Shekar Natarajan, American Eagle’s chief supply chain officer has a vision: retailers – even competitive ones – collaborating on logistics, and focus on what they do best, such as designing and producing garments or other products.
Supply Chain Digest Says...
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| Natarajan also said it is difficult for mid-size smaller retailers to compete with the giants on logistics effectiveness, necessitating something like American Eagle is doing to drive scale. |
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If done right, together apparel retailers would have enough volumes to generate Amazon-like efficiency, Natarajan told CNBC this week in an interview.
Nearly four years at American Eagle, Natarajan is building out what amounts to third-party logistics capabilities even rivals can use.
To that end, over the last two years American Eagle has spent major dollars to acquire two logistics firms, including AirTerra, a Seattle-based parcel shipping start-up, and Quiet Logistics, a 3P that operates several distribution centers around the US.
Natarajan says he want to “Uber-ize” the global supply chain, turning into shared services available to fother retailers.
He told CNBC that if retailers quit competing among themselves on logistics, a a conglomerate of retailers could be shipping out just as many packages daily as Amazon.
It would be a “frenemy network,” Natarajan says, adding that “The only way that you could actually have Amazon-like scale, Amazon-like costs and Amazon-like capabilities - you have to share,” he said in the interview
This vision from American Eagle actually preceded the pandemic in 2020, with the shift to ecommerce accelerating its implementation.
The company plans to offer retailers services on everything from ensuring orders with multiple items are packaged together, to accelerating up home deliveries.
AirTerra and Quiet Logistics are now part of what the company calls the Quiet Platform, the internal logistics branch of American Eagle. The division is run by Natarajan and a small-but-growing team that stays at arm’s length from the core retail division, to diffuse, it hopes, any concerns about competitive issues.
Company CEO Jay Schottenstein said on an American Eagle earnings conference call in March that the company’s two acquisitions were already translating into cost savings, creating a new “growth platform” for the company.
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Natarajan also said it is difficult for mid-size smaller retailers to compete with the giants on logistics effectiveness, necessitating something like American Eagle is doing to drive scale.
In fact, American Eagle created a graphic showing the challenge an d opportunity for retailers, as shown below:
“The reality is none of us own our supply chain,” Natarajan said. “We manufacture goods in factories that are shared right across retail. We move them in ships that are shared across businesses.
“But shared capabilities — whether they’re technology capabilities, fulfillment capabilities or transportation capabilities — are the future of this industry," Natarajan concluded.
SCDigest just notes there is no shortage of 3PLs already out there.
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