Production: Shifting to New Distribution Contractor Need Not Result in ‘Delivery Meltdown’

By: W. Eric Schult

Production delivery

There’s something of a “fog of war” aspect to the recent delivery travails being experienced by the Boston Globe and its readers, following a shift from one primary distribution vendor to another. An armchair general (or industry watcher from another market) might read the “Delivery Meltdown” headlines and come to some easy conclusions about the wisdom of the Globe’s move, the competence of its new vendor, or some other takeaway that misses the context and nuances of a complicated situation.

“Let’s not put ourselves through that,” may be the words echoing through newspaper executive boardrooms at the moment. However, there are more useful observations to be made, especially for papers considering the outsourcing of distribution or contemplating the transition from one delivery vendor to another.

Consider, for example, the St. Louis Post-Dispatch and the San Diego Union-Tribune, who both went through comparatively uneventful transitions using the same vendor the Globe hired to manage its distribution services. Meanwhile, the Globe’s experience wound up more closely mirroring a hugely disruptive conversion that took place at the Orange County (Santa Ana, Calif.) Register in 2014. A commonality in all of these cases was the involvement of ACI Last Mile Network (formerly ACI Media Group), a California-based vender with 50 years of history serving the newspaper industry, as the contractor managing the transitions.

What happened in Orange County “was a different scenario,” not one that Globe management anticipated for itself, “because (ACI) had (only) three weeks to prepare for the Orange County Register,” said Globe chief executive officer Michael Sheehan, in an on-air interview with local Boston TV station WGBH, following the delivery service interruptions affecting his own paper earlier this year. “In other markets where (ACI) came in, they (had) done a very good job working with other publishers. We had talked to all of them…The Orange County Register was a completely different situation.”

Jack Klunder
Jack Klunder, ACI president and chief operating officer

There was, however, at least one other significant parallel between Boston and Orange County that may have been lost on some of the parties involved. What made for a bumpier ride for the Globe and the Register, according to Jack Klunder, ACI president and chief operating officer, was that for those two papers, local circumstances made it necessary to build out an entirely new distribution system from scratch, whereas in St. Louis and San Diego, ACI was merely absorbing existing distribution systems previously managed by other parties.

Klunder said factors inhibiting cooperation between outgoing and incoming service providers were key to the level of disruption experienced in Boston and Orange County. In St. Louis and San Diego, that complication didn’t come into play. 

Optimal Scenarios 

The St. Louis Post-Dispatch, Klunder said, represented the most optimal situation for a distribution vendor entering a new market, since the paper was simply outsourcing the management of an in-house distribution system. He explained, “Virtually every newspaper carrier who was under contract with the St. Louis Post-Dispatch came under contract with ACI, on (his or her) existing route because we had the cooperation of the newspaper to facilitate that. That’s the ideal transition format to go through. So you have full cooperation and full access to the carrier infrastructure, the routing, and the current management team.”

Because “most newspapers still manage their own home delivery operations,” Klunder said, this is the largest segment of potential business for ACI and a primary reason for the company’s growth during the last 10 years “with all of the downsizing that’s been taking place” at newspapers.

There are several reasons why papers entertain this option. “From a strategic standpoint, they’re choosing not to want to have to manage (distribution operations) on a day-to-day basis,” Klunder said, allowing them to focus instead on things like content creation and advertising sales. There’s also potential cost savings and legal advantages for newspapers in states where the status of carriers as contractors (versus employees) has come into question.

The San Diego Union-Tribune wasn’t in the same situation as the St. Louis Post-Dispatch, in that it had already outsourced distribution of its print products to various vendors. ACI was delivering its weekly TMC product, but there were two other vendors affected by the paper’s decision to consolidate distribution under ACI. “With both of those vendors (though), we had full cooperation, so there were no issues in terms of the transition,” Klunder said.

Harry Woldt
Harry Woldt, ACI senior vice president of national operations

Harry Woldt, who was vice president of circulation sales, marketing, distribution and operations for the Union-Tribune at the time, said the decision was based on a desire to refocus the paper’s resources.

“It was me saying, ‘Look, I believe I have a partner here that can handle the distribution as good or better than I’m doing, and it will allow me and my sales team in particular to focus on growing the business and save some money that could be re-invested in that sales initiative,’” he said. “I think the biggest driver was I did not want myself or staff distracted any longer with the distribution issues that come up.”

Woldt eventually left the paper to become ACI’s senior vice president of national operations. “It was refreshing to consider going to work for a company that was growing, and also a company whose principals I knew,” he said. “I knew their values, I knew what they stood for. I had a great working relationship with them.”

The circulation director for the St. Louis Post-Dispatch also left his paper to serve as a market manager for ACI, as did several of the paper’s district managers, who became distributers for ACI in the St. Louis market. “When you have…people in place who have knowledge of the market, that conversion goes rather smoothly,” Woldt said. “In St. Louis, there really weren’t any real bumps.”

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Bumpier Transitions 

Klunder and Woldt acknowledged, though, that that wasn’t so much the case in Boston and Orange County.

In Boston, “the Globe did not have (its) own…distributors and/or district managers that could have—like in St. Louis and other markets—come over to ACI,” Woldt said.

“Every newspaper carrier was under contract with another provider, and while we were able to recruit and have our distributors recruit and contract many of those delivery providers, we didn’t have access to all of them,” Klunder said. Meanwhile, “the outgoing provider remained in the market by handling other delivery products,” including The New York Times, The Wall Street Journal and USA Today.

