Taking charge of the supply chain’s last (and middle) mile

Retailers are taking a more hands-on approach to routing products to stores and customer homes or businesses.

The last mile, which is the part of the supply chain where packages travel from a pickup center to their final destination, is notoriously difficult to manage. The middle mile” of the supply chain – where goods travel between warehouses or from a warehouse to a “last mile” pickup point, is no picnic, either.

To avoid the shipment delays and cost overruns often associated with last and middle mile execution, many retailers outsource these segments of their supply chain to third-party service providers. While there are many advantages to outsourcing, in-house management provides greater internal operational control and visibility of shipments.

Therefore, an increasing number of retailers are bringing last and middle mile supply chain operations in-house. While this requires the right strategic, technological and financial capabilities, it can produce substantial ROI. Here are three current examples.

American Eagle – Robotic last-mile logistics
Specialty apparel chain American Eagle Outfitters has agreed to acquire Quiet Logistics Inc. for $350 million in cash. Quiet Logistics operates a network of logistics centers, which utilize state-of-the-art technology including robotics, across the U.S.

The centers are designed to locate products closer to need, create inventory efficiencies, and provide affordable same-day and next-day delivery options to customers and retailers. Quiet Logistics is also the creator of Locus Robotics warehouse automation systems.

American Eagle is purchasing Quiet Logistics following the September 2021 acquisition of Terra, a brand-new logistics startup whose system aggregates packages from multiple shippers through its own network in major metropolitan areas. American Eagle expects to utilize Terra to further leverage its network of stores and distribution centers to more efficiently fill orders and offer same-day services. The retailer has been making increased investments in its supply chain capabilities. In June 2021, it said it cut 1.5 days off its average shipping time.

It is also interesting to note that the American Eagle-Terra deal was the first time a specialty retailer purchased its own last-mile delivery service, enabling it to compete in terms of same-day and last-mile delivery.

The Home Depot – Flatbed distribution centers
In 2020, The Home Depot Inc. opened its first-ever flatbed distribution center (FDC), an 800,000-sq.-ft. facility in Dallas. The company plans to eventually build 40 flatbed distribution centers in the 40 largest markets, so it can bring bulk orders of construction and building materials to customers on a same-day, next-day basis.

Designed with professional customers in mind, the new centers fulfill orders of such products concrete and concrete blocks, lumber, drywall, shingles and more. Flatbed trucks can drive directly into the facility and load up on heavy items. By directly delivering construction and building items to an intended audience of mostly professional customers, Home Depot hopes to increase the accessibility and speed of major project deliveries.

Target – Regional sortation centers
Target Corp. is attempting to shave time off its online delivery process by speeding up the fulfillment of e-commerce orders from stores with enhanced middle mile efficiency. In April 2021, Target publicized a pilot of a new sortation center in its home city of Minneapolis that streamlines the process of fulfilling digital orders from stores, which fulfill more than 95% of the discount giant’s online orders.

The pilot uses store associates to pick and pack digital orders. A Target-controlled truck then collects the packages and brings them to the center, where they are automatically sorted with proprietary technology for individual routes and immediate delivery at the neighborhood level by delivery partners like Shipt to deliver to customer homes.

Sortation centers are designed to make this process faster by retrieving packages as soon as store teams are finished packing and sorting, batching and routing them for delivery to local neighborhoods. The discount giant will open four new sortation centers in major markets across the country — including Houston, Dallas, Philadelphia, and Lawrenceville, Georgia.