Collaborative Logistics: Supply chain cooperation for mutual advantage
In today’s increasingly competitive B2C and logistics spaces, no company can afford to be an island. Collaborative logistics offers advantages that go beyond the bottom line. Here we explain briefly what collaborative logistics is and how to start implementing it.
Twenty-plus years into the age of the internet — an incalculable and infinitely interwoven collection of information and services — a fundamental shift in human mindset seems to be taking place. Where the industrial revolution brought segmentation and division, the internet is fostering sharing and collaboration for mutual advantage.
The logistics industry is famously slow to catch on to new ways of doing things, but this attitude of collaboration is beginning to infiltrate the production and movement of goods.
What is collaborative logistics?
Very simply, collaborative logistics is the act of working together with one or two or several other entities from any or all parts of the supply chain to realize mutual benefits. The potential advantages are numerous: economies of scale leading to reductions in inventories and costs; improvements in speed, service levels, and customer satisfaction; boosted performance and better business continuity; access to new markets and opportunities for growth and expansion; insights and innovation — to name a few.
Collaboration works in all directions
Opportunities for collaboration exist both vertically — upstream and downstream — and horizontally — partnering with an enterprise with the same logistical role or requirement.
These two approaches can also be mixed. For example, a manufacturer combines purchasing with another manufacturer to gain price breaks, and also improves the packaging of goods in a way that eases handling downstream, thus reducing stocking and transportation costs. At the same time, the manufacturer comes to agreement with a number of other shippers and carriers to reduce movement of empty trucks.
Find opportunities for collaboration
The best way to find opportunities for collaboration that will leave all parties better off than before is to use a combination of data analysis and innovative thinking. Look at your entire operation, from inbound to point of delivery or purchase. Pull the data and run the numbers to see where there are blockages or inefficiencies. Are customers in certain areas experiencing delivery times that are too long? Do you have warehouse space that is not being utilized? Could you reduce HR costs by combining order reception with a competitor? Rivalry downstream doesn’t have to preclude cooperation upstream.
If you use a TMS, you have at your fingertips the data and analysis power to see exactly where collaboration could reduce costs, boost performance, and even create opportunities for market expansion.
Once you have a clear picture of where collaboration could benefit you most, turn on the right side of your brain and think creatively and innovatively. Also consider your motivations for collaborating. Business cooperation can have beneficial effects that go far beyond improving the bottom line of those involved.
An example of this comes from the fiercely competitive tea industry. The Tea 2030 partnership, which counts among its members Unilever, Twinings, and Tata Global Beverages, is focusing collaboration on three areas: sustainable production, market mechanisms, and engaging consumers — with the ultimate aim of turning tea into a “hero crop” that benefits the millions who work in all parts of the industry as well as the wider environment and economy.
The exponential advantages of collaboration are being recognized by some of the largest commercial entities globally. “We’re very convinced that we cannot act alone,” Joe Franses, CSR Director for Coca-Cola Enterprises, has said. “We rely on collaboration.”
What’s necessary for collaborative synergy?
Of course, simply forming an agreement doesn’t guarantee that it will work well. There are a number of factors that will help ensure an effective collaboration. The more of these factors that are in place, the greater the likelihood of a successful partnership for all involved.
Powerful reasons to collaborate
Satisfaction of all parties
Management that’s on board and ready to participate
Similar attitudes towards risk and goal achievement
A timeline that allows for success
Long-term collaborations offer the best chance for transformative change. Parties that work together for a long time get to know each other well and, especially importantly, develop the deep trust necessary to look beyond the obvious and take risks. In addition, over time the learning curve flattens out, procedures become streamlined, and communication becomes more efficient.
When designing the collaboration agreement, make sure it contains agreed-upon metrics and KPIs that allow all parties to compare achievements with objectives. The metrics should also be periodically reviewed to ensure they’re still relevant, and then adjusted as necessary.
In today’s increasingly competitive B2C and logistics spaces, no company can afford to be an island (to paraphrase John Donne). Working in cooperation with others opens up possibilities for immediate financial advantage as well as long-term business transformation. The only limit is your imagination.