Horizontal Collaboration combats Rising Energy Costs
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Written by James E. deMin, BT Global Services
Collaboration is as old as life itself. In the 19th century, Darwin described “symbiosis” (persistent biological interactions) as a common survival strategy. Today, with rising energy costs threatening profitability and economic survival, emerging strategies are driving competitors to collaborate in critical value chain functions. In logistics, companies are working interactively to service common customers, and becoming each other’s customers.
SUPPLY CHAIN COLLABORATION
A multinational consumer products manufacturer discovered that approximately one-third of their aggregate truck miles in Europe were empty trucks moving to the next point of load. This level of inefficiency was not unique to them, their products, customers or distribution network design. To reduce costs and carbon footprint, they established a partnership with a competitor to share truck capacities across their network of factories and distribution centers. By the end of the first year, they had saved more than three million empty truck miles and millions of dollars and are now extending this practice to other geographies.
Collaborative logistics is achieved when two or more companies form partnerships and/or work with value chain partners (customers, suppliers, carriers and increasingly competitors) to optimize transportation operations by sharing truck capacities to cut the high-costs of less-than-truckload shipments and empty backhauls. These practices can lower inventories, further reducing costs and stockouts that impact customer service.
There have been numerous similar initiatives where enterprises are employing “horizontal collaboration” methods in addressing the typical logistics challenges of equipment availability, decreasing congestion on roads, fuel price volatility and transportation routing. Horizontal collaboration in logistics extends well beyond sharing truck capacities; many companies report that collaboration extends to:
· Sharing knowledge, experience, expertise
· Consolidating finished goods flows
· Sharing transport vehicles/network capacity
· Sharing logistics infrastructure – e.g. warehouses, DCs
· Cross-enterprise sustainability objectives
The benefits and implementation of horizontal collaboration agreements may appear simple, but ultimately they require enabling inter-enterprise visibility over critical processes, materials flows, asset allocations, payment processing and numerous other business functions that cross three principal barriers: (a) geographic, (b) systems and (c) organizational.
These barriers are the domain of the telecommunications provider, who must be able to securely extend their customers’ collaborative capabilities and system access across increasingly more geographically stretched value chains, made even more challenging by emerging market strategies. The telecommunications provider must provide enterprise-wide access to systems that reside both within centralized data centers and local plants. Horizontal collaboration involves not only overcoming these barriers, but sharing system access across multiple organizations and harmonizing security requirements across all partners.
Elon Musk's Boring Co. planning wider tunnels for freight
Elon Musk’s drilling outfit The Boring Company could be shifting its focus towards subterranean freight and logistics solutions, according to reports.
A Boring Co. pitch deck seen and shared by Bloomberg depicts plans to construct wider tunnels designed to accommodate shipping containers.
Founded by Tesla CEO Musk in 2016, the company initially stated its mission was to offer safer, faster point-to-point transport for people, particularly in cities plagued by traffic congestion. It also planned longer tunnels to ferry passengers between popular destinations across the US.
The Boring Co. completed its first commercial project earlier this year in April. The 1.7m tunnel system is designed to move professionals between convention centres in Las Vegas using Tesla EVs. It says the Las Vegas Convention Centre Loop can cut travel time between venues from 45 minutes to just two.
Boring Co.'s new freight tunnels
The Boring Co.'s new tunnel designs would allow freight to be transported on purpose built platforms, labelled as “battery-powered freight carriers”. The document shows that, though the containers could technically fit within its current 12-foot tunnels, wider tunnels would be more efficient. Designs for a new tunnel, 21 feet in diameter, show that they can comfortably accommodate two containers side-by-side, with a one-foot gap between them.
The Boring Co.’s new drilling machine, dubbed Prufrock, can tunnel at a rate of one mile per week, which is six times faster than its previous machine, and is designed to ‘porpoise’ - mimicking the marine animal by ‘diving’ below ground and reemerging once the tunnel is complete.
Tesla’s supply chain woes
Tesla is facing its own supply chain and logistic issues. The EV manufacturer has raised the price of its vehicles, with CEO Musk confirming the incremental hike was a result of “major supply chain pressure”. Musk replied to a disgruntled Twitter user, confused as to why prices were rising while features were being removed from the cars, saying the “raw materials especially” were a big issue.
Car manufacturing continues to be one of the industries hit hardest by a global shortage in semiconductor chips. While China’s chip manufacturing levels hit an all-time high in May, and the US is proposing a 25% tax credit for chip manufacturers, demand still outstrips supply. Automakers including Volkswagen and Audi have again said they expect reduced vehicle output in the next quarter due to a lack of semiconductors, with more factory downtime likely.
Top Image credit: The Boring Company / @boringcompany