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Retail Business Review | Tuesday, April 05, 2022
Small-to-mid-size retailers struggle to get the scale needed to compete with the big guys on logistics. A supply chain veteran says there’s a better way.
FREMONT, CA: In terms of customer expectations, retail giants like Amazon, Walmart, and Target have set the benchmark. It's not so much a price problem because smaller stores compete on price in many categories. It's more to do with the logistics side of things. Small businesses don't have the volume to acquire the same savings as big businesses, and they can't take advantage of transportation tactics due to their lack of size. Nonetheless, they must satisfy the leaders' delivery expectations. Therefore, they do their utmost to minimize the agony and protect their profits by paying what is necessary. Pre-COVID, when e-commerce was still modest – although growing – share of revenues, such a strategy might have been workable or absorbable. The old retail business is gradually giving way to the wholesale model. Walmart, according to some estimates, adds shipping volume equivalent to around 20 AEOs per year, allowing the company to obtain additional scale and data that it can utilize to become more efficient and gain more leverage with its transportation partners.
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Brent Beabout is a professional supply chain executive who has led supply chain teams at Office Depot|Office Max, Nordstrom, and Walmart's e-commerce division. He is currently the president of Quiet Logistics and the creator and president of AirTerra Inc. Both companies are now owned by AEO and serve as the cornerstone of a vision for Supply Chain 4.0 based on collaboration. Shekar Natarajan, AEO's supply chain leader, created Supply Chain 4.0. Last November, AEO and Natarajan received the 2021 Supply Chain Visionary Award for the Supply Chain 4.0 concept at SCMR's NextGen Supply Chain Conference.
For starters, e-commerce had exploded from a tiny fraction of a retailer's sales to as much as 20percent to 30percent for some. Second, with limited capacity and escalating delivery costs, the big players had deep wallets and scale, which mitigated some damage; smaller merchants couldn't. Since its inception, the goal was to be asset-light and collaborate with others: The company has specialized trucks and leases premises where it runs its sort centers and then arranges the first mile, middle mile, and last mile, in addition to using 3PLs. AirTerra also offers complete order tracking from beginning to end. Natarajan is putting together the Supply Chain 4.0 puzzle at AEO, and AirTerra is one of the pieces. The other is the acquisition of Quiet Logistics in December 2021. Quiet Logistics was also a client of AEO, which used the 3PL to increase the retailer's geographic distribution locations.
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