Collaborative distribution brings together different shipments from different companies that are going to the same location. A third-party transport company can identify which shipments are going to the same location so these shipments can all be loaded onto a single truck. This not only fills that truck so space is not wasted but, it also cuts down on the number of trucks required to move goods.
At its core, collaborative distribution is a very simple idea: create a shared infrastructure for product distribution. Instead of tens of thousands of product “streams” emptying into the same ocean, combine them into one highly efficient river of products that takes trucks off the road, reduces greenhouse gas (GHG) emissions and cuts distribution costs as much as 35%.
The collaborative distribution concept leverages freight consolidation as a supply chain strategy, not just a transportation tactic. It means merging different loads destined for the same end point to maximize trucking efficiency but, it begins farther upstream in the supply chain.
In a collaborative distribution scenario, competition among CPG manufacturers begins and ends at the shelf. They share truck and warehouse space where like loads are destined for the same store or retailer warehouse. As a result, everyone saves time and money. Shippers and carriers rationalize transportation moves and costs, end customers can better allocate labor for unloading full truckloads, and the energy, pollution, and congestion generated by transport is substantially reduced. Unfortunately, collaborative distribution is not yet a mainstream reality and will require a coordinated effort to develop.
To achieve such results requires a paradigm shift in the way supply chains are managed and administered. People don’t like change, so it’s important to position executives who will inspire the necessary change in an organization. Change management requires the right people on board, with clearly set goals. Companies have to get people who have bought into a consumer-driven supply chain, and ones familiar with the electronics age we now live in. Priorities have to shift, and cultures need to change.
Where do we begin?
In today’s globally outsourced business environment, most of the data that companies need to run their supply chains resides with partners, and typically in the systems of those partners. Companies struggle to get a get a unified picture of their supply chains because the information systems they have been buying for the past several decades were designed to operate within a single company, not across a network of companies.
Today, the best companies manage business across their broader networks, not just inside their own companies. They succeed because they are expert managers of information. Operational excellence requires informational excellence, and these companies know they must see and control the financial, physical, and informational business flows into and out of their companies in order to transform their performance and develop a collaborative distribution model.
While supply chain visibility remains a top operational priority for corporate leadership, the EDI VANs and hubs of today have not delivered on the promise of high-quality, timely and complete partner data. The enterprise business software that’s installed at most companies comes up short because the data that these software applications must have to be useful is far from complete.
Cloud supply chain platforms invert the traditional EDI hub equation by moving the data processing and linking logic from the partners at the ends of the spokes to the center hub itself. In this model, the entire value chain community leverages a common core technology utility so that all partners link to a single version of supply chain truth across the entire network.
Cloud platforms represent a truly radical shift in how companies exchange information with one another. New platforms based around the Internet and the economics of Cloud are enabling companies to become agile and hyper-efficient networked organizations. These newer platforms are no longer nice-to-have; they are must-have systems. Without the extra-enterprise nervous systems to see and control the supply chain, companies are at a strategic disadvantage in their efforts to develop collaborative distribution.
Gartner predicts a 300-percent rise in cloud-based services over the next few years. In three to five years, 80 percent of software will be consumed from the cloud, according to other sources. Those are staggering numbers, but they make sense. If you’re not in the IT business, don’t set up servers. Give the apps to a cloud provider and have it maintain your IT environment.
Making collaborative distribution work will require changing entrenched processes, and change is never easy. But we all need to wake up to the ineffectiveness of what we’re doing now, and the opportunity to take a whole new direction. Shifting to supply-side mentality requires a strong commitment to managing logistics and investing in technology, but the end result is a win-win for all those involved and many retailers are looking to adopt supply chain management techniques such as Collaborative Distribution.
Retail, fashion, and manufacturing companies can collaborate with suppliers to manage and optimize shipments to customers, distribution centers, and retail outlets to meet demand. The cloud was designed to enable this collaboration.
But what are the risks associated with collaborative distribution?
Manufacturers and distributors may have the following concerns about collaborative distribution:
- Finding the right partners to collaborate with
- Ensuring timely shipment and delivery
- Questions about equitable cost-sharing
- Problems associated with trust, planning concerns, and effective communication between partners
Successful collaborative distribution requires partners to agree upon terms, commit to a payment methodology, and carefully communicate all planning and logistics.
What is the role of each party in today’s collaborative distribution model?
