Transport collaboration offers huge economic and environmental benefits but also faces challenges like trust deficit and information shortages. Successful collaborative operations require clear communication, trust-building and advanced tech.
Transport collaboration or as it is also known, ‘horizontal collaboration', is a strategic approach to managing and optimising urban and suburban flow of goods. It has emerged as a promising solution to the complex challenges of modern logistics, particularly regarding supply chain management. These horizontal cooperations aim to streamline processes, reduce costs, and enhance environmental sustainability by coordinating multiple parties, including manufacturers, retailers, and transport companies.
However, the path to successful collaboration is fraught with obstacles, ranging from trust issues and information asymmetry to technical difficulties in real-time route optimisation. This article delves into these aspects, providing a comprehensive analysis of the benefits and challenges of transport collaboration operations, with a particular focus on the problems faced outside urban areas.
The Promise of Transport Collaboration
At its core, transport collaboration is about sharing available capacity to achieve common goals. By pooling transportation resources, companies can significantly reduce the number of vehicles on the road, also leading to lower fuel costs and less maintenance, as well as substantial environmental benefits. This not only translates into substantial cost savings, it also contributes to improved efficiency. By coordinating schedules and routes, companies can optimise delivery windows and improve service levels, thereby enhancing customer satisfaction.
Moreover, horizontal collaboration plays a crucial role in promoting environmental sustainability. With fewer vehicles on the road, carbon and NOx emissions from freight transport are significantly reduced, contributing to the global fight against pollution. This is particularly pertinent in today's context, where companies are under increasing pressure to minimise their environmental footprint.
The Hurdles on the Road to Collaboration
Despite its apparent benefits, transport collaboration is not without its challenges. One of the main hurdles is the lack of trust between collaborating parties. This is particularly evident in transactional relationships between Shippers and Logistic Service Providers when the absence of long-term contracts doesn't stimulate compliance. Moreover, the shortage of trust in these circumstances is also exacerbated by the industry's nature of commoditised and highly competitive service offerings and never-ending race to the price bottom.
Information asymmetry' presents another significant challenge. Companies often seek to protect their commercially sensitive data, making it difficult to share the necessary information for effective collaboration. This perception is particularly prevalent among manufacturers within the same product category or between retailers and their suppliers/vendors. Given their competitive positions, these parties are often reluctant to share information and plans, hindering the decision-making process, the potential for effective collaboration and capturing of mutual benefits.
Technical challenges also abound, particularly when it comes to planning and replanning optimised routes in near real-time. This requires high processing speed and the optimisation of complex mathematical problems, which can be daunting even for systems with advanced technological capabilities.
At Value Chain Lab, our commitment to addressing these challenges through innovative research is unwavering. Our latest research article, "Fair collaborative vehicle routing: A deep multi-agent reinforcement learning approach”, stands as a testament to this dedication.
The Unique Challenges Outside Urban Areas
When it comes to transport collaboration outside urban areas, additional challenges come into play. These are often driven by the lack of synchronisation of loading and delivery windows for Less Than Load (LTL) loads across a wide geographical spread of shippers, as well as differences in their business requirements and priorities. Absence of geographical clustering spread and varying business requirements make it difficult to coordinate schedules and optimal routes, leading to inefficiencies and increased costs.
Furthermore, freight capacities, both in the UK and globally, are distressingly underutilised. Only 63% of journeys transport a useful load, with the average vehicle utilisation languishing below 60%, whether measured by weight or volume. These inefficiencies lead to spiralling costs, increased congestion, and amplified pollution levels.
While innovative asset-sharing concepts have gained traction, with load consolidation promising up to 20% cost savings and a 25% CO2 reduction for collaborative shipments, the fragmented logistics market, dominated by proprietary solutions and freight exchanges, hampers their full potential.
Case Studies: Industry Attempts to Implement Transport Collaboration Solutions
Several attempts have been made in the industry to implement transport collaboration solutions. One notable example is the "Smart Freight Leadership" initiative, as mentioned in the "Rethinking deliveries summary report" by Transport for London. This initiative involves stakeholders working together to report and set targets, reduce emissions by implementing action plans, and collaborating and advocating for long-term public policy. However, despite its promising approach, the initiative has faced challenges in relationships among collaborating parties and information asymmetry, leading to limited success.
Another example is the "Synchromodality" concept, which involves stakeholders of the transport chain actively interacting within a cooperative network to flexibly plan transport processes and switch in real-time between transport speeds and modes tailored to available resources and needs. While this concept holds great potential, its implementation has been hampered by the same issues of trust as well as by limitations and timing of information sharing.
Conclusions and Recommendations
The logistics sector is on the brink of a transformative era, with a future that's collaborative, efficient, and environmentally conscious. At Value Chain Lab, we're spearheading this transformation, offering innovative solutions for a brighter, more collaborative logistics future. While transport collaboration holds a significant upside, it also faces considerable operational and relationship challenges.
To overcome these challenges, it is recommended that companies adopt different and more effective operational and decision-making frameworks. These should involve clear communication and transparency, and the establishment of trust between collaborating parties through 3rd party trustees which will use advanced technological capabilities to optimise and manage co-shipment routes. Such 3rd party intermediaries could offer secure solutions to manage data, ensuring that commercially sensitive information is protected while still enabling effective collaborative route planning.
