Would you Outsource your Logistics Services to a Competitor?
Back in October 2021 when the supply chain crisis was hitting its stride US retailers were presented a choice. They could either continue weathering the storm or take proactive steps to mitigate its effects. Few firms had enough wiggle room in a storm of this magnitude, but those that did engaged in the unthinkable – they chartered their own cargo ships to import products.
Port delays and worker shortages led to untenable delays for retailers. It was an expensive move, but major retailers like Target, Costco, Home Depot, and Walmart were left with few options. A year later, the supply chain crisis is still raging (albeit a bit calmer) and retailers are considering another major move – outsourcing their logistics services to third parties.
One of those retailers is Saks Off Fifth. The sister business to Saks Fifth Avenue, Saks Off Fifth made the controversial decision of contracting a provider to manage some of the company’s logistics operations. In the short term the bet has appeared to have paid off. Saks reports improved delivery times and greater agility. The company Saks Off Fifth contracted was Quiet Platforms, a subsidiary of American Eagle Outfitters (AEO). Both AEO and Saks Off Fifth sell clothes and likely compete with some customer segments. This begs the question as to why a retailer would turn over their customer database to a company owned by a competing retailer?
While Saks Off Fifth appears to have benefited, AEO has as well. By branching out into the logistics arena, AEO is generating revenue not only through the sales of T-shirts and jeans but also through their contract logistics provider, Quiet Platforms. Gap has taken a similar step with GPS Platform Services, a logistics and fulfillment network fully owned by Gap that offers their services to businesses of all kinds, not just retail. Amazon was one of the first to pioneer this model with Fulfillment by Amazon, a shipping and warehousing service for third-party retailers. Moreover, Fulfillment by Amazon operates in parallel to Amazon selling its own retail products online.
Walmart’s GoLocal is another example, launched in August 2021. This is a rapid delivery service for third-parties that has reached 1 million plus shipments in just one year. The benefits of running one’s own supply chain are clear – greater visibility, transparency, and privacy. Yet, Quiet Platforms and others are quick to chime in noting that clients have full visibility into their supply-chain operations. Gap has touted their strict data protection when it comes to client information and the authorized operators and personnel that manage them.
Some experts feel that using a third-party from a firm that doesn’t directly compete in the same product category makes sense. Yet others warn that if you’re both selling large quantities of sportswear, for example, running the risk of your competitor getting their hands on your customer data is a risk not worth taking.
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