Nearly two million pounds of paper are parked on the floor of Friesens Corp.’s printing plant, a growing monument to the supply chain woes that are squeezing and transforming not only Canada’s book industry, but the global economy.
Two years ago, much of the space taken up by stack upon stack of 3,500-pound paper rolls would have been empty. Then came the COVID-19 pandemic, and an astonishing renaissance in reading that still has printers, publishers and bookstores scrambling to adjust.
For Friesens, that scramble has been a logistical headache. Book-grade paper stock that formerly took four weeks to procure now takes upward of 12 weeks to arrive here in this small town just north of the U.S. border, as paper mills have pivoted to other markets. Friesens’ solution has been to stockpile those massive rolls, with its inventory levels surging 25 per cent.
“Now, there’s paper on that wall. There’s paper down there. There’s paper over there. There’s paper everywhere,” says Doug Symington, Friesens’ general sales manager, as he walks around the floor of one of the three buildings that makes up the company’s 350,000 square foot printing facility. “So that’s a result of the supply chain issue, and us trying to get ahead.”
But Mr. Symington sees opportunities arising from the pandemic-fuelled demand for printed books that far outweigh the pain.
Before the pandemic, the plant would have orders booked six weeks out. Now, those waiting times have stretched. For colour printing, Friesens is heavily booked through to next April. For one-colour printing, capacity is mostly accounted for through to September. Those stacked-up orders result in part from the worldwide surge in demand for container shipping that has redrafted the economics of the global supply chain.
Like many other kinds of North American manufacturing, book printing migrated overseas in recent decades. That worked well enough before the pandemic. But the hard reboot of the global economy in late 2020 stretched the capacity of the shipping industry, sending rates soaring.
Congestion at ports along the Pacific seaboard, including Vancouver, delayed the arrival of shipments. Labour shortages in the trucking industry constricted the next link in the supply chain. This fall, the devastation from landslides in British Columbia made a very bad situation worse, and the threat of the Omicron variant could intensify supply chain woes even more.
Mr. Symington says the pressures at his plant, in turn, complicate timelines at publishers. And those headaches make it trickier for bookstores to manage their inventory.
The reaction to those constraints has made a bad situation worse. In one sense, it’s a massive and more costly repetition of the frantic buying by consumers early in the pandemic, says Walid Hejazi, an associate professor of economic analysis at the University of Toronto.
In those first frightening weeks, supplies of toilet paper, pasta and flour were pinched, as restaurants shut down and the food industry struggled to pivot to fill higher demand from grocery stores. But the mere possibility of shortages led to lineups, hoarding and then bare shelves – a self-fulfilling panic. Even the experts weren’t immune: Prof. Hejazi queued up at a Toronto grocery store to buy toilet paper and pasta. “We still have the pasta,” he notes wryly.
Businesses may be slightly more level-headed, but inventory levels are rising as they hedge their bets against supply chain interruptions. If the mantra of the globalized supply chain has been just-in-time inventory, the pandemic-updated version is: just in case. And shifts in consumer spending have placed new strains on many sectors. It started with toilet paper and flour, but now those ripples are spreading elsewhere, including the book industry.
Prof. Hejazi sounds a cautionary note about making investments that assume today’s kinks in supply chains will endure. “I don’t think we should have an overreaction.”
But a reaction is most certainly playing out. The calculus that had pushed publishers – like many other industries – to send work overseas has suddenly swung toward on-shoring. For Friesens, that changed calculus means not just months of predictable volume, but possible expansion. “It’s phenomenal news,” Mr. Symington says.
In the short run, the surge in demand for Friesens’ services has meant making the most out of existing equipment. The plant used to operate on a six-day, 24-hour weekly schedule, but is now running flat-out 24/7. An old printing press that was scheduled to be replaced by a bigger, more modern version was instead kept in place, boosting the total number of presses to five.
Right now, the bottleneck is not a lack of machinery, but one money alone cannot solve: a labour shortage. Mr. Symington says he could use another 80 employees to reinforce his stretched existing work force of 600. Skilled workers who can operate a press are in particularly short supply. That kind of labour gap – increasingly prevalent throughout the Canadian economy – won’t be filled easily or quickly, pointing to the likelihood of persistent supply chain constraints and continued upward pressure on prices.
There’s another major constraint on further investment: uncertainty. If today’s tight market conditions persist, it would be foolish not to embark upon a major expansion. But if they don’t, expensive new equipment could turn into an underutilized drag on profits for years. “What level of demand do you aim for? That’s the million-dollar question,” Mr. Symington says.
