2. Can we compare our operating metrics to other companies?

Access to and assessment of operating information (e.g., functional expense to net sales ratios, lines per order, fill rates, order time in process, average collection cycle, etc.) is essential to managing costs and improving profits. If your business systems cannot provide this information without a brute-force effort, you are likely leaving money on the table—profits that outsourcing may allow you to leverage.

3. What environmental factors are likely to affect our current distribution operations?

For example, does the growth of POD reduce the need for traditional warehouse operations as currently sized? As POD costs decrease, will the physical size of your distribution operations need to remain the same in terms of staffing and square footage? Does outsourcing offer a way to manage better as production and distribution requirements evolve?

4. Where do we most need to invest?

Does your organization have the capital resources to fund ongoing maintenance and investment in the information- and warehouse-management technologies necessary to reduce transaction costs, improve productivity and respond to the increasing service expectations of both major brick-and-mortar retailers and Internetbooksellers? Faced with the choice of investing in data analytics technology that will help you understand your current and prospective customers better or investing in an upgrade to your warehouse system – which is more important to the long term health of the organization?

5. What are the opportunity costs?

What product development opportunities are left unexploited because cash is being consumed by the operating and capital requirements of the distribution operations? What is the market value of the physical plant you are now devoting to distribution operations? Can these assets be converted to cash that can be redeployed for strategically more significant uses?

6. How are customer expectations likely to evolve?

Does your organization have the resources and risk tolerance to fund the creation of the dedicated infrastructure to support the demands of the emerging marketplace for e-books, POD, and/or online content delivery?

Qualitative vs. Quantitative Considerations

The operating environment of the book publishing industry (albeit to different degrees for different product lines and distribution channels) has permanently changed and will continue to change. Only the largest publishers or distribution specialists will have the scale or functional expertise to manage the increasingly demanding and complex requirements of the marketplace.

Even this assertion is something of a misnomer, as the major players in the third-party distribution business offer supplementary services such as e-book delivery, POD, and short-run digital printing through partnerships with specialist firms.

Regardless of how capable we may believe our current, dedicated distribution operations to be, the periodic evaluation of outsourcing versus a captive distribution operation has become a requirement and is now fundamental to the strategic planning process for publishers. To be effective, the evaluation process must dispassionately examine the qualitative and quantitative considerations, one-time transition costs, and of course, the related risks.