The Supply Chain Matters blog highlights developments indicating that large online and brick and mortar retailers are taking more direct control of online and in-store physical warehouse facilities as well as inventory management.

One particular retailer elected a strategy in acquiring logistics services providers.

 

Direct Investment in Warehouse and Customer Fulfillment Facilities

In late October, The Wall Street Journal reported that more and more big retailers were directly acquiring customer fulfillment warehouse facilities. (Paid subscription required) Industry giants Amazon, Costco, Kroger and Walmart have led the way in supporting expanding online buying volumes by outright buying of industrial warehouses and similar real estate. One passage in the report states that: “Companies want as much inventory in their stores and (online support) facilities as they can get, creating a greater need for industrial storage space to support it.”

The report cites data from CoStar indicating that: “The 25 largest U.S. retailers acquired about 38 million rentable square feet in new industrial space last year, up from 18.8 million square feet the previous year.” Last year’s volume is noted to be the highest total for the past ten years.

The cited motivations are large retailers having record levels of cash, and by acquiring owned fulfillment or distribution centers, retailers aim to garner more direct control of fulfillment. In addition, making an investment in a hot and growing real-estate sector is a reported attractive use of cash.

 

Outright Acquisition of Online Logistics Providers

Last week, apparel retailer American Eagle Outfitters announced its intention to acquire online logistics services provider Quiet Logistics in a $350 million cash deal in what is billed as taking greater control of its supply chain. The retailer was a customer of Quiet Logistics, among other retailers and firms.

Quiet’s logistics strategy is predicated on pre-positioning customer inventories closer to urban consumers targeted by specific brands. This logistics services provider has reportedly garnered over fifty leading direct-to-consumer and omnichannel brand customers. The company had previously spawned the creation of Locus Robotics a provider of collaborative autonomous robots that work directly with customer fulfillment workers in order fulfillment processes. Locus was spun out in 2015.

This was this retailer’s second acquisition following the May acquisition AirTerra, an online buying services provider that aggregates shipments from multiple retailers.

The stated goal of these acquisitions is to provide added scale, efficiencies and flexibilities provided by large industry dominants such as Amazon.

American Eagle Outfitters indicates that both logistics providers will operate independently of each other.

 

Other Alternatives

With this year’s unprecedented global supply chain disruptions and exploding transportation costs, some third-party logistics providers have been urging retailers, wholesalers or businesses to engage in multi-year service contracts in in effort to better manage cost and service levels. Supply Chain Matters recently read an account of one retailer that reportedly signed a five-year contract.

Goodness knows what can and will occur across global and onshore sourcing and logistics operational and technology landscapes in the next five-year horizon. Whether such contracting decisions are a means to mitigate or buffet such changes is certainly a topic of debate.

Strategies that allow businesses to align closer to suppliers, customers, key market segments and transportation lanes are by our lens, actions related to rethinking business strategies in the light of what is occurring in future business and supply chain fulfillment landscapes. Few businesses have the deep pockets of an Amazon that can sink billions into logistics real estate and operational investments. Providing more direct control in executing online and in-store fulfillment strategy and spawning revenue growth as well as new business segments makes sense.

 

Bob Ferrari

 

© Copyright 2021, The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.