Finding Value in Supply Chain Collaboration

[Sandy Vosk]

Collaboration in the supply chain continues to be a hot topic, but it’s very difficult to find quantifiable examples and case studies documenting the value achieved from collaboration. I came upon a great example this week on Purchasing.com of the success achieved by BASF Coatings North America and Subaru of Indiana Automotive (SIA) in an accelerated paint line conversion project.

"We took an on-site conversion procedure that typically takes months and compressed it to two weeks," said Ted Morris, an account manager in the North American region for Southfield, Michigan-based BASF Coatings, a tier 1 automotive supplier. "While in total this was about a 15-month process, our two companies worked very closely together to accelerate the actual plant conversion, including equipment changeover, and we had Subaru up and running in a full production start-up within two weeks of when we could access the paint line." Although no specific numbers were actually quoted in the article, it’s fair to say that there was a significant bottom-line benefit to both companies, from the labor savings associated with the time to convert, as well as the additional revenue associated with a quicker time-to-market,

A recent interview by Dan Gilmore of SupplyChainDigest, with Greg Aimi of AMR Research, focused on the impact of “green” on collaborative transportation. There are potential savings of 10% on transportation costs, which depending on the size of the company and current shipping volumes, can be significant. In transportation, there are 4 primary areas where there are opportunities for significant benefits from collaboration:

1. Load Linking – this is where 2 or more shippers agree to share a full truckload carrier. This can be as simple as sharing complementary lanes, where one shipper delivers in one direction, unloads and a second shipper loads and delivers in reverse. There can be savings to both partners in sharing costs and this can create additional opportunities for collaboration.
2. Truckload “co- mingling” – in this situation, different shippers with multiple LTL (Less than a Truck Load) shipments, destined for roughly the same place or general direction are combined into a single, multi-stop truckload shipment. This is the model most broadly used by 3PLs (3rd Party Logistics providers) but there are companies such as Global Forwarding that have developed a business model similar to Travelocity and Expedia, enabling companies to save significant costs in their LTL shipments.
3. Local delivery “co-mingling” – is more futuristic and perhaps companies increased focus on green and sustainability will propel this type of collaboration. In this situation, companies who have common customers share a full truckload carrier. This reduces costs for all partners but will present challenges that will require a real commitment to collaboration for success.
4. Forecasting collaboration – where shippers and carriers share forecasts and capacities electronically. This can result in greater scenario planning by each partner, enabling a reduction in costs associated with shipping and an increased ability to respond to unexpected events.

As Dan points out, “… the potential cost savings have just never been enough to make Collaborative Transportation take off”, however, as Bob Dylan wrote, “the times they are a’changing. The economic recession is forcing companies to continue to seek ways to reduce costs and increase customer satisfaction. Collaboration, when supported by the leadership of business partners and backed by strong agreements and technology to enable it will meet this objective.

What do you think? Do you have specific examples of companies who have been successful in collaborating with their partners?

Supply Chain Experts, a community of highly qualified professionals, can help your organization find unique solutions to supply chain challenges that can help you improve your bottom-line, competitive position, and overall customer satisfaction.

Sandy Vosk is President & CEO of Allied Tracking Systems, Inc. a technology company that specializes in supply chain solutions which improve operational efficiency, business intelligence, asset management and collaboration with customers, suppliers and partners. He speaks at a number of industry events and was recently published in David Coleman’s “42 Rules for Successful Collaboration”. Sandy is also the founder of Supply Chain Experts.

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[Dr. Edward Knab]

Green initiatives must transcend companies and forge new relationships that add value to consumers and at the same time are good for our planet. The most obvious example that comes to mind exists in your neighborhood and mine. All day, every day, trucks the zip up and down our streets making local deliveries from the US Post Office, DHL, Federal Express, and United Parcel Service. Today I received a delivery from the US mail, Federal Express and DHL all in different trucks, at different times the day, with different individuals.

          Currently the small parcel delivery business is incurring tremendous losses as the slow economy has put a significant dent in their growth oriented business plan. All of these carriers are making deliveries in the same neighborhood to the same addresses throughout the day. I would like to see a little collaboration between these carriers to determine if they couldn't divide the city into segments where one carrier would make one stop daily at each residence and deliver all of the packages at one time.

          This has the potential to be a colossal green initiative saving millions of gallons of gasoline each year and improving the delivery efficiency of each of these carriers by as much as 60%. As businessmen and concerned citizens we have to be willing to look at green initiatives that transcend our individual business priorities and examine how the entire supply chain can become more efficient and thus reduce cost. Distribution could be improved significantly if there was greater consolidation through collaboration, competition has built considerable redundancy into our systems that could be eliminated with improved collaboration built on trust.

          This type of collaboration is based on trust, which is built slowly like a great wall of China one brick at a time. Think about your industry, are there ways you can collaborate and reduce cost while at the same time benefiting the environment. Mature industrialized nations can only improve their competitiveness by thinking of the box and forging new relationships created by true collaboration based upon trust that reduce the overall cost and delivery of goods to the consumer.

          If you have some ideas or would like to learn more about how your company or industry could be more competitive through better in collaboration contact the Supply Chain Experts.  Supply Chain Experts can help your organization improve collaboration in a manner that takes cost out of the system allowing you to deliver more value to your customer at a reduced cost.

Dr. Edward F. Knab BLOG
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Dr. Knab is an academic practitioner and seasoned Global Supply Chain expert whose company, Productivity Constructs, is focused on driving cost and inefficiency out of the Global Supply Chain. Dr. Knab can be contacted for speaking engagements, coaching, or consultation at [e-mail], [e-mail] or www.edwardknab.com.