Warehousing, Inventory, and 3PL

November 7, 2023
BISG Lunch & Learn
 Introduction
• 3rd Party distribution has been a fixture of the publishing
landscape for decades. CoVid-19 accelerated interest in this
alternative to traditional distribution strategy.
• Consider 3rd Party Distribution as an alternative strategy and/
or testing the market if already using 3rd Party services.
• The definition of Third-Party Distribution is situational &
depends on the publisher’s objectives
• At minimum, third party distribution includes pick/pack/ship.
• Depending on publisher needs, the portfolio of 3rd distribution
can include:
• Sales & Marketing
• Order to Cash & Customer Service
• Pick / Pack / Ship 2
• Book Manufacturing
 Why the Increased Interest?
• Traditional distribution (i.e.- publisher managed warehouse)
involves significant fixed costs and requires predictable level of
activity to support full cost absorption.
• Pandemic & volatile channel behavior changed the rules –
many changes are permanent, and the degree of change
remains to be seen:
• Amazon’s temporary exit of the business of books.
• Publisher focus on cultivating B2C relationships with their readers
- with the associated benefits.
• Increased interest in digital delivery /e-books
• OER / Inclusive Access / Open Access and demographic changes
and their impact on volume.

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 Why the Increased Interest (continued) ?
• Outsourcing provides undeniable advantages from cash & risk
management perspectives.
• Businesses with outsourced services (i.e. - fulfillment and
technology) are viewed as more attractive acquisition and
merger candidates.
• Outsourcing makes bolt-on of acquired properties much
easier.
• Combined with co-located manufacturing (a.k.a. – “One Roof
Strategy”), outsourcing upside increases significantly, allowing
the publisher to accelerate transition from a Print First – Sell
Later to Sell First – Print Later inventory models.
• Moving from the fixation on unit cost to total cost of
ownership is good business! 4
 Comparing Distribution Models
Traditional Outsourced
• Fixed real estate cost • No real estate
• On-going staff & • No technology & staff costs
technology spend • Pay as you go fees
• High fixed costs • Time in process
• Labor Challenges opportunities
• Uncertain cost • Significant economies of
absorption scale
• Modest economies of • Predictable cost depending
scale on model used.
• Burns Cash • Conserves publisher cash 5
 Outsourcing Considerations
• Outsourcing not without risk. Risk is a function of the breadth
of functions outsourced.
• Timing is crucial.
• Requires careful planning, dedicated publisher resources and
clear communication of expectations to your provider.
• There are one-time costs (cash & non-cash) associated with
moving from owned to outsourced:
• Inventory Transfer (Freight)
• Inventory write-off if reserves are inadequate
• Severance
• Write-off of unamortized capital investment
• Consider the cultural impact on the organization. Both the
publisher AND provider should check references 6
 Outsourcing Providers
Company Services
B&T Publishers Services Full Service
Books International O2C / PPS / Book Mfg.
Cengage O2C / PPS
Chicago Distribution Services Full Service
Hachette Sales / O2C / PPS
Hopkins Fulfillment Services O2C / PPS
Ingram Full Service
Independent Publishers Group Full Service
Lakeside Books O2C / PPS
Long Leaf Full Service
Maple Logistics O2C / PPS / Book Mfg.
NBN Full Service
Norton Sales / O2C / PPS
Penguin Random House Sales / O2C / PPS
Simon & Schuster Sales / O2C / PPS
TriLiteral O2C / PPS
University of Toronto Press Sales / O2C / PPS
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Full Service = Sales & Marketing /O2C / PPS / Book Mfg.
O2C = Order to Cash / Customer Service
PPS = Pick / Pack / Ship
 Closing Thoughts
• Focus on your core competencies. Is warehousing one of them?
• Think long term – do fulfillment services fit your strategy &
priorities?
• Understand provider’s business model
• Is it service or sales based? What’s included & more important -
what’s not? Prepare test cost calculations.
• Do not make your selection on arithmetic! Qualitative
considerations are critical.
• Include “what if considerations” in your evaluation.
• Consider the size of the “pond”.
• Customer relationships are valuable – especially as more publishers
build B2C capabilities. Consider retaining O2C capabilities.
• Even if already outsourced, test the waters and examine alternatives
as contract renewal date approaches.
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• Fulfillment organizations facing cost pressures with labor, packing
materials, energy, transportation and infrastructure investment.
 Contact Information

David Hetherington
VP Global Business Development
Books International
(908) 458-5928
d.hetherington@booksintl.com
(https://booksintl.presswarehouse.com/)