Thursday, April 29, 2010

Collaborative Transportation Management - Sharing the load

With today’s focus on reducing costs and protecting the environment, the time for collaborative transportation management may be here.

Canada, the second largest country in the world – about 5,000 km from Vancouver to Conception Bay – is one of the most challenging, high-cost countries in which to distribute goods.

Forty-two percent of the population inhabit five urban areas where manufacturing and distribution facilities face common transportation challenges. Meanwhile, disproportionate shares of transportation resources are required to service the balance of the population, scattered over 10 million square kilometers. The situation dictates a high use of less-than-truckload delivery, and all-too-frequently, pick-up and delivery trucks simply aren’t full.

On top of this less-than-efficient system, the cost of moving goods across Canada is bound to increase. Fuel prices will inevitably rise. Driver shortages due to an aging population, attrition, and a lack of new entrants is already occurring. When the economy picks up we’re going to feel these pressures even more acutely.
One solution to optimize productivity is collaborative transportation management (CTM) in which the traditional one-to-one relationship between a shipper and receiver, is replaced by a more efficient many-to-many approach. Shippers, receivers, carriers, and third-party logistics companies can gain tremendous efficiencies through cooperative forecasting, order consolidation, optimizing asset utilization, sharing routes, and streamlining carrier payment.

Pooling resources improves the supply chain, reduces mileage, eliminates unnecessary trips, and increases load factors – all of which reduces costs. At the same time, energy consumption is substantially reduced, resulting in huge benefits to the environment in the form of reduced carbon expenditure, pollution, and congestion.
Need an example of where this is already working? The Canadian Pharmaceutical Distribution Network involves 21 manufacturers who distribute their products to hospitals across Canada through a sophisticated collaboration system. Hospitals order and receive the products they need from multiple suppliers through a single order system managed by a third party.

In order for CTM to work, some key interactions need to develop between consignors, carriers, and consignees, as well as any intermediaries that are involved in managing the process. Collaboration eliminates inefficiencies and improves supply chain performances for all, but a degree of transparency is absolutely critical.
CTM is not a new concept but it has not been widely adopted. Senior decision makers are too caught up in gaining competitive advantage, focusing on marketing and sales, to set up a collaborative system that will benefit them in the long term. When orders need to be delivered they not to think about the bigger picture. Typically they can’t see past individual corporate objectives.

That’s why logisticians really have to drive CTM. Their involvement ensures that key operations and procedures will be analyzed for hidden efficiencies. Information sharing between organizations is critical and must be conducted with absolute honesty and openness – without crossing legal boundaries, of course. The process will require continual monitoring by committed champions who will solve problems jointly, rather than individually. The technology employed must not only be effective but must allow seamless information interchange. The billing process must be simple, with costing methods that ensure all participants pay their fair share. And most importantly, tangible benefits must be realized by all parties.
Change management is going to be critical here, as companies negotiate roadblocks and move from single-minded self interest (with the associated attitudes and practices) to a more cooperative approach.

So how can all of this be accomplished? Again, logistics will have to lead the way, organizing from within, meeting with company stakeholders, educating them on the threats on the horizon and the potential benefits of collaboration. Analysis will be helpful – particularly of the current ordering process, size, and cycle, and the efficiency of the shipping and receiving functions. And a list needs to be generated of companies that would provide synergy in collaboration. For this it’s always good to reach outside your organization, gleaning what you can from discussions at industry functions. Networking is excellent way to discuss collaboration with like-minded colleagues. Search the internet for buying groups coordinating on potential logistics efficiencies.

Third-party logistics providers who have embraced collaboration are in a great position to educate manufacturers, distributors, wholesalers, retailers, shippers, and receivers on the advantages of CTM. They can also get the ball rolling, providing essential services and distributing the savings.
Collaborated distribution is an opportunity whose time has come. We will all win with cost reductions and a better environment.