Shared Networks and Insourcing, A New Trend For Brands

The Newest Trends for Retailers is Shared Networks and Insourcing - Here's What You Need to Know

By Nick Bartlett on August 22, 2022
Transporting goods efficiently in a post-pandemic world is stressful, that's why modern companies are switching to internal supply chains to beat rising costs and unknown delays.

Whether you’re a massive, brick-and-mortar business or an e-commerce startup, you’re probably stressed about transporting goods efficiently in a post-pandemic world. Delivery hold-ups are just as frustrating for you as your customers, but between supply chain slow-downs, and staffing shortages, what can you do?

If you’re dissatisfied with the new status quo of the past few years, you’re not alone. Retail giants like Target, Costco, Panasonic, and American Eagle Outfitters are all changing the landscape of modern delivery with a single move. They’re turning to in-house logistics networks. 

Why make such a big switch? Promising one-day or even same-day delivery is a huge selling point for today’s consumers. Controlling your supply chain by bringing outsourced parts of your delivery process back under your company’s control is one of the best ways to make these guarantees.

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Here’s how modern companies are switching to internal supply chains to beat rising costs and unknown delays.

Owning your supply chain means guaranteed deliveries

Let’s start simple: What’s in-house logistics? 

Traditionally, it’s cheaper for most companies to outsource parts of their supply chain like manufacturing, warehousing, distribution, and fulfillment to third parties.

In the past few years, however, mid-to large-size retailers took back control of their supply chain by spending extra dollars on insourcing. They built private distribution centers, bought assets like warehouse space or transport ships, and even acquired logistics companies.

But if outsourcing is cheaper, why would a smaller company choose to insource instead? Simply put, the pandemic changed shipping to the point that companies are having trouble making shipping guarantees. Third-party shipping providers are being forced to prioritize larger clients — when that happens, small and mid-sized companies are pushed to the side and told to accept delays.

By building or buying their assets, mid-sized businesses can prioritize their business and capitalize on increased consumer interest from reliable, guaranteed deliveries. The long-term payoff of competing with Amazon Prime or Walmart Express Delivery can be well worth it.

How are companies taking operations "in-house”?

Here are some increasingly popular ways other companies are taking their supply chains in-house (source):

1. Building private distribution centers

Abercrombie & Fitch and other companies are building distribution centers in strategic areas near their customers, particularly in the midwest. This allows them closer access to high-volume markets and cross-country shipping routes.

2. Constructing warehouses and other industrial space

Storage space can be a supply chain bottleneck. By owning their space, businesses ensure greater range and deliverability of their goods. Look no further than Costco. The company has doubled its warehouse space over the last five years to nearly 12 million square feet. 

3. Chartering private ships for container shipping

With rising international e-commerce competition competing for container space, brands like The Home Depot have started chartering private ships directly for shipping.

4. Acquiring logistics companies

Businesses benefit twice by acquiring businesses: first by guaranteeing their deliveries, and second by offering their services as a subscription to other companies. Target did this in 2017 when it acquired Shipt, a same-day delivery service, which contracts with businesses like CVS and Big Lots. They’ve expanded beyond delivery to logistics, too.

RELATED: Omnichannel Fulfillment — How to Get Your Goods to Customers, Really Fast

Supply chain sharing: the American Eagle model

Not comfortable with insourcing, or don’t have the money to make it happen? American Eagle Outfitters (AE) says that’s not a problem. It’s asking retailers to join its shared logistics network instead. 

Just like Target and Costco, AE is busy acquiring businesses specializing in supply chains and delivery. These acquisitions include third-party logistics (3PL) provider, Quiet Logistics and shipping solutions provider, AirTerra. Its grand plan is much larger: the company wants to use its new resources to become a “frenemy network” supply chain platform

How it works:

Hoping to compete with industry titans like Amazon and Walmart, AE wants to ally with smaller companies to pool resources. This could mean anything from sharing container space on ships to buddying up on delivery routes and warehouse space. By working together, partners can collectively ship fewer packages, capitalize on expanded networks and routes, and save significant amounts of money.

As of mid-2022, AE already had over 50 partner retailers on board.

The pros and cons of insourcing:

Pros:

  • Preferential treatment, guaranteed: Insourcers are guaranteed a spot on ships, on trucks, and in warehouses, because they’re yours. Furthermore, if something goes wrong, you can take direct action to fix it, instead of waiting on your third party to solve the problem.

Cons:

  • Money, money, money: Outright acquiring logistical assets requires a massive financial investment, and many businesses don’t have the cash or the credit necessary. Don’t underestimate the amount of time that research and construction take, either. It could be years or even decades before your investment starts to pay off.

The pros and cons of network sharing: 

Pros:

  • Lower initial investment: Unlike purchasing an in-house network, you won’t need boatloads of cash up-front to join one. This option might make more financial sense for smaller businesses in the future.
  • Scaled-up opportunities: By pooling resources, smaller businesses can access opportunities traditionally reserved for larger operations. This includes streamlined delivery to widespread international markets or more flexibility in logistics routing.

Cons:

  • Helping out the competition: Sharing is great… until it starts helping your rivals, too. Remember, any benefit you gain from supply chain sharing equally helps any competitors in the same partner network. Similarly, unless you’re in AE’s position as the network “owner”, you don’t get to decide who joins.
  • Getting lost in the crowd: If too many partners join your network, you might start to have the same issues as third-party providers during the pandemic. Assets will start to run low, and your larger, more well-known partners might be prioritized.

Use a 4PL to get all the benefits of insourcing and shared networks in one place

Down the line. Insourcing and shared networks could become strong options for brands tired of catering to multinational logistics companies. However, shared networks are a distant goal today and most businesses can’t afford to bring logistics in-house.

However, there is already a solution out there for businesses that want a relatively inexpensive yet flexible logistics network: fourth-party logistics (4PL).

At CBIP, we’re a 4PL service ready to help you form the quickest, cheapest, and most efficient supply chains for your business.

Here’s how it works:

We forge partnerships and networks with highly-vetted logistics providers in markets all across the globe and connect them to your business. We have everything you need to get past pandemic slow-downs and revolutionize your logistics process without buying.

  • We’ll always put you first: No more fighting for container space or delivery drivers. As our partner, we put you first – guaranteeing reliable partnerships so you can pass that reliability to your customers. 
  • We have all the logistics options you might need: Need warehouse space? International shipping routes? Help with last-mile fulfillment? We work with the best local providers in Southeast Asia, Europe, and the US/Canada to create the bespoke networks you need.
  • We’ll save you time and money: Instead of spending time researching or constructing your own logistics assets, let us sweat the details for you. We’ll look at your current operations and future goals to help streamline your supply chain for you, saving you time and money you can then invest back into your business.

Our process is simple: consult with our industry experts, access our network, and access our licensed software. Whether you’re looking for help with e-commerce delivery or full-service logistics, we have the connections, resources, and technology to help.

Contact us to arrange a free consultation. Our experts will reach out to you and start revitalizing your supply chain today.

About Author

Nick Bartlett

Nick Bartlett is CBIP’s director of sales and marketing. His expertise lies in marketing, supply chain management, and corporate retail experience. He honed his skills over 10+ years working across the Asia Pacific region and beyond.

Nick keeps a close eye on new markets and believes successful business operations come through value-based relationships.

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