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The Outsource Question

Celebrate logistics, as I've said before, because logistics make the romance of publishing possible. A publisher can also outsource its logistics so it can focus on the sides of publishing it loves best and does best—probably editorial, sales and marketing. But just because you outsource doesn’t mean you can forget about operations, fulfillment and accounting. You just need to be involved in a different way at a different level.

Tom Woll has a number of suggestions for taking some (but not all) of the pain out of these functions.

* Outsourcing Accounts Receivable.
The pain of accounts receivable (AR) is that trade and other large accounts don’t pay in 30 days. “The average collection period in the book industry is between 90 and 120 days from the time of invoice. . . . The difficulty of collecting accounts receivable is, indeed, one of the primary reasons publishers use distributors . . . to cope with this job of collection.” (pp. 276-77) But you still have to monitor closely what the distributor owes you. And if the distributor goes bankrupt, you’ll likely see little if any of your money.

* Doing AR Yourself.
If you handle your own collections, it is vital to “monitor your accounts receivable every day” (p. 277), focusing on accounts that are more than 90 days overdue. As I’ve said before, it’s all about cash flow, baby.

* Outsourcing Warehousing and Fulfillment.
Customer expectations these days are that an item ordered will be shipped within twenty-four hours. Again, this is not an easy task, and many choose to outsource warehousing and shipping. But be careful.
    1. Don’t put your entire stock with one distributor. Again, if the distributor goes bankrupt, “your entire stock of books will be frozen (locked up) by the bankruptcy court and unavailable to you for some length of time” (p. 278). So you may want to handle some yourself or hire a second service to handle, for example, book clubs, premium sales and review copies.
    2. In any case, make sure the fulfillment service you use understands the fragility of books. A torn cover can make a book unsaleable.

Outsourcing was all the rage several years ago. And it can be very helpful for small or large publishers. But there are always drawbacks with every choice, and the industry is full of horror stories about outsourcing gone very wrong. Publishers should consider the pluses and minuses carefully when deciding how to handle logistics.

Posted by Andy Le Peau at July 28, 2008 5:55 AM