David Frentzel 0000-00-00 00:00:00
Partnering with companies with similar logistical requirements can boost your bottom line. Over the past decade, numerous supply chain experts have extolled the virtues of collaboration, a supply chain practice that has the potential to help shippers substantially reduce waste, minimize redundancy, and save money. The concept—defined for the purposes of this article as bringing two or more companies with similar supply chain needs together so they can share costs for facilities, take advantage of greater economies of scale, and use their combined volumes to build more cost-effective shipments—has always made sense. But it’s become even more compelling in this era of escalating fuel prices, small profit margins, and heightened sustainability. Whether your company has already begun participating in such an initiative or is just beginning to test the waters, here are three pieces of practical advice that I hope will be of help on the road to finding—and keeping—the co-habit, co-load, co-operative logistics matches that will be exactly right for you. A: Add more companies to your list of potential collaborators In an ideal scenario, the companies you collaborate with would have manufacturing and delivery points that are nearly identical to yours in the areas where shared activities will take place. For example, logic suggests that Shipper A’s and Shipper B’s Pacific Northwest supply chains could blend well if both companies sell their goods via the same group of area retailers. However, if your company is too tightly focused on finding partners whose demand chains are virtual clones of its own, it may be overlooking some other potentially promising combinations. These include: • Partnering with a shipper that has a manufacturing plant located near the end of your company’s delivery routes • Teaming with a shipper that needs specialized warehousing services and equipment—such as machines that handle canned goods—in an area where you hope to establish distribution operations but don’t have the volume to justify a dedicated facility • Finding a shipper that has a reverse logistics challenge and needs a reliable resource for picking up, transporting, and either disposing of or re-shipping unsold or returned product from the same retailers you serve As long as the mix of your product and theirs is permitted by DOT regulations and unlikely to alter the condition of your inventory (for example, food products and perfumes aren’t a recommended combination), any shipper whose supply chains closely parallels, frequently crosses paths with, or has key origin points near your routes’ final drop-offs might qualify as a suitable candidate for your shared logistics initiatives. B: Beef up the immediate advantages In a 2009 Transport Intelligence study of 150 companies throughout the world, 94 percent of respondents expressed a willingness to engage in supply chain collaboration with another company. Research like this suggests that while shippers don’t need any convincing regarding the potential benefits of co-habit/co-load arrangements, many are still reluctant to commit, because the reality is that true collaborative logistics relationships are still few and far between. Part of shippers’ reluctance may be due to concerns about working too closely with the competition—a not unlikely scenario considering how similar (and therefore compatible) most head-to-head competitors’ demand chains are. In addition, some hesitation may be related to a wait-and-see attitude. To paraphrase that famous Jerry McGuire character, shippers may want other shippers to be the early adopters and “show them the savings” before they’ll be willing to take the plunge themselves. Finally, many companies may be anticipating roadblocks when it comes to getting the buy-in from another important target audience—delivery recipients—whose purchasing departments often must agree to modify their ordering processes with the partnering companies in order to make co-loading work as effectively as it should. For these reasons, your company may want to consider offering some extra financial incentives to help make the prospect of working with your company that much more appealing. Possible suggestions include: • Asking a 3PL to help you locate and negotiate with potential co-tenants/co-shippers in exchange for a percentage of the supply chain savings your company will realize from the initiative • Temporarily offering potential co-tenants more reasonable warehouse rates than they might enjoy if they elected to use public warehousing space instead • Giving retailers a per-pallet discount or rebate for every joint order they’re willing to make with you and your collaboration partners. C: Create an atmosphere of trust To an extent, successful co-habiting/co-loading is much like successful outsourced logistics: it doesn’t just depend upon finding the right partner; it also depends upon being the right partner. To make a collaborative relationship work, all participants must be willing to do a number of things that don’t always come naturally to businesses when working with “outsiders”: sharing detailed information about their practices and processes, being candid about weaknesses, and permitting shared visibility. Just as important, they must do everything they can to ensure each participant has a clear understanding of its roles, responsibilities, and designated rewards—so that there’s virtually no room for the misunderstandings that can lead to failure. To help pave the way for these behaviors, your company may wish to consider: • Involving a 3PL; every collaboration needs a leader, and tapping a reputable player to coordinate everything from day-to-day operations to the financial end of things is an excellent way to ensure that every participant “plays fair” • Signing watertight non-disclosure agreements, so that players will feel less uncomfortable sharing important information that’s usually considered propriety • Establishing formal—and frequent—communications procedures; this will keep all participants on the same page and provide an opportunity for the regular give and- take that fosters healthy relationships • Giving the relationship time, because often, even well-matched partners require a period of acclimation, and more often than not, there may be some period of adjustment required before both players are working together as well as they should. Clearly these aren’t the only keys to successful collaborative logistics relationships. In fact, there are countless other recommendations ranging from the contractual to the technological— enough, in fact, to require an entire alphabet. But for now, suffice it to say: collaboration may still merely be a just an ambitious goal for many companies, but any way you spell it, it’s one that’s clearly worth pursuing.
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