Moreover, investments in advanced technologies such as Artificial Intelligence (AI) / Machine Learning (ML) to progressively identify better-optimised routes in real-time will be necessary. These technologies help process large amounts of data quickly and accurately, enabling planners and transport managers to make informed decisions and respond swiftly to changes in demand or supply.
Finally, companies should consider engaging with government authorities and industry bodies to advocate for policies and regulations that support transport collaboration. This could include incentives for companies that engage in collaboration, as well as regulations to ensure fair competition and protect commercially sensitive information.
In the end, the road to successful transport collaboration may be challenging, but the potential benefits make it a journey worth undertaking. FLOX is designed to tackle these challenges. It identifies collaboration opportunities in near real-time and allocates tangible gains through a software solution, ensuring equitable gain-sharing, a cornerstone for success.
By leveraging advanced technologies and adopting effective partnership strategies, companies can overcome the hurdles and unlock the full potential of transport collaboration operations.
FAQ
What is collaboration in transportation?
Collaboration in transportation refers to the strategic alliance between two or more businesses, often involving shippers, carriers, and receivers, to optimise the logistics and freight transport processes. This collaboration can take various forms, including the establishment of shared transit lanes, coordinated freight movement, and coalition building among companies in similar or different lines of business. The central objective is to enhance efficiency, reduce costs, and minimise environmental impacts associated with transport activities. Key aspects of collaboration in transportation include:
Shared Resources: Businesses work together to utilise transportation assets more effectively, such as sharing truck space or coordinating delivery routes to avoid empty miles.
Coordinated Transport Planning: Participants align their supply chains when they have overlapping transit routes, allowing for more efficient load management and reduced operational costs.
Data Sharing: Collaborators often leverage third-party data to ensure that the logistics arrangements do not impose additional burdens on drivers and minimise unnecessary miles travelled.
Environmental Benefits: Collaborative transport initiatives can lead to lower carbon emissions and reduced environmental impacts by decreasing the number of empty runs and optimising load capacities.
Economic Advantages: By pooling resources and optimising transport operations, companies can achieve cost savings—e.g., reducing delivery costs and improving service levels—ultimately contributing to enhanced competitiveness.
Overall, collaboration within the transport sector is seen as a vital approach to address challenges such as market fragmentation and inefficiency in the logistics sector, while also achieving sustainability goals.
What is collaborative transportation management?
Collaborative Transportation Management (CTM) is a strategic approach in supply chain management that emphasises collaboration between different stakeholders, primarily between shippers (such as retailers) and carriers (logistics providers). CTM aims to optimise transportation processes, enhance flexibility, and improve overall efficiency within the supply chain. Key aspects of CTM include:
Collaboration: CTM fosters interaction and cooperation among trading partners and carriers, enabling them to share information, resources, and capabilities. This collaboration helps in aligning their objectives and improving supply chain performance.
Flexibility: By promoting flexibility in delivery capabilities, CTM allows carriers to adjust their operations according to varying demand and logistical requirements. This adaptability is crucial in responding to changes in market demand and ensuring timely deliveries.
Cost Efficiency: The implementation of CTM can lead to significant reductions in transportation costs for retailers by minimising inefficiencies and optimising delivery schedules. It reduces instances of backorders and the need for secondary carriers, which often come with less favourable contract rates.
Improved Service Levels: CTM enhances the service level offered to customers by ensuring that replenishments occur at the right time and place, thus minimising delays and uncertainties in the supply chain.
Simulation Models: CTM can be evaluated through simulation models that examine different scenarios of delivery capabilities, helping stakeholders understand the benefits and optimise their strategies.
In summary, CTM is a comprehensive strategy that not only enhances the effectiveness of transportation planning but also integrates it more closely with broader supply chain collaboration efforts, ultimately leading to improved performance and customer satisfaction.
What is an example of collaborative logistics?
An excellent example of collaborative logistics can be seen in the implementation of urban consolidation centres (UCCs), which act as logistical hubs designed to facilitate the distribution of goods within urban areas. In a UCC model, multiple retailers or suppliers share a single distribution point where goods are consolidated before being delivered to their final destinations.
This collaborative approach reduces the number of delivery vehicles on the road, leading to decreased traffic congestion, lower emissions, and improved efficiency in last-mile delivery. By pooling resources, participating firms can achieve economies of scale and lower transportation costs while also enhancing service levels through more reliable and timely deliveries. Studies have highlighted the critical factors for viable business models for UCCs, emphasising the need for cooperation among stakeholders, effective coordination mechanisms, and innovative funding solutions.
Another notable example of collaborative logistics is the use of horizontal collaboration among competing firms in the freight transport sector. In this model, companies that are not traditional partners, such as those from different industries or sectors, come together to share transportation resources, such as trucks or warehouse space. Collaborative freight transport allows firms to share capacity during periods of low demand or peak shipping times.
Research indicates that this form of collaboration can lead to significant cost savings and improved service levels while fostering trust and long-term partnerships among participants. With this collaborative business model, companies can navigate challenges such as rising transportation costs, regulatory pressures, and sustainability goals, demonstrating that collaboration can drive competitive advantage in the logistics sector.