HarperCollins and R.R. Donnelley have reached a comprehensive agreement that will significantly alter HC’s approach to the supply chain. Under the agreement, Donnelley the longtime printer for the majority of HC titles, will now also fulfill and ship orders for new books for all of U.S. HC divisions including Zondervan. In addition, Donnelley will serve as HC’s print-on-demand supplier in global markets. HC said the new arrangement, which will start to be phased in this fall, will lower costs and increase speed to market. As a result of the change, HC will close two of its four U.S. warehouses.

HC’s move comes as the demand for print copies declines and printing technology improves. The combination, explained Larry Nevins, executive v-p of operations and technology for HC, has created the right time to reengineer HC’s supply chain to make it more efficient. The first goal will be to move HC’s new-release titles from its Williamsport, Penn. warehouse to Donnelley’s Harrisonburg, Va. plant in November. The Williamsport warehouse will be closed in January. The November switch will affect HC's 2011 fall list. Donnelley will take over all fulfillment for Zondervan backlist and frontlist titles in July 2012 at which point the Grand Rapids Zondervan warehouse will close. The two warehouses employ a total of 115 people.

HC and Zondervan will continue to handle credit, collection and customer service internally and reorders will be shipped from HC’s Scranton, Pa. distribution center.

By the end of the year, Donnelley will begin taking over the pod operations for HC in the U.K. and Australia, putting in new printing equipment in HC’s warehouses in both locations. According to Nevins, the new pod capability will allow HC to make more titles available in those territories than had been economically feasible in the past because of shipping costs and long lead times. While both the U.K. and Australia will maintain their own publishing programs, HC will now be able to sell books in those places where it has rights. By using pod, Nevins, said HC will be able to offer its complete catalogue of titles to overseas customers. Details on print minimums overseas have not yet been worked out.

Donnelley’s Ed Lane said the blending of traditional offset printing with digital printing gives Donnelley the opportunity to allow publishers to make traditional fixed publishers’ cost such as warehousing a variable cost. He noted that the printer has been in discussions with other publishers about how they can change their supply chain business models.

The HC-Donnelley deal is a step beyond what Ingram and Macmillan implemented last fall when Ingram took over management of the publisher's traditional inventory and POD needs for long-tail titles.