Sunday 26th Mar 2017 - Logistics & Supply Chain

A Penguin of low repute

A couple of weeks before Christmas, I walked into a large bookstore to purchase a modest volume as a present for one of my nearest and dearest. The book wasn’t available on the open shelves but the assistant behind the order counter was most helpful.

‘It should be in within a couple of days,’ she said as she tapped at her computer. ‘Oh.’ She rolled her eyes. ‘I think there may be a problem.’ The
problem was that the book was published by Penguin and that for much of 2004 that publisher’s distribution system had veered between the erratic and the shambolic.

Penguin’s failure to supply the bookshop with the titles it needed had been costing sales. A passing assistant in the store expressed an opinion on the company using language not entirely suitable for a respected business publication.

Disgruntled authors
Its not only bookshops that are fed up with Penguin. The firm’s authors are furious that the failure to supply books efficiently — customers have
sometimes been erroneously told that titles are out of print — has lost them as much as half -the royalties they would have expected to earn. ‘Penguin’s generally good reputation with authors has suffered significantly,’ wrote Mark Le Fanu, general secretary of the Society of Authors, to Helen Fraser, Penguin managing director.

The problems all started when Penguin closed its old distribution warehouse at Harmondsworth in Middlesex and opened a computer-controlled facility at Rugby. What Penguin managers hadn’t realised was the software designed to move books around inside the new warehouse wasn’t ready. So staff found themselves trying to pick orders by hand.

But that wasn’t easy because the computer couldn’t tell them where the books were or even if there were any and, if there were, how many were on the shelves. Last summer, Penguin chief executive Anthony Forbes Watson (who left the company in February) noted: ‘The ability to distribute
books goes to the heart of our business. We are deeply aware of the inconvenience we are causing.’

As the peak Christmas period approached, the company made strenuous efforts to improve matters by building a temporary marquee in its
car park, getting printers to send some titles straight to bookshops and using the warehouse of its sister company, Pearson Education. Penguin’s management can be in little doubt about the anger among its suppliers (the authors) and customers (the bookshops), not to mention book buyers who haven’t been able to purchase their chosen reading matter.

Penguin’s directors have made soothing noises — Forbes Watson’s comment about ‘inconvenience’ must rank as the supply chain understatement of last year. But as authors know, kind words butter no parsnips and Penguin has rejected the Society of Author’s request for compensation payments for writers who have lost out on royalties.

No doubt, in time, Penguin will learn something from the debacle. But there are lessons here for all involved in the world of logistics — and not just about the inadvisability of opening warehouses based on untested computer systems. The broader question is about damage to reputation.

Increasingly, reputation is a prized corporate asset. It’s become highly prized since the marketing folks pointed out how much they invest in
building brands and how much brands can add to the capital value of a company. To put it bluntly, there is a direct link between what people think about your company and its value (whether it’s quoted on a stock exchange or not).

Until fairly recently, logistics pros may have thought that reputation management was a topic that could be safely left to the Clarissas and Timonthys in the PR department. But when corporate reputation is damaged the work PR people do amounts to little more than sweeping up after the elephants have passed.

What shrewder boards now recognise is that reputation must be managed proactively. The starting point for that exercise is often a risk assessment of those parts of the business that could cause damage. Has the board of Penguin conducted such an exercise? And if so, had they identified distribution as a potential reputational risk? We’ve not been told. Somehow I very much doubt it.

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