System Report: Random House cuts turnaround in half

Big-box retailers, the Internet and e-books have upended the way books are purchased by consumers. Many of those same dynamics are altering the way books are distributed as well.

Not so long ago, Random House Inc.—the world’s largest English-language trade book publisher—distributed only its own newly published and backlist hardcovers, trade and mass-market paperbacks, and audio books issued by its nearly 100 imprints in North America. What’s more, a significant portion of those books were likely to be shipped as full-pallet orders.

Today, Random House still distributes its own titles. But, it also has a growing third-party distribution business, shipping titles for 30 other publishers to thousands of brick and mortar retailers, distributors, wholesalers and libraries, as well as direct-to-consumer Web orders. In addition to warehousing and shipping, Random House also handles customer service and back-office support functions for its third-party customers.

The profile of those orders has also changed. According to Annette Danek, vice president of fulfillment, who runs the company’s distribution and fulfillment centers, “As people are buying more electronic books, you don’t need as many physical books in the supply chain.”  As a result, full pallets comprise fewer than 10% of the units shipped from Random House’s 1.3-million-square-foot distribution center in Westminster, Md. About 60% of the units are full cartons and 30% are loose picks—individual titles picked to a mixed carton.

To address those changes and to support its growing third-party logistics (3PL) business, Random House added a single-tray tilt-tray sorter (Intelligrated) to the Westminster facility in the fall of 2009.

The 712-foot-long sorter features:
• Two induction locations with six stations each and four induction belts per station, for a total of 12 high-capacity singulated automatic inductions.

• Overhead scanning after each array of induction stations. The scanners read a UPC bar code on the exterior of each item on the sorter.

• And, 250 double-level chutes for a total of 500 potential sort/pack-out destinations. Packers are responsible for more than one-sort destination.

The sorter allows Random House to efficiently handle the mixed-case and direct-to-consumer orders that now comprise a larger share of its business. Order turnaround time has been improved by 50% since the sorter went live even as the company increased its overall title volume with its non-Random House clientele.

The change was a calculated strategic decision made together by company CEO Markus Dohle; Madeline McIntosh, the president of sales, operations and digital; and the senior distribution leadership that has paid off despite an economic slowdown. “We decided to invest in our physical infrastructure at a time when most publishers have put on the brakes with theirs,” says Danek. “We’re now able to get our books delivered faster than our competition, and we have become a more effective and profitable partner for our booksellers with our advanced supply chain productivity and efficiency.”

The payoff: Random House has reduced lead times and increased throughput since the sorter went live, adding 10 new outside publishers as Random House Publisher Services clients. And, there is room to grow. “We could double or triple our SKUs and keep the same turnaround times because of the sorter,” Danek says. 

Hitting the distribution wall
In addition to choosing great authors and publishing hundreds of bestsellers and many Pulitzer and other prize winners among its more than 8,000 new titles a year, Random House considers distribution one of its core competencies. The company prides itself on having the finest distribution system in the book publishing industry. It was recently named Amazon.com’s “Distributor of the Year” for its efforts on behalf of the third-party publishing clients that are overseen by the Random House Publisher Services group.

At present, Random House operates two national distribution centers. In addition to the Maryland facility, which is the largest DC in the publishing industry, it operates a second facility in Indiana. The facilities differ by the products they ship: Indiana primarily ships children’s books while Westminster ships titles for adult readers.

Prior to the tilt-tray sorter going live in October 2009, the Westminster facility was up against a distribution wall that was hindering its growth. “We put in our first conveyor system for piece picking in 2000, before we entered the third-party distribution business,” says Danek. “The system was designed with fewer than 20 pick modules to handle 16,000 SKUs.” That system was also installed before the e-book phenomenon took off.

Once Random House began taking on distribution for other publishers, that picking system proved inadequate for two important reasons.

• The shelving and pick modules were added on an as-needed basis to accommodate new customers and not in an integrated fashion. “We were tearing out carton flow rack and replacing it with shelving in our picking areas,” says Danek. “We got more density, but we had to replenish those locations more frequently.”

• With additional pick modules, cartons visited more modules to complete an order using a pick-and-pass picking method. “When we only had 20 modules, a typical carton would visit three or four modules to complete an order,” Danek says. “Once we got up to about 35 modules, a carton would go to nine or 10 modules before an order was complete.” Approximately 66% of orders were shipping in three business days or less.

During this same period, e-books became a potent force in the consumer marketplace. This explosive-growth, reading and distribution format further altered a business model that was already under pressure. Random House’s customers were returning more excess titles than in the past. All those returns had to be processed and returned to inventory, which further slowed down processes.

“One of our strategic initiatives was to reduce our returns by speeding up our supply chain,” says Danek. The idea was to encourage large customers to become demand-driven: Instead of ordering once a week or once a month and then returning unsold titles, Random House urged its largest customers to carry less inventory and order daily, based on the titles that were selling. That way, fewer unsold books would be returned.

From a distribution point of view, that meant customers would be ordering fewer full carton or multiple carton orders and more mixed carton or loose items. “To do this successfully, we had to reduce our lead times because our customers would be placing an order once a day and we would be doing more with each picking,” says Danek. “Since we already had a bottleneck in the each picking area, we had to devise new picking and handling processes.”

Sorting through bottlenecks
A tilt-tray sorter proved to be the most effective solution for the Westminster facility. One of Random House’s priorities was to replace the pick-and-pass picking with a new methodology that would allow it to send a book from a pick module to the shipping dock without routing it through nine or 10 pick modules.

With a tilt-tray sorter, Random House could aggregate the picking process. Instead of sending a shipping container from one module to the next, all of the items from a single-pick module are sent to a sorter induction point. The sorter then routes all of the items for an order to one of 500 packing destinations. Once all of the books for a carton have accumulated, a light flashes to notify a packer that an order is ready to be packed.

In this system, one packer can handle several packing locations at a time. Once a carton is packed, it’s placed on a takeaway conveyor, and then automatically scanned and conveyed to a final pack. There, it’s weight-checked, bubble-wrapped, sealed, labeled for shipping, and sent to shipping, where it is loaded for delivery.

By aggregating orders, approximately 98% of orders ship in three business days or less. The system is flexible enough to maintain that level of productivity through the inevitable order-cycle peaks and valleys.

Once Random House settled on a technology, there were logistical problems to address. One was a matter of layout. “We already had a mezzanine and we knew we needed certain operating speeds,” says Danek. “But we didn’t have a lot of space and we had issues like I-beams in the way.”

A second concern was whether the process of moving books from the sorter to a packout station would cause damage. “The pitch of the chute is pretty important to prevent damage,” says Danek. A team from Random House spent a day at the integrator’s facility in Frederick, Md., testing more than 100 sample books that varied from large and heavy coffee table books to textured children’s books. “We looked at a number of sorter designs, and this one handled our books in the gentlest way,” Danek says.

Danek adds that the picking processes in the loose pick area remained the same. “We were already using voice technology to direct our picks,” she says. “By creating a denser picking area, we picked up a 15% gain in productivity and the sorter improved our accuracy. But the change with the most impact was improving our throughput rate by almost 50%.”

As Random House approaches its second anniversary with the sorter, returns are on the decline. More importantly, with the increasing shift to e-books, the speed to market enabled by the sorter has kept Random House a big step ahead of the competition.

“By putting in this system, we can accommodate our growth and we can get our physical books to our customers faster than other publishers,” she says. “We have a mandate to have the best supply chain in book publishing, and with it we will grow both the profitability of our customers with Random House titles, as well as our own.”