In Windsor, Ont., one of Mr. Symington’s customers is wrestling with the same quandary, but from a much different vantage point.
Biblioasis Inc. was already a rarity in the industry – an independent publishing house that grew from its roots as a bookstore. Now, publisher Dan Wells is contemplating an even bigger transformation: setting up a printing operation to become a vertically integrated publisher-printer-retailer.
That’s not because of any unhappiness with Friesens. In an interview, Mr. Wells emphasizes how his long-time supplier has worked to accommodate his printing needs. But the pandemic and the resulting crunch in North American printing capacity have started to make the economics of self-sufficiency more attractive.
Mr. Wells says he thinks a return to something approaching normal conditions won’t happen until late 2023, perhaps even 2024. “There’s no doubt that things are going to get much worse before they get better. We’re going to have to get pretty creative,” he says in an e-mail.
Entering the printing business, possibly with another publisher, would essentially be a defensive move, to ensure timely access (although it would also require finding other printing customers to keep the presses running full tilt). And it would require capital.
But the cost, and logistical hassles, would provide certainty – critical for ensuring books are available to sell as scheduled marketing and promotion campaigns roll out. And an in-house press would give Biblioasis added flexibility during any hiccups in the editorial process.
The most important reason for that flexibility is to move quickly on reprints once it becomes clear a book could be a bestseller (at least by Canadian standards). Before the pandemic, it was relatively easy to tee up a reprint run. Now, with domestic capacity so strained, it’s likely to come down to stitching together a run from gaps in production at several printers, says Kate Edwards, executive director of the Association of Canadian Publishers.
In the short run, Biblioasis has hedged its bets by ordering larger print runs for potential bestsellers than it would have before supply chains slowed. Bookstores typically don’t have to pay for unsold books returned to publishers, but it still costs money to acquire and store inventory, and to ship back returns. Ordering more is a calculated risk: There will be lots of books on hand if an award or word of mouth confers bestseller status, but inventory will pile up if that does not happen.
In the meantime, pre-emptively increasing print runs adds to strains on domestic printing capacity – one more example of Prof. Hejazi’s point about the self-fulfilling peril of hoarding.
The pandemic economy has been unexpectedly kind to Biblioasis’ retail arm. At the end of 2019, the bookstore, a few blocks away from the publishing offices, was floundering and Mr. Wells thought of shutting it down. “It was a failing enterprise,” he says bluntly.
Then the pandemic came – and came to the rescue. The early weeks of public-health shutdowns were, to be sure, an enormous disruption. But the upheaval forced Mr. Wells to re-examine Biblioasis’ long-neglected retail arm. The store was unkempt and poorly organized, and the books in stock weren’t what customers wanted.
Like many Canadian retailers, Biblioasis lurched into e-commerce. That, too, provided revelations. Mr. Wells was able to see the buying patterns of online orders, gaining a much richer understanding of what his customers wanted. Eventually, he took over all buying.
Now, the bookstore’s cramped aisles are gone, replaced by a more spacious layout that easily accommodates physically distanced customers. After a rough start in 2020, there’s a steady stream of online sales.
The result is that the formerly struggling bookstore has posted huge sales increases during the biggest economic downturn in generations. Sales in 2020 were up nearly 60 per cent, and as of mid-November, 2021, were up 30 per cent from the same time a year ago.
The bookselling industry as a whole hasn’t racked up such impressive growth, but the basic pattern is similar: stagnating sales up to 2019, a dizzying drop in the early days of the pandemic and then, starting in the summer of 2020, a surprising rebound.
“There was huge pent-up demand,” says Noah Genner, chief executive officer of Book Net Canada, a non-profit organization that tracks point-of-sale and inventory data.
Still, 2020 ended with lower overall book sales than the preceding year. But sales have sprung back in 2021; as of early December, unit sales were up 1 per cent from the same period in 2019. The critical retail days of December are yet to be counted, although Mr. Genner notes that concerns over the latest coronavirus variant could dampen sales momentum.
Mr. Wells certainly is counting on brisk holiday sales; he’s ordered extra stock of the store’s top 500 titles, up to 25 copies for bestsellers. He’s expecting higher sales, and worries how hard it would be to get snap shipments if he ran out of the most popular books.
Or at least, he hopes they will be popular. “If I didn’t get the number right, it does mean my returns are going to be far, far higher,” he said.
In the seasonal cycle of the book industry, January and February are a low point for publishers, when returns trickle back from retailers and reduce revenue as booksellers claim credits.
