Tackling Shipping and Freight Challenges in the Book Business

In July 2021, BISG hosted a webinar conversation about the challenges and potential strategies available to manage constraints in the book publishing supply chain. BISG member Perry Crowe (Hay House) revisited the recording and prepared these notes to help underscore the content of  the webinar. Deep thanks to Perry for his interest and contribution here.

Challenges

• Equipment shortages (chassis and shipping containers)
• Lack of space on container ships
  • manufacturers and publishers buying on the “spot market” (bidding for limited number of shipping containers available rather than scheduling the container in advance)
  • bigger carriers want longer-term contracts
  • Shipping costs have drastically risen since Sept 2020
    • Costs gone from $4,000 per container to $18,000 per container today (probably will hit $20,000)—on “spot market”
    • Manufacturers and publishing facing major demurrage and detention fees even once inventory has arrived because they can’t get orders out to make space for the new inventory
    • Carries can give a quote for a shipment leaving within a week’s time, but while the freight estimate will stay the same, the final cost could be much higher with “landing fees” (storage, etc.)
    • FedEx and UPS cutting capacity by 25%
• Port congestion at every major port
  • 4-color work has been moving from China to Eastern Europe, Spain, and Turkey, but freight and shipping issues are major challenges in those locations as well
  • COVID safety protocol mean fewer workers on a shift and more space between workers, meaning all the work takes longer than it usually does
• Trucker shortage of about 60,000 drivers throughout the continent, so even domestic freight is impacted not just global
  • Average age of driver 55 to 56, retiring generation without replacement generation
  • Truck driving schools working at 50% capacity
  • Carriers trying to recruit drivers are attaining only 10 to 15% of recruitment goals
  • High rate of over-the-road truckload rejections (22 to 25%) due to unavailability of drivers
  • Trucker spot rates 40 to 85% higher than previous years
  • North American banded freight activity is up 40% compared to 2019
  • Significant competition to move less-than-truckload freight with LTL networks at or exceeding capacity
• Little reason for optimism in freight for the next 18-24 months 

Actions

• Evaluate Your Entire Supply Chain (not just freight)
  • Look at origin of product to delivery to customer, from first printing through reprints
  • Examine for improvement and spot vulnerabilities
• Utilize the BISG Supply Chain Map to visualize your supply chain and identify pain points and areas for innovation

Areas to consider

• Managing cash & fixed costs is of paramount importance—especially in an environment with a high degree of uncertainty
• Onshore vs offshore COVID risk (domestic vs. overseas)
  • Be realistic before you start planning your manufacturing in China and Europe. Double your lead times. Realize you will have no cost guarantees.
• Domestic Manufacturing Capacity
  • tight market given recent acquisitions and consolidation of printing facilities
  • capacity for manufacturing will be rationed across publishers
• Offset vs. Digital Manufacturing Economics
  • Increasing digital manufacturing can support situational inventory strategies. Digital supports three inventory models; offset does not
    • POD – sell first, print later
    • Automated Stock Replenishment – Print first, sell later with minimal risk
    • Core – Traditional book publishing model that prints first, sells later
  • long run vs short runs / Offset vs Digital
    • With freight challenges, publishers rely more on POD, especially digital printing in the country of the end reader
    • Digital has its limitations for mass market. Above 5000 units, think twice from an economics standpoint. But from an availability standpoint, it is a proven solution
    • Printing digitally also introduces limitations to formats and finishes (embossing/debossing, spot UV, foils, etc.)
  • Paper Prices / Supply
    • Prices going up across the board
    • Cost of wood tripled in past year
    • Most manufacturers currently on paper allocation
  • Shift from Bricks & Mortar to B2C
    • Big shift, moving at lightning pace, need e-commerce infrastructure
    • B2C strains supply chain more (More little pieces instead of big shipments through big players)
  • Sustainability Expectations
  • Brexit Issues – Cost & Speed to Market
    • Moving inventory from UK to Europe is facing upset
  • Educational Publishing facing challenges from Enrollment Declines / OER / Inclusiveness Access
  • Stock Out Costs
    • Have some “just in case” inventory (not the least amount possible, not “tight inventory”)
    • Inventory buffers are going to help service and fulfill orders, cross-dock, and throughput; holding inventory relieves pressure on the transportation network
    • Focus on availability & lowering TCO (total cost of ownership) not unit cost
      • Cost of having stock, of not having stock, implications of having just-in-case inventory

Possible Mitigation of Challenges

• Outsource warehouse while retaining B2C functions and associated customer relationships
• Regularly revisit inventory & manufacturing strategies
• Ship directly from your manufacturer to customer whenever possible
  • The fewer handoffs in your supply chain, the better
  • The longer your supply chain, the higher the risk. Shortening the chain reduces safety stock and offers better customer service
• Print & fulfill from same location when possible
• Shipping strategies for the smaller publisher
• For smaller shippers that don’t have volume to leverage in the marketplace, maybe the “4PL enterprise logistics model”
• Engage with companies that provide transportation services so you can collectively go to the trucking industry with not just your volume but other shippers’ volume to bundle it together to get the best optimal rates and cast the widest possible net when it comes to engaging as many carriers as possible regardless of the mode to find capacity.
• Trucker shortage could perhaps be mitigated by engaging lobbying groups like the Association of American Publishers to encourage government intervention such as:
  • Lower trucker age from 21 to 18 to attract younger drivers
  • Offer path to citizenship for immigrants willing to come to pursue work in trucking

All indications are that these challenges will continue at least through January or February 2022. It is likely that rates will never go back down to the levels they were previously. So the time is now to evaluate your current supply chain and identify areas where you can pivot to addresses these challenges.

Education is key, and you can find many resources here at BISG.