Sovereign handling of peaks in the music business
Arvato SCM Solutions’ business unit “European SCM Services” manages the physical supply chain of leading international music and entertainment companies. The fourth quarter is a particularly intense time of year for 4PL (fourth party logistics) providers due to the popularity of media products as Christmas presents.
According to the Federal Association of the Music Industry (BVMI), revenues from CDs, records, DVDs and paid streaming services in Germany amounted to €1.6 billion in 2017. This was 0.3% lower than the previous year. However, following four consecutive years of sustained growth, this signals a certain stability in an industry that is rapidly changing as a result of digitization. CDs, vinyl and DVDs still account for almost 50 % of the profits, however. That means it’s peak season for the business unit European Services, which has been managing Sony Music’s physical supply chain in Europe and beyond for years from its base in Gütersloh.
European Services oversees releases from the time they are planned, produced and distributed to the time at which they are ultimately sold by retailers. When it comes to production, they coordinate the various CD and vinyl manufacturers, and on the distribution end, they ensure that the three European warehouses, as well as foreign subsidiaries and licensees outside of Europe, are all supplied.
„Transparent processes and a good team are crucial in peak management.“
Heiner Kleinekathöfer, President European Services
Sound carriers are in demand
As the second biggest music conglomerate in the world, Sony Music Entertainment owns many successful record labels such as Columbia, Epic and RCA, which in turn represent famous artists including Justin Timberlake, Beyoncé and Pink. A large amount of music is traditionally sold in the run-up to the end of the year, which means that the time between the beginning of September and the end of December is peak season for European Services. “But peaks can also be difficult to predict,” says Heiner Kleinekathöfer, CEO of European Services. “In the case of secret or surprise releases, for example, we have to make do with very little planning time and operate under a high level of secrecy.”
Black Friday and the week of Cyber Monday now also play a significant role in release planning. The same is true of Record Store Day in April, which is marked every year with special offers and exclusive deals. “The preparations for the specialist retailer event began in the autumn,” says Kleinekathöfer. “Even when the number of copies involved is only moderate, we have to spend a lot of time working very closely with our record labels to coordinate our plans for the release. We also need a decent amount of preparation time in order to avoid shortages in the event of complications.”
Precise Planning for Success
Album releases always pose new challenges, because they are influenced by many different factors. It’s not just that the number of copies initially produced and distributed is dependent on the sales expectations of the artist and on the product itself – social media use, streaming results and retailer feedback must also be taken into account. “In order to overcome the challenges posed by these peaks and satisfy our customers, we have to plan carefully and ensure that we choose the right manufacturer for the desired set of product features from our pool of specialized service providers,” Kleinekathöfer explains. “Then the products have to be delivered on time to the necessary distribution sites in order to ensure that they can go on sale exactly as planned.”
However, unforeseen issues can arise in even the most intricately planned supply chain. And when it comes to smoothly resolving these issues, the only thing more important than the appropriate tools and systems are employees with enough experience and industry know-how to use them. Another big plus is the IT system, which is secured via the Bertelsmann data center and corresponding backup systems. Heiner Kleinekathöfer: “In the worst-case scenario, we can always rely on our experienced employees to assess the situation properly and find a suitable solution.”