The publishing industry has navigated a variety of impacts during the pandemic, including ongoing supply chain issues that have affected nearly every wholesale or retail business. The challenges facing the book business this holiday season and beyond were years in the making, and while there are no quick fixes, there are strategies companies should be focusing on to continue building on the strong consumer sales the industry achieved in 2020 and 2021.
Publishers Weekly, with support from Westchester Publishing Services, presented a webinar, Publishing Industry Supply Chain Challenges and Opportunities, on Oct. 5, to examine the current business climate, how the industry reached this point, and actions publishers and booksellers could take. The speakers included Matt Baehr, executive director of the Book Manufacturers’ Institute; Kelly Gallagher, vice president of content acquisition at Ingram Content Group; Tyrrell Mahoney, president of Chronicle Books; and Bill Smith, director of trade publishing and sales at the MIT Press. Jim Milliot, editorial director of Publishers Weekly, served as moderator. Below are key takeaways and highlights from the discussion.[related]
Years of widespread closures left printers and paper manufacturers ill-prepared to cope with an unexpected surge in book sales following the Covid-19 outbreak. Book sales soared in 2020, with all trade segments posting solid gains, and, as a result, unit sales of print books were almost back to 2008 numbers, based on data from NPD BookScan. Since the beginning of the pandemic, backlist titles have been outselling frontlist, Baehr says, largely due to the print-on-demand (POD) technology that allows titles to be available in perpetuity. “Backlist was everything in 2020,” says Mahoney. “2021 is different; frontlist is what feeds our future and is what’s most impacted by the supply chain.”
An Industry Plays Catch-Up
Paper suppliers and printers scrambled to meet demand last year and are still playing catch-up, Baehr says, as book sales remain high in 2021. One of the largest ongoing challenges facing all areas of book manufacturing are labor shortages, which preexisted the Covid-19 outbreak and have grown exponentially since, Baehr says; even if U.S. printers wanted to add a third shift to meet demand, they most likely couldn’t staff it.
“The labor shortage isn’t new,” Baehr says. “BMI has been talking about it for years; Covid just made it worse.” Throughout the economy, he says, the distribution and manufacturing sectors lost approximately 1.2 million employees (55 and older) to early retirement driven by the pandemic. “We’re talking about people with specialized experience,” Baehr says, noting that the publishing business was particularly hurt by the retirements. Additionally, Baehr says that, with 10.9 million open jobs in the U.S., it will be difficult to find enough employees to meet production demands.
Awareness of the paper and printer crunch has led to another characteristic of the pandemic: panic buying. “Since supply has dropped, there’s been a little bit of stocking up, or paper hoarding,” Baehr says.
The situation is much the same with overseas printers. In addition to delays in getting books from Chinese and Asian printers into the U.S., owing to congestion at ports, container costs have risen fourfold over the last year, Baehr says. These logistical and freight issues are causing late and/or failed deliveries, he says. Mahoney notes that printers and other manufacturers in China are now coping with planned power outages. Both Gallagher and Baehr point to another labor shortage: truck drivers. This shortage has made FedEx announce price increases while also setting capacity limits. “Pickups are becoming a bigger and bigger issue,” Gallagher says.
A Path Forward
Among the solutions offered, Baehr and Gallagher point to using POD as an insurance policy to prevent hot-selling titles from going out of stock (Ingram owns Lightning Source, the country’s largest POD publisher). Gallagher, citing the steady improvement of POD technology, credits the technique with helping to make surprise bestsellers of social justice titles following the surge in demand for those books after the murder of George Floyd by Minneapolis police officers last year.
Gallagher says publishers must use a variety of solutions. “POD has really come into a new role in the industry,” he says. Using POD, Ingram can fulfill orders using ultra-short runs while waiting for stock to arrive at port. Moving forward, Gallagher says, publishers need to have multiple printing options and be open to using different materials, should some paper types become low in stock.
What’s more, says Gallagher, “consumer direct fulfillment is here to stay.” Publishers’ ability to drop-ship a book directly to consumers is another example of being open-minded with solutions. Mahoney sings its praises too. “Consumer direct is a big part of our long-term strategy,” she says, “allowing us to serve directly when we can.”