Further, there was reportedly no obligation on the part of the outgoing provider to work with its successor for a “smooth and orderly transition” on the Globe’s home delivery. That’s language Klunder said is in all ACI’s contracts. “We put that in there so (that) if a newspaper publisher ever decides to terminate our contract and work with another provider, we’re required to work with them in some sort of a transition period to make sure that there’s little disruption in the marketplace.”

“Just think about the disruption possibilities of launching a market all at one time, with no cooperation from the outgoing vendor,” Klunder continued. “You have no access to the carrier workforce in the market. You have no access to the existing route structure. You have to develop all new locations for buildings. You bring your distributors in. You set up your entire infrastructure. Then you develop brand new routes and try to contract new carriers on every route.”

“That’s the least attractive way to do it,” he said, but “sometimes a publisher doesn’t have an option to do it any other way.” Such was the case with the Boston Globe, he said.

“In the case of Orange County,” Woldt said, “ACI was called in to take over that distribution on incredibly short notice with huge disruption in the market,” owing to a financial dispute. “The point is there was nothing to take over. It had to be started from scratch—the same (as) in Boston. Contract aside, that makes for a much more complex situation.”

Peter Doucette
Peter Doucette, Boston Globe vice president, consumer sales and marketing

Peter Doucette, the Globe’s vice president of consumer sales and marketing, said that while he thought there were some parallels between the challenges ACI faced in Boston and Orange County, he pointed out there were “marked differences between what (they) executed in Boston and what happened in Orange County,” having to do with “the timeline, the level of preparation and the number of facilities,” among other differences.

The Globe’s goals in shifting vendors was to “improve service for consumers,” Doucette said. “We were trying to make our home delivery operation both more effective and more efficient. Improving service, getting a better model in place, (and) helping stabilize our home delivery business were the objectives going into this change.”

Disconnected Expectations?  

Sheehan acknowledged during his interview with WGBH that ACI had warned Globe management there “was going to be disruption, and it was going to be considerable,” but not to the extent that was realized. “We were never told that people were not going to get their papers at a rate of ten percent a day,” he said.

“I felt that we had pretty good communication in place,” Klunder said, but he added, “It’s difficult to prepare somebody for that scenario adequately. You try as hard as you can to describe the disruption level, and it’s still a shock to the system.”

Like in Orange County, he said, the current situation in Boston would work itself out in time. “We’re going through that whole transition right now, so it’s a work in progress. We’ll come out it and they’ll come out of it, and it’s going to be just fine, but you go through a lot of pain to get there. It’s not a doomsday scenario, but it sure looks that way in the beginning.”

For Globe management, though, the immediacy of the situation prompted it to renegotiate with ACI and its previous primary vendor, Publishers Circulation Fulfillment (PCF), a Maryland firm, to split the bulk of home delivery distribution more equally between them.

“Even when we switched most of the delivery over to ACI, we still had a relationship with PCF,” Doucette said, pointing out that part of the original goal of the switch was to “diversify our vendors and our options to improve service levels and create more competition in the market.” The subsequent adjustment, though, returned a significant amount of the paper’s home delivery to PCF.

James Cunningham, vice president of communication and change management for PCF, declined interview requests, saying, “We are all-hands-on-deck with the return of Globe deliveries to PCF. Ensuring those operations run smoothly is everyone’s priority. We have every possible resource focused on getting the Boston Globe back on track as quickly as possible.”

The mid-course correction has succeeded in restoring delivery performance to a degree, but there’s more work to be done. “We think where we are now is stabilizing the market,” Doucette said when he spoke with E&P. “We’re still one month into the transition, so there’s still a lot of moving parts, but I think we’re happy with the progress that’s being made every day with both ACI and PCF. I think where we netted out is a place where we’ve got multiple vendors that we can use for services, and created a competitive market, which we think for the long run will be good for the Globe, but it will also be good for both ACI and PCF.”

Takeaways 

For papers contemplating the outsourcing of their delivery or switching delivery vendors, Klunder had several tips: “Have a good understanding of a good, smooth transition plan,” and make sure there is language in the contract requiring the provider, upon termination, “to work for an orderly and smooth transition.” The absence of that language in any existing contract and any limiting factors affecting continuity of service are tipoffs for a bumpy ride.

 

W. Eric Schult is a retired, 35-year veteran of the newspaper business. He most recently served as senior operations and technology executive at The Fayetteville (N.C.) Observer. Contact him on LinkedIn.com.

 

Editor’s Note: Earlier this month, the Boston Globe announced it was parting ways with ACI Media Group and transitioning back to PCF.

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Published: March 21, 2016

2 thoughts on “Production: Shifting to New Distribution Contractor Need Not Result in ‘Delivery Meltdown’

  • March 21, 2016 at 3:24 pm
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    What happens in these scenarios, is the carriers are asked to do more work for half the money.

    Reply
  • March 24, 2016 at 7:20 am
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    I’m on the Board of the American Association of Independent News Distributors. We have a conference, in New York, on April 28th. I’m looking for someone to speak at the conference who can talk about what happened in Boston. All of the major national newspaper publishers (NY Times, Wall St Journal, USA Today, FT, Wash Post, IBD, etc) will be in attendance. If you can help, please contact me: menewman@mitchellsny.com

    Mitchell newman

    Reply

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