Retailers take control of parts of their supply chain
Are you, as a shipper, struggling with high freight costs? Delays? Perhaps buying a logistics company may help ease some of these pains. American Eagle Outfitters (AEO) has become the latest poster child of this trend after recently acquiring last-mile startup AirTerra and e-fulfillment provider Quiet Logistics.
“Our total delivery leverage, digital delivery leveraged as a percent of sales, delivery dollars are down, and our packages are getting to customers 10% to 15% faster….and clearly, we’re acquiring Quiet Logistics, and we acquired AirTerra because we believe that this combination of scale, speed and cost advantages is needed in the market,” AEO’s COO Michael R. Rempell told analysts during the company’s Q3 earnings on Nov 23.
Meanwhile, another retailer, Ashley Furniture, acquired certain assets of Wilson Logistics in November. Online publication Supply Chain Dive noted in an article on the acquisition, “This acquisition is expected to expand ADS’ brokerage and distribution operations in the western United States,” Ashley Furniture said. ADS is the retailer’s private fleet, comprising more than 900 tractors and 3,700 trailers.
Let’s not forget Costco Wholesale, which in 2020 acquired Innovel [renamed Costco Logistics] for big and bulky last-mile deliveries. “Overall, we’ve improved delivery time on many items from up to two weeks to in many -- in several cases, now five to seven days. We’ve also taken several items that were previously vendor-drop shipped and are now being directly imported, allowing us to not only speed up delivery but reduce prices to our members,” Costco Wholesale CFO Richard Galanti said during the company’s fiscal Q4 earnings call on Sept 24.
As more retailers begin to take control of their supply chains, will we see shippers move away from outsourcing?
It’s doubtful there will be a complete departure away from 3PLs. However, 30% of shippers surveyed for the latest annual 3PL Study from NTT Data, Penn State and Penske, indicated that they plan to return to insourcing many logistics.
In addition, 73% of shippers surveyed indicated that the use of 3PLs contributed to improving service to customers. This is not an alarming percentage, but it’s considerably lower than the 88% of shippers that said similar in 2020.
Perhaps a bit more upbeat is that more shippers this year believed that 3PLs contributed to reducing overall logistics, 68%, compared to 64% of shippers in 2020.
Indeed, shippers’ logistics costs have skyrocketed over the past couple of years as shippers struggle to ensure enough inventories are on hand to maintain store and online sales.
But consumers have been in a buying mood with retail sales up 18.4% year-to-date through October, not seasonally adjusted.
“The issue is business is recovering at a little faster clip than what the containers are coming,” Samsonite CEO Kyle Gendreau told analysts on Nov 12.
While many retailers will likely continue to lean on their 3PLs and freight forwarders for international supply chain needs, some retailers may be getting a slight upper hand in managing supply chain needs within their middle and last miles, particularly as many move deeper into omnichannel strategies. Connecting the fulfillment with the final mile is important in positioning the right inventory closer to the consumer, faster last-mile delivery services and faster returns management handling and cost management.
Retailers are fulfilling e-commerce orders in different ways. They need to utilize data obtained from tech integrations linking the two parts of the supply chain to understand how much and what types of inventories are required for each of their facilities.
During its first-quarter earnings call in April of this year, Amazon noted that the ability to control the flow of products from the warehouse to the end customer is a competitive advantage. AEO, Ashley Furniture, and Costco Wholesale are removing Amazon’s competitive advantage via their logistics acquisitions and taking control of their middle and last-miles to manage the flow and customer experience.
-Cathy
That’s about it for now. Thanks for reading. While I aim for a weekly story, sometimes life gets in the way, so think about subscribing (free) so that you don’t miss anything.
For daily thoughts and shares, be sure to follow me on Twitter and LinkedIn.
I wear a number of hats these days. Besides running a logistics market research firm, catch my weekly articles on air cargo, freight forwarding, and the express markets, as well as a monthly podcast on Air Cargo World , I’m also trying to figure out how to measure returns for the Reverse Logistics Association, I assist companies with content and other needs and I’m trying to figure out how to update my website (which is down at the moment).