Logistics collaboration, your way of being lean, mean and green at the same time!
The extremely difficult economic climate of the past few years has given birth to consumer behavior that expects deep price discounts along with high customer service. As we see signs of economic recovery, many corporations are once again focusing on sustainability. From the convergence of these trends, a new equation has evolved where there is a drive to lower carbon footprints yet at the same time provide higher service through more frequent deliveries set against the backdrop of deep price discounting. This deep price discounting has left corporations scrambling to identify opportunities for costs reductions and has left logisticians pondering how this new equation can be best solved.
We see a growing number of our customers in Europe opting for the solution of transport pooling. This kind of logistics collaboration is now being widely discussed and on everyone's agenda. Pooling consists of grouping together transport flows across supply chains rather than along supply chains. Might this be the obvious solution, and if yes, why didn’t we think of this earlier?
This particular type of collaboration requires a set of compatible products with departure points in close proximity that are then distributed into the same networks (read customers). The easiest way of creating such a business scheme within these constraints, is to start collaborating together with your direct competitors. And this is exactly where the barrier is, or should we say was. The initial response of most Logistics Directors is: “I am not going to share warehousing and transport with my competitor, as this directly improves their financial performance & customer service.” These people however forget that in the this new economic era your (logistics) competitive advantage is no longer achieved through physical distribution, but instead through best in class processes in Sales & Operation Planning, inventory capital management and cash-to-cash cycle times.
Transport and warehousing have become commodities, and like manufacturing, both can easily be outsourced without losing your corporate identity. So if this is the case, what’s the problem with shipping your product together with your competitors to the same customers? I would venture to say, none. This approach allows you to increase the fill rate of your trucks, reduce costs and make a direct contribution to reducing your carbon footprint.
In order to maximize the benefits of the transportation pooling, it is not enough to simply load your products in the same truck as your competitor. For example, the delivery schedules/days to the customer have to be aligned between the pooling participants to maximize the potential of this scheme. In practice this doesn’t have to be a showstopper, as your customer also recognizes the advantages. The customer receives fewer trucks at its docks, reducing handling and administration.
This delivery schedule alignment, within the concept of transport pooling, also has a positive impact on inventory levels throughout the network of supply chains. In a collaborative setting, an individual supplier does not have to wait until a minimum number of pallets are achieved before shipping is executed. Instead, the supplier just adds its load to the competitor's load. Consequently, the number of deliveries from the supplier to the customer increases while the number of trucks is decreased. This leads to less stock in the retail warehouses and to a higher customer service level.
As we come out of the recession it seems that the volumes will have dipped structurally. In response there are only two viable options; take out fixed costs through structural reorganization and/or find additional synergies. Supply chains are already running very lean, with internal costs largely reduced to a minimum. So we need to be creative and find our synergies somewhere else. Logistics collaboration with external partners provides a huge opportunity for costs reductions, creating synergies by positioning your transport flows with those of other businesses.
If your company has begun transport pooling in Europe, we would welcome your accounts as to how the collaboration has worked out, both the successes and the problems that you have encountered. Please email us at firstname.lastname@example.org