Collaboration idea in supply chain 'is marketing rubbish

A recent surge in talk about supply chain collaboration between freight/logistics service providers and their customers is generally more hype than reality.

In fact, the main potential for supply chain-related collaborative partnerships lies in manufacturers agreeing to share freight transport capacity with each other in order to reduce costs. Logistics providers do have a role to play in that context but more as facilitators of such collaborations rather than as partners in them.

Those were some of the key findings of a survey looking at collaboration in the supply chain presented at a seminar organised as part of the Multimodal 2010 freight transport and logistics exhibition held in Birmingham, England, last month.

The survey, carried out by Transport Intelligence, a UK-based international research and analysis company focussing on the transport, logistics and express sectors, in partnership with The Shipper's Voice, a portal established to improve communication between shippers and the freight transport sector, secured feedback from nearly 150 respondents worldwide, including a number in Asia, across a range of industry sectors.

Introducing the findings of that research, Joel Ray, head of consulting at Transport Intelligence, pointed out that while collaboration in the supply chain was not a new idea, it did appear to have been talked about more over the past 18 months. That, he suggested, might be down to economic recession prompting companies to look at different ideas for improving their supply chain performance.

Ray listed several types of supply chain collaboration. They included competitor collaboration to achieve operational synergies/efficiency gains and cost reductions; supplier/customer collaboration, for example, between a logistics provider and a manufacturer.

However, Ray queried whether the relationship between parties in that second category was really true collaboration. "I am sure there are examples where companies do genuinely collaborate in this area. Generally, though, I don't think supplier, customer collaboration is really collaboration - it is a normal business relationship."

That view was supported by seminar panellist Philip Damas, director of UK-based international logistics consultancy Drewry Supply Chain Advisors. "The first thing a 3PL (third party logistics provider) or logistics vendor will tell a manufacturer or retailer is 'I'm your partner'. But in most cases it is a transactional relationship, the 3PL is just working for somebody," he said.

"In 90 percent of cases, this entire idea of collaboration is marketing rubbish. In 10 percent, you have some gain-share, some strategic thinking, but in the vast majority of instances, that is not the case."

However, fellow panellist Clyde Buntrock, head of business solutions for UK independent international forwarder Allport, whose worldwide operational network of 230 wholly-owned, joint venture and partner offices includes 60 in Asia, suggested there was "a lot more to be had out of having just a pure transactional relationship".

"The other thing I would say is that everybody really needs to understand what the relationship is when they go into it and not expect more out of it than the basis on which they entered it," he said. "It is important to understand the type of relationship you have with a 3PL, what you want out of that relationship, and to invest in it appropriately."

Outlining the actual findings of the Transport Intelligence/The Shipper's Voice survey, Ray said more than half (53 percent) of the respondents had reported they were aware of existing collaboration projects in the supply chain. "That highlights the fact that collaboration is not a new phenomenon - it has been going on for a number of years."

Ray said 94 percent of respondents had indicated they would consider supply chain collaboration with another company in the future. "Quite surprisingly, almost 40 percent said they would be happy to do that with a competitor." The main incentive for that, he added, was the opportunity to reduce costs.

As with those companies which had collaborated in the past, he continued, consumer/retail firms and automotive manufacturers were seen as being the most likely to benefit from collaboration projects.

When it came to indentifying the specific areas of supply chain operation most likely to benefit from collaboration, continued Ray, transportation stood out, both as a stand-alone activity (nominated by 40 percent) and as part of a mix along with value-added services and warehousing (54 percent).

"On the other hand, when it came to warehousing alone, only two percent of the sample said they thought they could benefit from collaboration," he said. "That may be due to the fact that shared user warehousing is fairly common and a lot of companies can gain access to improved warehouse utilisation through sub-contracting to a shared-user facility."

The main driver of supply chain collaboration for companies investigating or entering such projects with competitors, according to survey respondents, was cost reduction (64 percent).

"Companies may talk about efficiency gains, they may talk about green operations, but when you sit down with these guys and really dig deep into what is really driving these collaborations, it is cost, quite clearly," said Ray.

Encouragingly for the freight/logistics industry, the survey also found that service providers had a part to play in supply chain collaboration projects. "The vast majority of respondents, 90 percent, felt that 3PLs could play a significant role," said Ray.

That response, he continued, backed up earlier work done by Transport Intelligence during which manufacturers had stated they would only collaborate with each other in supply chain operations if there was a neutral third party managing the process. "So there is quite an important role that 3PLs can play in brokering and managing such deals," concluded Ray.

(Source: Cargo News Asia)