- Manufacturers may need to move their inventory to co-locate with like vendors shipping to the same customers. Also, they must allow their goods to be shipped with other companies, even competitors. They need to create a shared warehousing, transportation and distribution model designed to improve each company’s supply efficiency, competitiveness, and carbon footprint. Manufacturers may have to be more flexible in working with retailers to identify consolidation opportunities but, collaboration is a hot topic. Walking the talk will make you stand out from competitors.
- Retailers must get their different buying groups – for ketchup, pickles and paper towels – to do something they are not doing today. Talk. These buyers need to consolidate orders and agree to receive these different products on the same days. The logistics folks at the distribution center would be happy. They’d much prefer to receive one consolidated shipment from multiple vendors than four staggered shipments from individual companies, tying up dock doors and unloading crews.
- Third-party logistics providers (3PLs) by their very nature, can provide valuable advice and act as matchmakers or go-betweens to increase the possibility of success with collaborative distribution. They enable integration of services and utilize successful and economically beneficial partnerships, as well providing a shared warehouse space but, a collaborative distribution model will require a change to 3PL pricing and compensation approaches. As part of a new pricing model, 3PL’s will need to share the savings gained from collaboration, and make those savings clear and specific up front.
What is the role of each party in tomorrow’s collaborative distribution model?
If you haven’t already read the “Material Handling and Logistics U.S. Roadmap” you can download a copy of it by clicking on the link. This report compiles what more than 100 industry thought leaders had to say about the future of material handling and logistics. In it you’ll find many of the same problems that are being solved by a new concept that is being developed with a conceptual video available here: Cargo Carousel System. This system is patented but, still in development at the conceptual stage so, this isn’t some sort of promotional pitch but rather a request for input from fellow supply chain professionals. This concept addresses not only the shortcomings of today’s collaborative distribution model but, a multitude of current problems that are common to all supply chains and it hopes to carry these solutions well into the future. You’ll notice that the MHL U.S. Roadmap lists the following problems and with each is a proposed solution provided by this concept. At the end of this post we ask a simple question, “Is this a viable option for the supply chain?” We recognize the sensitivity to self-promotion both, on this site and in our blog so, we are simply seeking input from those who care to comment. We would appreciate constructive criticism of the “concept” rather than of a proposed finished system as development is still in its infancy and your feedback goes toward refining the conceptual stage before further resources are brought to bear.
- PROBLEM: Shippers are not willing to collaborate to consolidate their loads with third-party logistics companies for the reasons listed above.
SOLUTION: With this concept individual opaque, lockable and seal-able modules from different shippers can be loaded onto the same truck without worrying about finding the right partners to collaborate with, ensuring timely shipment and delivery, equitable cost-sharing or problems associated with trust, planning concerns, and effective communication between partners. This concept also works for shipments in both the supply and reverse chains and can reduce GHG emissions dramatically.
- PROBLEM: Current supply chains lack the visibility to truly identify the quantity, condition and location of inventory throughout the value chain and software alone cannot solve this problem completely (even though some will claim otherwise).
SOLUTION: Radio Frequency Identification (RFID) with GPS can be added to each carousel to identify anything on any module anywhere in the world at any time offering true end-to-end “Control Tower” visibility in the supply chain and can have sensors for location, temperature, light exposure, humidity, barometric pressure, shock, movement, etc. to alert owners of any problems in real-time.
- PROBLEM: Trucks have to be completely unloaded before being re-loaded and require sophisticated routing programs just to lay out the most efficient route but routing alone cannot eliminate empty back hauls or partial loads that are common to every route.
SOLUTION: With this concept modules loaded with recyclables or distressed inventory (store returns, shelf pulls, overstocks, perishables, etc.), among other goods, can replace positions on the carousel as they become empty and at the same time while the truck is still at the dock. Delivery and/or pickups can be done continuously on the same trip eliminating empty back-hauls, partial loads and sophisticated route planning software.
- PROBLEM: More then 50% of the space in a warehouse is set aside for aisles to allow fork trucks to maneuver in.
SOLUTION: The concept of stacking carousels side-by-side and end-to-end in a warehouse can create automated deep storage and retrieval that offers twice the space utilization of regular racking or shelving as it can minimize the need for the aisles that are required between regular racking for forklifts to maneuver doubling warehouse cubic space utilization.
- PROBLEM: Labor is one of the most expensive components of any warehousing operation.
