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Collaborative Logistics: Creative Solution for a Difficult Market?

Tight trucking capacity, volatile rates, and continuing driver shortages are all in the news as we enter 2015.  Ocean shipping rates, in a slump for several years, are starting to rise once again. Even the US Less-Than-Truckload (LTL) industry, long in the doldrums, is showing strong pricing discipline and demanding rate increases that stick.

Facing these and other challenges, shippers are starting to think more and more about alternative strategies to control costs and drive efficiency in the supply chain. One approach that has garnered great interest but has never really taken off is collaborative logistics. There are many examples of collaborative logistics in place, many addressing “final mile” delivery to retailers with diverse and sometimes even competitive items riding together on the same trucks.

Source: ePublicist

Source: ePublicist

Automotive leads the way

A particularly well-run example of collaboration is operated for the automotive industry by Carter Logistics out of Anderson, IN.  Carter Logistics developed an innovative approach to managing LTL shipments moving between automotive suppliers and assembly plants. By focusing operations on a group of similar companies all sharing similar networks and customers, Carter Logistics was able to set up a system of regularly scheduled “Milk Run” fixed route loops that provide faster, more-consistent transit times at lower cost than traditional LTL carrier services. The result was a win-win for all parties involved.  Shippers get faster deliveries at lower cost, and wasteful extra miles and handlings are kept to a minimum.

Going global

What if we could apply these same concepts to global supply chains?  Would it help?

Many of my current clients use consolidations to reduce ocean shipping costs.  Commodities are picked up, brought to the warehouse, and held until sufficient quantities are on hand to fill a container. Once “stuffed,” the container is shipped to its destination as a Full Container Load (FCL) shipment. In other models, shippers have a fixed schedule, and FCL shipments are released on regular intervals. For shippers with low demand, Less-than-Container Load (LCL) shipping is an alternative option. Shipments from multiple customers are grouped together to fill containers. LCL shipments move at higher cost, and suffer additional handlings.

With collaborative logistics, shippers could get the service benefits of LCL timing and the cost advantage of shipping FCL on every shipment.  How to do it?  Find and partner with other shippers that routinely generate loads but can't fill containers often enough to meet service requirements.  Sometimes this can be done directly, other times with the help of a Third-Party Logistics (3PL) provider.

Now it's your turn

Think about your supply chain. Are there missed opportunities to fill assets?  Would you like to ship more often but lack sufficient volume?  Consider the possibilities of collaboration, and think creatively.  Ideally, every piece of equipment you ship should be full, if not, you are likely a good candidate for collaborative improvements to your network.  Note that collaboration efforts can be horizontal, across similar companies, or vertical, tying together companies at different levels in the supply chain.  Either way, companies can win big when they work together.  Cliff Lynch cited a four to six percent savings from collaborative logistics for a major food-industry consortium headed by General Mills.  What could you save?

3 comments on “Collaborative Logistics: Creative Solution for a Difficult Market?

  1. pjoygordon
    January 30, 2015

    In your post you pointed to Cliff Lynch's 4-6% savings from deploying a collaborative logistics strategy.  Another type of savings is environmental:  When shipping containers are optimally loaded, fewer trucks, flights, ships, and rail cars are necessary — thus reducing air pollution, use of non-renewable fuel, and carbon emissions.

    Thanks for pointing the industry to collaborative logistics.

  2. JGilbert
    February 1, 2015

    Thank you for bringing that up, Pam.  The CO2 impacts of these initiatives are definitely measurable.  In transportation, cost savings often equate to CO2 savings and pollution reduction too.

    Jon

  3. rssrinivasan
    February 26, 2015

    Thanks for the post. Collaborative logistics is equally, if not more, important for reverse logistics, where the pressure on cost management is higher. I wonder if you have come across collaborative logistics practices in reverse logistics.

    Ramesh Srinivasan

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