But while POD can work for some titles, it’s not for everyone. Smith says that POD isn’t yet possible for his titles. “We are known for design-rich books and illustrated books,” Smith says. “These books demand high production standards, and for cost purposes we source overseas.” Given the many issues facing the industry, Smith and Mahoney advise publishers to be more flexible with their on-sale dates and printing schedules.
Publishers have trended toward increasing the precision of their print runs to ensure there is as little overstock as possible, Baehr says. And while no one wants to be left sitting on inventory, Baehr says this may be a time to adjust that policy. Indeed, Smith says the MIT Press has upped its first printings in some cases, to avoid being caught with no inventory. The MIT Press has decided to evaluate their runs and work through “more liberal print runs.” As an example, Smith offers an upcoming 1,400-page textbook with a 20,000-copy print run. “We’ve been speaking to our provider and have scheduled it well in advance to ensure we have the paper for that.” The print run might be steeper than expected, but Smith and his team worked with their distributor, Penguin Random House, to come up with a strategic number.
Mahoney says that Chronicle has not yet taken that step but has made other adjustments. “We went from a four-week time frame to adding three to five weeks to that schedule,” she says, explaining that the added time will accommodate the extra transit time. In the worst-case scenario, it might be two months before books are available to customers, owing to how long it takes for the stock to leave China, arrive in the U.S., and make the trek to the warehouse. Still, Mahoney advises holding strong on current print run strategies. “We don’t want to find ourselves overprinting and with overstock problems,” she says.
Baehr points to a growing focus among some publishers on returning manufacturing to the U.S. to address supply chain hurdles. He says the typical 30%–40% in savings achieved from printing overseas is now less appealing, given the increase in transit time and higher freight costs.
Mahoney and Smith say they have shifted some on-sale dates. Mahoney says it’s possible that some fall titles will be moved to early 2022, noting that any illustrated book Chronicle is publishing that is not already on the water is not likely to be in stores for the holidays. Chronicle has considered seeking additional printers in places outside of China to combat this issue, but, Mahoney says, “it’s not something you do quickly or with a lot of immediate confidence.”
In moving pub dates, the publishers emphasize the importance of communicating changes not only to accounts, distributors, and the media but internally as well. “It is all about communication,” Mahoney says, adding that even she did not envision an increase in e-book sales this holiday as a way for consumers to buy unavailable print books. Smith says that MIT “has seen healthy growth” in e-book sales, “but it isn’t astronomical.”
A Difficult Holiday Season?
Distributors and wholesalers have warned their accounts to stock up on titles early, in anticipation of a difficult holiday season, and Gallagher says many stores have already placed orders. Historically, retailers wait until the last minute, but in the past year they’ve done things differently, likely anticipating inventory issues.
“Retail partners, especially brick-and-mortar and non-large online retailers, discovered that they can offer a diversity of cost, which resulted in gaining market share,” Gallagher says. Both big-box and indie retailers discovered that by buying a little bit of everything, aiming for a diverse range of books to choose from, they could entice consumers to buy titles outside their usual habits, he says. Still, logistical challenges remain, and it may be necessary at some point to ship stores less than a full allotment to ensure that all stores have some stock.
The long-term solution for delays in the manufacturing supply chain is automation, Baehr and Gallagher agree. “Automation is a priority” for decreasing dependence on jobs that have been hard to fill, Gallagher says. Given the lack of capacity, Baehr wasn’t entirely confident that U.S. printers could help overcome shortages. “It’s up to them to decide if they want to pick up any work,” Baehr says. “In terms of expansion, it’s all about automation now.”
And, the panelists agree that supply chain issues will continue into 2022 and costs will continue to increase. And though none of these increases have affected consumers yet, inevitably they will. “We expect to see some cost increases transferring to the consumer,” Gallagher says. “These costs and labor increases are going to have to land somewhere.” But, he says, “Hardcovers continue to be a great value, and in some cases undervalued as compared to other forms of entertainment.”
View the webinar at westchesterpublishingservices.com/supplychain21.