Edition 73
High-Risk, Solid Rewards
by Dave Bumbarger, Vice President of Operations, Contract Logistics Services, Norbert Dentressangle - with RJ Droll

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High-Risk, Solid Rewards – Simon & Schuster and Norbert Dentressangle chart out new territories in returns management

Through mergers and acquisitions, and a changing marketplace, the partnership between Simon & Schuster, Inc. and Norbert Dentressangle (originally Arnold Logistics) has progressed steadily for more than 13 years at their 230,000 square-foot returns center in Central Pennsylvania. With steady upgrades to technology and gain-sharing opportunities, Simon & Schuster has been able to increase their efficiencies and keep costs under control.

In the early 2000s, a fully implemented, process-driven returns center was uncharted territory for the publishing world. Simon & Schuster’s Vice President of Distribution and Fulfillment, Dave Schaeffer, had a vision to improve both his company’s returns processes and their bottom line by reducing overhead, introducing a high level of automation, and freeing up the space they were currently using to handle returns.

“Our problem at the time was our returns center in Bristol [PA],” Schaeffer explained. “The facility didn’t have enough space and we were having problems with production. We had a plan to automate the project and hopefully increase productivity, but the cost to do it was very significant, and there were other, better opportunities for investment that took priority.”

Schaeffer however had already researched the possibility of outsourcing and was able to present his company with the benefits of partnering with a third-party provider. With his proposal approved, Schaeffer sent the returns center opportunity out to bid, looking for a partner capable of designing and implementing a solution that would handle all of their domestic book returns and manage the intense programming surrounding recognition and issuance of credit to retail partners.

“We received bids from three companies,” Schaeffer recounted. “By far, the simplest was from Arnold Logistics. [One company’s] proposal was so complicated that we couldn’t fully understand the cost structure, and we saw a lot of risk in that. We liked the idea of a simple proposal, and we gained a lot of confidence in the people at Arnold.”

In addition to providing warehouse space and labor, Simon & Schuster called upon Arnold to demonstrate a thorough understanding of the publisher’s processes and provide a completely customized solution. Among the people at Arnold who Schaeffer worked with in those early stages was Dave Bumbarger, who helped envision and realize his company’s solution. This process took thoughtful development over six months of intensive summit meetings, analysis, and creation of the programming required to meet a day-one operational requirement.

Schaeffer also needed to realize a return on investment. In addition to the labor and infrastructure at the Bristol returns center, Simon & Schuster also utilized a number of internal associates to handle tasks associated with tracking, completing, and issuing credit.

“Our internal forecasts showed we needed a payback in less than two years,” Schaeffer said. “Once we were able to free up the 150,000 square feet in Bristol and bring in new distribution clients, we saw a total return on investment in just six months.”

Through mergers and acquisitions, the partnership Schaeffer forged in 2002 has survived and thrived for more than 13 years. Arnold Logistics was acquired by Jacobson Companies in 2007, and in 2014, Jacobson Companies was acquired by Norbert Dentressangle. Additionally, the marketplace has changed considerably for book publishers. In order to keep the partnership beneficial, Simon & Schuster has added more distribution clients and Norbert Dentressangle has constantly upgraded the technology used at the returns center.

“The volume is lower, but we’ve improved our efficiency,” Schaeffer said. “The SKUs have increased and are almost two-and-a-half times greater than the original number. Our industry is changing and that includes more titles in print longer for us and distribution clients. Thanks to the upgraded technology, we’re able to do a much better job of sorting through and determining the quality of what we’re returning, and able to get better product back to stock. The other thing to note is the backlog of what’s not processed at any given time is probably about 25% of what it used to be at its peak, and is consistently in a reasonable range.”

To further drive value in their partnership, Norbert Dentressangle has begun adding additional clients to the returns center. Since late 2013, two additional publishers have begun utilizing the space and processes the two companies have developed. With the fixed overhead for management and space at the facility, Schaeffer calls it a win/win for both companies. “[Norbert Dentressangle] can bid at a lower price to add more clients, and we get gain sharing because we’re sharing capacity and leveraging our processes.”

It is also important to note that the design of the returns center is flexible enough that new clients are not limited to the publishing world. “It was never just my vision to open a world-class book return center,” said Bumbarger, who is now Vice President of Operations for Norbert Dentressangle, and has continued to play an instrumental role on the project. “It’s always been in my mind to operate a center that can handle returns for a variety of consumer products.”

The flexibility and maturity of the business processes in place at the returns center allow their current clients to consistently improve operational efficiencies. Publishers require no advanced notice or consistency of return by their retailers.

“No one buys a book based on how nice our warehouse is or how we process returns,” Schaeffer said. “We don’t compete based on the services we provide distribution-wise; we compete based on what we publish.”

Norbert Dentressangle’s system provides their customers the ability to access claims data easily, looking for discrepancies with a single mouse click. This ensures credit is issued only for merchandise that was actually returned to the publisher. Furthermore, the system provides the ability to capture and record non-compliances from carriers to carton weights.

The center handles all aspects of the returns operation, from scheduling inbound carriers to outbound shipment execution to the certified destruction of all books unfit for resale. Additionally, Norbert Dentressangle provides value-added services, such as book inspection, re-jacketing, and re-pricing, and oversees the recycling of all paper and cardboard resulting from the destroyed books.

“It’s a good project,” Schaeffer said. “A lot of people told me they wouldn’t have done it because it was high risk, but it worked. The value of this partnership is that it frees up our investments. It allows us to have a smaller footprint for distribution and helps keep costs in line. We’ve developed a standard set of business rules that Norbert Dentressangle follows very strictly. It’s been a big benefit to us.”

Dave Bumbarger is the Vice President of Operations, Contract Logistics Services, for Norbert Dentressangle – a third party logistics provider that manages inbound, outbound and reverse supply chains for customers on five continents. Dave has more than 24 years of logistics operations experience and has proven expertise in driving organizational culture, management development, returns management and customized warehouse management systems.

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