Customs Delays and Wal-Mart Threaten
Illustrated Book Publishers’ Holiday Offerings
While merchants and shoppers alike are gearing up for the holiday season, publishers are giving a collective sigh of relief. Recent delays of Asian imports nearly squelched many publishers’ holiday cheer well in advance of returns. While the fourth quarter looms large for manufacturers and retailers, it’s the only quarter that matters for publishers of four-color illustrated books — a category that includes many childrens books, as well as those artful tomes that serve so nicely as front-of-store gift suggestions. Since they have always been printed abroad — until recently two-thirds were printed in Asia with the balance in Europe, but today about 99% are outsourced to China and Hong Kong — publishers have always madly dashed to get those books to their warehouses by September at the latest. If they missed the cut-off for books in stores within the next month, they could write off their big chain promotions. Judging by what PT has heard, 2004 can go down as the Christmas that shipping woes almost sank.
Various theories exist to explain the delays: everything from increased homeland security at ports to a trucker shortage. And to make matters worse, the largest US importer, Wal-Mart, has been known to elbow its way to the front of the line at ports — a very long line, indeed, as there have been 30 to 40 ships anchored off the West Coast waiting to dock in Los Angeles and Long Beach in recent months, according to William Armbruster, editor of Shipping Digest. Many in the industry also blame Wal-mart’s new “just in time” inventory control, which compressed four months of shipments into two and essentially made it impossible for others to get containers. But whatever the reasons for the east-to-west transport system’s current gridlock, it is compounded by the normal third-quarter push in advance of the year’s biggest selling season.
Though some publishers only recently felt the effects of port delays, problems have existed for a while. Freight forwarder and customs broker Raymond Ambriano, VP/COO of Meadows Wye, says much of this started in July, when additional customs regulations went into effect. But, he attributes it to many factors, starting with the depressed economy of the past few years that prevented transportation companies from upgrading their equipment or investing in new labor, which has resulted in a serious shortage of dock workers. Combine this with the rumored economic upswing, making everyone optimistic about potential year-end sales and hence moving a lot of product, and your normal headache becomes a migraine. Ambriano claims the delays add four to six days (and seven days at its worst) to the normal delivery schedule. “The publishers who are suffering the most are those that do their own shipping, and they’ve nickel and dimed their servicers … they’re the first ones to be bumped,” Ambriano explains. Also, because only full containers are shipped, smaller publishers have to ship books in mixed-goods containers, which are more likely to be singled out for a physical exam. (He estimates about 20-25% of containers get X-rayed, while only about 5% of containers are physically inspected. Almost all containers from “high-risk origins,” such as India or Indonesia, are X-rayed.) Looking on the bright side, he estimated in late October that “in the next three to four weeks, it should be better.” However, he pointed out that steamship lines have proposed extending their peak-season surcharge, which indicates they think the volume will continue to be high.
International trading experts probably saw this port jam coming, with the US’s growing dependence on Asian countries for manufacturing. However, outsourcing only remains viable if it is efficient, and efficiency requires the free flow of ships. Publishers have always relied on others for transport, but these relationships are critical to a publisher’s P&L. In the same way that Meadows Wye gave its clients a heads-up before July, PGW is thinking ahead. Its new “global logistics company,” called Publishers Logistics Worldwide, intends to help publishers cope with the problems that arise with outsourcing to Asia, particularly “lack of transparency,” inaccurate estimates, delivery date promises, and lack of container space; as well as problems once the shipments reach the US, such as truckers’ unwillingness to allocate full-load trailers to partial load shipments, according to Chris McKenney, Executive VP/COO of PGW. He says 35% of its clients’ printed material comes from Asia. Out of about 35 PGW publishers that print in Asia, about 25 are already using the logistics services, which unofficially started this summer. With an Oracle-based tracking system, PLW organizes the publishers’ print runs so they can consolidate titles into PLW containers and link the shipments with freight networks in the US. It will be extended to Europe “soon,” with a “consolidation point” in the UK, and is working to have similar facilities in place for US exports to Australia, Asia, and Europe by spring 2005. McKenney estimates the service will save publishers 10-70%, depending on the sizes of their shipments (more cost savings for smaller ones). Regarding the recent delays, he said, “We haven’t seen any titles that aren’t going to make it into Amazon’s supply chain, or B&N’s, or even our independents. It’s been much more of an annoyance than a hard-core sales problem — but if it doesn’t improve by late November, then we really will have some failed deliveries.” The ports say it will ease up, and he’s skeptical, but optimistic.
