Collaborative Logistics: The Who, What, Why and How
I interviewed Paul Van den Brande who discussed Collaborative Logistics. This interview was originally published my blog on the Kinaxis Supply Chain Expert Community at TheFutureofSupplyChains.com
During the time of the interview, Paul Van den Brande was a Partner at Just in Time Management Group in Belgium. Paul discussed collaborative logistics: who, what, why and how… He sees that the future of outsourcing and 4PL logistics includes the side effect of collaborative logistics and carbon footprint reduction.
What is Collaborative Logistics?
Today, collaboration means that competition works together through a neutral third party so that the data and confidential information is segregated. There is no direct access to confidential information between players in that field. This is a broad perspective because you can have broad collaboration between different suppliers delivery their products into one buyer, or buyers who have different suppliers and bring them in one truck/aircraft/ship. They would have to delivery at certain times. Collaborative logistics means competitors working together to service a common customer, or as a customer bundling competing suppliers (ie trucking companies) into one truckload to maximize utilization, have return loads, etc.
Why do Collaborative Logistics now?
The cost effectiveness is the major driver. In classical outsourcing to a non asset based carrier neutral company/4Pl, the savings will be 10% on average. If you do collaborative outsourcing the savings can go up to 20%. You can also realize a 5-10% improvement in service levels to the retailer. It is cost effective to pursue collaborative logistics. Also, the data is organized better and the soft savings are tremendous, without having to lay-off people or to necessarily shifting the trucking companies or logistics providers you are working with. The trucking companies or logistics providers are just a layer on top. What you need is strong software due to the increasing complexity of operations as more parties enter.
Who is Currently Doing Collaborative Logistics?
A year ago there were some emerging projects which have now come into play. In France, collaboration has been put together with Glaxo Smith Kline, Henkel Cosmetics and Colgate. Henkel in France collaborates with three other FMCG companies. This is made possible by their logistics provider. The usual logistics challenges of availability, increasing congestion on roads and fuel price volatility were becoming even more strained in this environment. Henkel recognized that they needed to make a significant change in their supply chain. Their solution was industry ”pooling”, which involved Colgate, GlaxoSmithKline (GSK) and Sara Lee. This collaboration with three other FMCG companies and a logistics provider required a cultural shift within the company, as well as commitment from all parties.
These leading companies have been sharing their experiences of collaboration across the supply chain. At a recent supply chain conference which focused on horizontal collaboration, strategies discussed included:
•Sharing knowledge, experience and expertise
• Consolidating goods flows
• Sharing transport vehicles and network capacity
• Sharing logistics infrastructure
• Sustainability objective drive collaboration
They are delivering into the big department stores similar to Walmart. All of the suppliers to this large retailer used the same logistics company. They decided to consolidate everything to get full truck loads and to organize empty pallets. They optimized full truckloads arriving at dedicated times with fast turnarounds. This started mid 2010. The cost savings are tremendous. Paul thinks they can do even better by using fourth party logistics, rather than third party logistics.
As these platforms continue to be built and put into operations, other stores can collaborate to grow the platform and the benefits and profits are shared with all of the players.
Other companies using collaborative logistics include food manufacturers such as Heinz, Henkel, Proctor & Gamble, Nestle Waters, Colgate Palmolive and Kimberly-Clark.
How to get Started with Collaborative Logistics?
You first need data. You can either start from retail companies or from suppliers. It is either a pull or a push situation. Today, Paul is speaking with some retailers who are dealing with the big manufacturers of computer hardware. The retailers need to meet a minimum sales volume, otherwise their contracts are stopped. This is dramatic for the distributor because they have service level agreements in place and customers to service. The distributors proposed to the big hardware producers that collaboration may need to be considered due to quantities not being met. The proposal is to create a collaborative logistics platform whereby everyone wins. This platform is currently being created.
About Paul Van den Brande
Paul has been in freight forwarding for a long time and he has always had the newest business models and technology in mind. In previous discussions Paul talked about outsourcing logistics to 4PLs. He sees that the future of outsourcing and 4PL logistics includes the side effect of collaborative logistics and carbon footprint reduction.