Shekar Natarajan, executive vice president and chief supply chain officer of American Eagle Outfitters, a finalist in the 2022 Supply Chain Innovator of the Year Award, describes building a successful fulfillment and transportation edge network.
Natarajan says the problem with all supply chains is threefold: They were built for servicing retail but must contend with enormous e-commerce order volume; they can’t compete with Amazon and Walmart, and they were built for peak demand.
Take the last problem. “Everyone's assets are only 60% to 65% utilized,” Natarajan says. “Take the carriers, take the brands, take the retailers. Everyone's assets are only built to process the peak. So think about it like this: I have the money, I built a road, and all I can drive on it is my rickshaw. No one else can use it. That is the industry problem.”
Looking to enable efficiency, American Eagle wanted to create a distributed logistics environment closer to the end consumer. “We now have omni-inventory, we reduced the reliance on the stores, but we are more efficient from a pick-pack-ship operations standpoint, [which] also gives us the ability to diversify the carrier pool.”
The results? “We were able to save $1.50 per package,” he says. “We reduced the time it took to service the stores by 80%. We actually saved 1,800 basis points on inventory productivity. We also were able to ship a day and a half faster to the end consumers, and we were able to reduce the parcel miles by two billion miles.”
The second step in American Eagle’s innovation journey was to make its process available to the industry. “And it's not a pipe dream,” Natarajan says. “We have 70 brands and 40 carriers on the platform. And we have more than doubled the revenue going through this network.”
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