honest, the publishing industry is in a state of rapid change. Most publishers have suffered during this economic downturn and many have lost as much as 30% of their revenue. Publishers who have their own warehouse have found how difficult it can be to reduce the expenses of owning and running a fulfillment center.

The single largest cost for a fulfillment operation is the cost of the facility and the second highest is the labor costs of running the warehouse. When your business is down 30%, you simply cannot cut the rent by that amount, and in many cases, it is nearly impossible to reduce the costs of labor. Many of the publishers I have spoken with tell me it is necessary to outsource because it allows them to change their fixed cost of warehousing into a variable cost. By outsourcing the fulfillment operation, as orders decrease, the warehouse costs are reduced as well.

As we move ahead and customer demand switches to an electronic format, e-books and e-ink are going to reduce the demand for printed books. Those who own your own warehouse will find it extremely difficult to reduce costs if you have the fixed costs of a warehouse on your hands. Our industry is changing and it is hard to predict what the demand will be in 1 or 2 years, let alone 5 or 10 years. Outsourcing your fulfillment operation now will allow you to take advantage of the changing industry and reap the rewards of selling more books electronically.

One additional item to consider is the equipment in the warehouse. You will want to know if it is being utilized to its fullest extent. Take a look at all the different pieces of equipment that has accumulated over the years, and determine what equipment you still have. For example, do you really utilize that shrink-wrap machine, or the forklifts? If so, how many hours per day are they being used? Know how many hand-jacks you have in the warehouse, as well as mailing systems and packing material machines. You may be able to generate some additional cash by transferring these under-utilized assets to a third party fulfillment provider.

Join me next time as I discuss the revenue driven reasons for publishers to outsource their fulfillment operation.

The combination of these “Why Outsource” blog entries will be available as a white paper shortly. If you have additional questions, or are interested in receiving this white paper, please feel free to contact me directly. I can be reached at (708) 587-4116 or kshay@ware-pak.com

The Right Fulfillment Partner Eases the Transition Process

For a publisher, making the decision to change warehousing and fulfillment vendors can be difficult. There are high costs associated with the move and the process is very tedious. Focusing on the services needed to become a better publisher can help determine who the right warehousing partner will be.

When the National Association of Home Builders (NAHB) had to make a decision to stick with their current fulfillment vendor or make a change, they began by developing a vision of what they were looking for in a fulfillment partner.

“We chose Ware-Pak because of what they did and did not do,” said NAHB Staff Vice President Lakisha Campbell. “They met our established criteria, but did not try to oversell. While other fulfillment companies on our short list always talked about add-ons and other things we weren’t really looking for, Ware Pak was very professional in their approach. When we asked questions, we got straight answers – and we got those answers quickly,” she added.

Ware-Pak prides itself on creating strategic partnerships with their clients. They know that a publisher’s success depends on their ability to control inventory, streamline product storage, assembly and distribution, and process returns efficiently. More importantly, they know that publishers, especially associations, don’t change fulfillment companies just for the sake of change. Reporting processes must be coordinated in order to provide the client with meaningful, actionable reports.

Since the transition began about two months ago, Ware-Pak has been diligent in taking the time to meet with the NAHB to evaluate progress and establish areas that need improvement in order for them to receive the exact reports and information they need.

In closing, Lakisha observed, “Transitioning from one fulfillment company to another is a process, and Ware-Pak is dedicating the time to work out the kinks.”


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