SOLUTION: Unmanned Automated Forklifts can load or unload this concept at the dock or in deep storage without human intervention by combining RFID with GPS for exact location identification because the modules in this concept stop at the exact same GPS position each time the carousel rotates offering true “Lights-out” warehousing.
- PROBLEM: Additional short-term warehouse space is expensive and long-term space is underutilized in the off season.
SOLUTION: Additional storage can be easily added to a store or warehouse (for seasonal or peak periods) and since this concept requires no docks they can be stacked outside for even more storage and easy access.
- PROBLEM: Most merchandise cannot be double stacked to fill a trailer because products on the bottom will be crushed resulting in partially filled trucks which only adds to inefficiency and GHG emissions.
SOLUTION: The conceptual modules are suspended to better absorb shock and “crushable” products could now be easily double-stacked without crushing the products on the bottom to insure trucks are always full. Eliminating partially filled trucks can improve the bottom line for all parties and can dramatically reduce greenhouse gas (GHG) emissions.
- PROBLEM: Wooden pallets are heavy and they use more of the annual hardwood harvest than all other uses combined.
SOLUTION: This concept will eliminate wooden pallets replacing them with recycled aluminum modules while reducing weight. A blue “CHEP” pallet weighs about 75 pounds and a 53’ container has room for 26 pallets on the floor but, this concept allows double stacking so the equivalent weight of that many pallets would be 75 x 26 x 2 = 3,900 pounds. This entire concept can weigh half this much depending upon the application or design while reducing deforestation.
- PROBLEM: Retailers are seeking better ways to fulfill the “Buy Online, Pickup in Store” shopping favored by many customers.
SOLUTION: Adding a digital keypad to this concept creates automated customer or courier pick-up like a giant vending machine anywhere it is positioned. It can be placed in a parking lot or even placed facing “inside” a store, high-rise or mall and empty carousels can be exchanged with full ones for quick replenishment and reduced labor and handling time. This becomes an excellent delivery method for congested areas in urban downtown settings as replenishment is fulfilled at the DC or store before the exchange is made.
- PROBLEM: Cruise ships and other marine vessels have extremely limited time to unload, clean and re-load before their next voyage but it takes hours to replenish a ship and time is money.
SOLUTION: With this concept marine vessels (Military, Cruise Ship, Freighters) can be designed to carry entire carousels that can be quickly “exchanged” when they’re emptied with carousels that are pre-stocked with supplies or munitions for quick replenishment (including refrigerated units).
- PROBLEM: Every time merchandise is handled it costs more money and the packaging is excessive and expensive.
SOLUTION: Modules in this concept can be built as actual retail display fixtures with merchandise already in the fixture to exchange with empty fixtures in the store to minimize handling and packaging.
- PROBLEM: Fashion clothing needs to be unpacked, unfolded, pressed and displayed creating a labor intensive process.
SOLUTION: Clothes can be hung from a cross-bar as a retail display fixture within an enclosed module of this concept which adds security and empty modules or fixtures can be exchanged for full ones to minimize touch points and reduce time in both the supply and reverse chains.
- PROBLEM: Perishable items lose half their shelf life while in transit and storage.
SOLUTION: With this concept trays of fruits or vegetables can be layered on trays in racks in a module. Refrigerated containers can be brought directly out to the field and loaded immediately since no dock is required, maximizing shelf life while minimizing touch points in the supply and reverse chains allowing perishables to also be recycled.
- PROBLEM: Postal services are suffering due to the Internet and their only remaining profitable service is parcel delivery.
SOLUTION: Courier or postal services could do a delivery and a “return” pick-up from the same location with this concept. A focus on parcel “returns” could breathe new life into the ailing international postal service because they’re already “in the neighborhood” anyway and returns are growing in volume due to online shopping.
- PROBLEM: Fulfillment centers take years to design and build and are permanent once they’re built.
SOLUTION: This concept could eliminate complete fulfillment centers in exchange for movable, stackable, weatherproof, temperature-controllable carousel containers in smaller multiple, secure, fenced yards inside or outside of the city for omni-channel fulfillment and “last-mile” delivery as docks, dock plates and dock levelers are no longer needed which allows re-positioning closer to targeted customer as demographics and circumstances change.
The bottom line:
Collaborative distribution can be truly successful for all parties concerned. Retailers, manufacturers, and third-party logistics suppliers could work together to create cost-effective plans and build sustainable and mutually beneficial partnerships but, like many journeys of change, the hardest part will be taking the first step.
What do you think? Is this system a viable option for the supply chain?