“Collaborative commerce” will be central to creating the supply chain of the future—Supply Chain 4.0.
That’s according to Quiet Platforms’ president Shekar Natarajan, who spoke Wednesday at the Manifest logistics conference in Las Vegas about the mission of AEO logistics subsidiary Quiet Platforms.
Natarajan believes that companies must band together to form a more interconnected supply chain “network” that upends the status quo.
In today’s commerce landscape, brands outsource operations like production and shipping via ocean, air, rail and truck fleets, as well as the management of retail property. But most still want to own warehouses and distribution centers, creating an “illusion of control” over their product pipelines. In reality, building out these venues is costly—as is managing them. “You build the DC for the peak capacity, and then you’re not utilizing it for 48 weeks out of the year,” Natarajan said. “Why the heck did you build this?”
Brands are singularly focused on their own operations, and that myopic attitude is a strategic disadvantage. “We’re only thinking about a micro-network that we manage, not the ecosystem that we are part of,” the executive added. In reality, brands would see things more clearly from a 1,000-foot view, he believes. The operating fabric of the future” is one where distribution is facilitated through an expansive network of flexible DCs, or “nodes,” with proximity to key markets, not large, centrally located facilities owned by brands.
AEO, which once fulfilled U.S. orders through just two distribution centers in Ottawa, Kan. and Hazleton, Pa., was struggling to manage DTC orders due to a shortage of available space. Rather than building out another large-scale warehouse, Quiet Platforms set up five smaller nodes to service the Los Angeles, Florida, Boston, Chicago, and Dallas markets, providing storage for products used to fulfill online orders as well as retail replenishments. Last year, the company added two more nodes in Atlanta and St. Louis, Mo.—a move that Natarajan said has improved inventory regionalization from 23 percent to 63 percent, ultimately shrinking transport costs by an average of more than $1 per package. “We spent less in 2022 than we spent in 2020 and 2021” on shipping, he said.
It’s a model that can, and should, be replicated by retailers across categories, Natarajan believes. “The world has created a lot of private networks… and what really works is consolidation everywhere,” he said. “It’s one giant shipping network.”