“As publishers, we’re all going to be facing higher returns come January,” he says, adding that Biblioasis may end up having the “statistical oddity” of a negative sales month in which credits from returns are greater than new revenue.
In Winnipeg, Chris Hall, co-owner of McNally Robinson Booksellers, is among the many retailers bulking up on orders in the hope of avoiding being caught short during the critical Christmas sales season.
With supply chains stretched thin, good guesswork or good luck is needed. McNally’s, one of Canada’s biggest independent bookstores, ran out of a top-selling title, Stanley Tucci’s new cooking-memoir, in early November. By happenstance, a shipment arrived unexpectedly this month. But many other titles at several publishers are out of stock – an expected if wholly unwelcome development for Mr. Hall.
Balanced against that impulse for just-in-case inventory is the fiscal reality of finite credit, and the vicarious worries of overordering books from publishers, particularly small houses, he says. “It’s hard to know what to do.”
Then there are logistical snarls, a problem that simply didn’t enter Mr. Hall’s mind before the pandemic. Two years ago, his concern was how to sell books, not how they would get to his stores.
Not any more. Ports, trains and trucks are all running slower. “I spend a lot of time trying to figure out where that new release is,” Mr. Hall says.
Publishers are doing their best, he says. When train shipments became untenably slow, he says, Penguin Random House Canada made alternate arrangements that got shipments from its warehouses to Winnipeg.
In Toronto, Robert Wheaton, chief strategy and operations officer at Penguin Random House, says getting books to his company’s customers has always meant sweating the details, but the pandemic has intensified those pressures. “These challenges are really acute right now,” he says.
But Penguin Random House’s goal is to make those challenges invisible to its retail clients. Expediting a shipment to overcome delays can be costly, but Mr. Wheaton says his company is “not blinking” and simply absorbs the added expense. Penguin Random House also made what turned out to be some well-timed logistical changes ahead of the pandemic, including opening a third North American warehouse in Reno, Nev., that speeds up shipments to Western Canada – including to McNally’s.
Jason Farrell deals with the logistical challenges of the book industry first hand, as vice-president of distribution for University of Toronto Press. He works with 95 publishers across the country, including Mr. Wells’s Biblioasis.
The coronavirus has complicated the firm’s warehouse operations, with the need to keep shifts of workers separate to avoid spillover infections. That’s meant added staff and costs.
But the biggest change by far is the “exponential” increase in transportation costs, the biggest Mr. Farrell says he has seen in three decades.
That’s prompted him – and much of the rest of the supply chain – to try to be more flexible. After the Canadian Association of Independent Booksellers raised its members’ concerns about running short of books during the holiday season, U of T Press eased credit terms for independent bookstores so they could take on more inventory. With the trucking industry overstretched, Mr. Farrell has split shipments between carriers. With publishers, he’s first absorbed what costs he can, then tried to have open conversations about those that must be passed on.
To some extent, that’s just another day in the whack-a-mole business of solving logistics problems. But Mr. Farrell worries the trucker shortage will be a persistent chokepoint – for the book industry and throughout the continental economy. Drivers who accelerated retirement plans because of COVID-19 won’t be easily replaced, he says. “It’s a longer term problem, in my opinion.”
Whatever domestic logistical pains Canada’s book industry feels are eclipsed by the difficulties of shipping books abroad. Victoria-based Orca Book Publishers, an award-winning publisher of children’s books, has felt that pain acutely, driven in large part by the soaring cost of overseas container shipping. Before the pandemic, shipping cost Orca 8 to 10 cents a book. Now those costs have jumped to between 60 cents and 80 cents.
“We’ve been very motivated in getting books back to Canada as much as possible, partly because of this container issue,” says Ruth Linka, Orca’s associate publisher. Demand for Orca’s educational books rebounded this year, but the company then found itself scrambling to find domestic printers.
The worst was yet to come. In late October, a cargo ship headed for Vancouver from Asia encountered stormy seas, catching fire off the coast of Vancouver Island and losing 109 containers. At first, Ms. Linka thought that disaster was someone else’s problem. Not so: 15,000 of Orca’s books were on the ship. Perhaps they’re now floating in the Strait of Juan de Fuca. Or they could be incinerated, or water damaged. Unless they are marooned and moulding on the ship.
Nearly two months later, Orca still has not been told about the fate of its shipment. In the meantime, the company ordered a new print run, though that will still mean delays in fulfilling orders.
Coming on top of month upon month of uncertainty, adjustments and pivots, the ship disaster was particularly heartbreaking, Ms. Linka says. “It just feels like one more thing we can’t control, and we can’t fix.”
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