Companies often think of their supply chain’s last mile as being, well, the last mile, but it actually starts thousands of miles earlier, long before inventory is being managed in a local capacity. And this global mindset requires highly specialized technology to connect the international and domestic pieces for true end-to-end synchronization.
American Eagle Outfitters has made a name for itself as a retailer on the forefront of strategy and investment when it comes to supply chain. Back in 2014, it started focusing on omnichannel retailing, building out supply chains and the capability to be channel agnostic. Fast-forward to 2021, where the Covid-19 pandemic accelerated agility and resilience commitments even further, driving major logistics initiatives to support new consumer buying behaviors.
In the past few months alone, AEO purchased two logistics companies, starting with AirTerra and paying $350 million to acquire Quiet Logistics, creating a network for businesses to share supply chain logistics and boost efficiencies. As an analogy, instead of using four trucks to bring a customer one FedEx package, one UPS package, one USPS package and one Amazon package, logistics are aggregated. Only when networks “move out of their lane” can companies truly optimize scale, speed, cost and environmental advantage.
“We at American Eagle are creating a supply chain platform that levels the playing field for everyone,” Shekar Natarajan, American Eagle Outfitters
“We at American Eagle are creating a supply chain platform that levels the playing field for everyone,” said Shekar Natarajan, chief supply chain officer at American Eagle Outfitters. “Networks are built analog, but supply chains and commerce have become more digital. We’re basically trying to put the two together,” he said, adding that while the industry average is about 1.4 shipments for every order, AEO can now do it in 1.05. “And it’s not just fewer packages showing up faster at your doorstep, but more importantly, it’s showing up cheaper as well.”
Truly creating efficiencies, however, requires economies of scale, which is easier said than done. “American Eagle [sells] 225 million units a year, and to put that in context, that’s what Walmart does in a day and a half, and what Target does in 13 days,” said Natarajan, who noted that AEO has to be more efficient and strategic with decision making and logistic operations. “We laid out a strategy to say, ‘How do we get closer to the end consumer but do it in a smarter way?’”
To further this effort, AEO has an ongoing relationship with global supply chain management technology company Bamboo Rose, which has proven success helping retailers connect product development, sourcing, and supply chain processes to strategically differentiate from the competition.
“It’s not just a bottom-line impact. It’s a top-line impact for growth,” said Chirag Patel, Bamboo Rose president. “And it’s why larger retailers in the industry such as Home Depot or Walmart are verticalizing and bringing a lot of supply chain processes in house versus leveraging other service providers.”
In a fireside chat, both Natarajan and Patel sat down with Sourcing Journal founder and president Edward Hertzman to discuss the role that technology plays in driving supply chain agility and resilience, and why it’s worth the investment.
And while nothing can be done without the right software platforms and systems, it takes commitment and often a mindset shift to get there. “Technology is an enabler,” said Patel. “It’s the commitment to operations and risk taking and being an innovator that helps a company take advantage of the technology.” He cites AEO as a retailer that truly realizes that intersection. “It’s having the audacity, the guts, the vision, plus working through a lot of internal chaos to have a clearer picture on how to adapt the technology to keep your entire value chain fluid.”
Click the image above to view the chat.