Throwing Schedules to the Wind
Producing high-end art books was always complicated, and printing and shipping from abroad was always somewhat unpredictable, but the port delays have exacerbated the already complex process, many say. Jeff Servais, VP of Operations at Motorbooks, says none of his books has been more than two weeks late, but the lag has required a lot of juggling. Motorbooks’ freight forwarder, Phoenix International, is asking for four-weeks notification, rather than the usual one or two, for when merchandise will be ready to be loaded in Asia. Servais has no qualms about laying the blame on Wal-Mart, which owns 35% of all freight coming from Asia. In addition, he said US Customs in addition to its spot-checking, is also looking for counterfeit products and checking for valid licensing arrangements. “This means they open the container, unload selected pieces of merchandise and remove them to a spot where they can open the cartons and really check the merchandise,” he explained. The trains are also a factor, he said, with those coming into Minneapolis rail yards finding an excess number of containers waiting to be processed and picked up by trucks, and no space to unload because of congestion.
Janet Behning, Production Manager at Princeton Architectural Press, says she is still learning the nuances of shipping in a post-9/11 world. For example, all containers leaving Italy (where they print occassionally) must sit for 48 hours before being loaded onto a ship. When she spoke to PT in mid-October, she had just received her third notice for the month that one of its titles coming in from Hong Kong had a customs hold. “The addition of a customs inspection means the final segment of the delivery cannot be scheduled until the shipment is released,” she explained. “Even if the actual hold is only a day or so, the final delay can be three or four days longer by the time a truck delivery can be arranged,” which adds up to a one- to two-week delay.
At Abrams, they have started building two to three extra weeks into their schedules, says President/CEO Michael Jacobs. But, he said its freight forwarder Damco was good at forewarning the company that the changes in security policies that were implemented in July would slow down delivery, and urged them to get their books in early. “For publishers like us … the fourth quarter is critical. I’m not sure the impact [of the customs checks] was apparent to us until it was too late. It takes a long time to rejigger a schedule when you’re planning as far in advance as we have to,” Jacobs explains. Though he’s confident all of Abrams’ planned fourth-quarter list will make it to store shelves in time for the holidays, he admitted, “I’m a little more concerned about how much time the product has to sell through and be re-ordered before the holidays.” Ina Raghunandan, VP/distribution at Abrams/STC, said she has been adding a month to the schedule for final delivery of books. She blames the spot checks that entail opening not just containers, but cartons.
Both Vendome’s co-owner Mark Magowan, and Terry Downes, VP/Operations at Disney, also praised Damco for giving them the heads-up back in the spring. “Where we could, we changed our publishing schedule on the front end,” said Downes. And when that wasn’t possible, he added time to the back end and let his suppliers know the later dates, adding that what used to be one month for transit is now scheduled allowing for six to eight weeks. Plus, Disney had been routing its shipments to Seattle to avoid the gridlock in L.A.
Meanwhile, at Rizzoli, it has become standard practice to add two weeks to their schedule in expectation of delays, says Alan Rutsky, VP of Finance. He thinks the delays are partly from increased homeland security, but more a result of containers not getting to the rails on time. Though no publishers admitted that their books would miss the holiday selling season, PT heard of one (Jamee Gregory and Charles Davey’s New York Apartments, published by Rizzoli and delayed until late November) — and this suggests to us that there are others.