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.