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April 2, 2009 - Supply Chain Digest Newsletter



Collaborative Transportation: Will Green Finally Do the Trick?

Collaborative Transportation – the elusive logistics practice that promises a slew of benefits, but which has just never seemed to gain any critical mass. The question de jour is: Will the push for Green supply chains finally make it happen?

I asked my friend Greg Aimi of AMR Research about transportation collaboration, and his first response to me was “What kind?”

OK, that’s a good place to start. I think there are four potential varieties (feel free to expand the taxonomy if you wish).

1. “Load linking” and “tours”: Probably the most commonly meant type, which involves two or more shippers agreeing to share a full truckload carrier. In one version, it is simply complementary lanes – one going from Cincinnati to Buffalo, and another shipper doing the reverse. Share the truck, the savings, and maybe other benefits that may accrue from such an arrangement. In other load linking scenarios, the “continuous moves" may be a bit more complex or even, in theory, dynamic.

Gilmore Says:  

Still time to register for next week's Transportunities On-Line Conference and Trade Show. MIT's Chris Caplice and David Simchi-Levi, Green Transportation, leading solution providers and more. Outstanding presentations."

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2. Truckload “co-mingling”: In this version, multiple LTL-sized shipments from different shippers headed roughly the same place or direction are combined into a single multi-stop truckload shipment. Today this is most broadly used by 3PLs managing a facility or campus with different shipper clients, but there are also some individual companies making this happen together.

3. Local delivery “co-mingling”: Primarily in the realm of vision, the idea is, for example, that it doesn’t make sense for 4 or 5 beer trucks to each stop at the same bar to drop off a few cases of brew. So, some service could/should be created to combine deliveries from several beer companies. There have been visions for this type of arrangement over the last decade, but little real action – though I recently heard another such idea raised yet again for a different industry.

4. Forecast collaboration: This is the area where I actually first heard the term “Collaborative Transportation,” arising from a VICS process standard circa 2000 for shippers and carriers to exchange forecasts and capacities electronically, similar in a sense to collaborative demand planning (CPFR). My sense is that the VICS-specific version never really gelled, though certainly many shippers and carriers engage in this process at some level.

In this column, I am focusing on the first variety, “load linking and tours.” The interest in this opportunity has been very high for many years. I have been involved in many conferences where the topic led to overflow crowds in the meeting room. And yet…

I know of no one better to discuss this subject than Bob Shagawat, CEO of Shippers Commonwealth, and someone who has chased this collaborative dream for nearly two decades. Actually, the first time I met him was when he was giving a presentation on the potential savings for shippers from collaboration. As far back as the early 1990s, when he was working for Westinghouse (which at the time offered a TMS), he created a small collaborative group among his customers. Today, Shippers Commonwealth is one of several service providers that offer a load linking platform (Caravan) – though to my mind none of the platforms (e.g., i2, Sterling Commerce, etc.) have really gained significant traction.

For a variety of reasons, as we’ll discuss below, the potential cost savings have just never been enough to make Collaborative Transportation take off. But, then came the capacity crunch of 2004-06. Savings are one thing, but if you were having a hard time getting product to customers, that was something else.

Shagawat told me during that time that suddenly, interest in load linking/tours soared. Why? Because when someone in the “network” had a truck, another company might be able to latch on to a complementary move and secure the capacity.

But alas… the capacity crunch, as it always has, came to an abrupt end, the victim of extra capacity added to the market and then dramatically falling demand.

“Shipper demand for collaborative transportation will only return once the current glut of supply versus demand reverses, which we expect during the next 2-3 years,” Shagawat told me.

But let’s take a step back. Why weren’t potential transportation savings of 10% or greater in some cases enough to drive shippers to embrace collaboration?

First, we’ll note it takes some level of cooperation from the carriers, who in general have not been wild about the idea, especially so in periods of tight capacity. They also usually want be the ones in control about how to position their assets. Lately, however, I have talked to several in the industry who say that in this environment, carriers are a lot more receptive. Heck, maybe it can now guarantee them two loads instead of just one.

David Goodson, Managing Director of Cavallino Consulting LLC and someone who has been both VP of Transportation at Michaels stores and run trucking companies, among other logistics pursuits, firmly believes issues around cost/savings allocations between companies have been a huge barrier to the collaboration concept – even within a single corporation.

He offers this example: say a shipper has two divisions, one of which ships from a plant in Chicago, the other from Miami. The Chicago plant pays $2.00 a mile for a TL carrier to haul loads to southern Florida. The plant in Miami pays $1.00 a mile to the same truckload carrier to haul loads to Chicago. The average truckload rate per mile is $1.50. The shipper negotiates a continuous move rate of a $1.35 a mile for loads moving between the two cities. In theory, this saves the company 10%.

But, he says, “If the cost of the continuous move is allocated to the divisions at $1.35 a mile, the Chicago division is a huge winner. Its rate went from $2.00 to $1.35, a savings of about 33%. The Miami division is a huge loser, as their rates went from $1.00 to $1.35, an increase of 35%. So, while the company may save 10% overall, the Miami division is subsidizing the savings for the Chicago division.”

Similar issues or worse would be true for such a continuous move between different companies. Where are the models or standards for how the savings should be shared? We can all say there should be a way, but I agree, in reality, this has served as a large barrier.

AMR’s Aimi says that there have been other very practical issues, in addition to the savings allocation question. Those include: the reliability of the linked loads, and how they get handled when a tour is broken; having a single rate from a carrier that applies to two organizations; and getting organizations to change their carriers in a lane to take advantage of opportunities.

“The best models that I have seen work are when a particular company assesses its lanes and works directly with another or couple of suppliers or other manufacturers to get complementary lanes,” Aimi told me. “This is especially true when a dedicated fleet is being used and the patterns have reliable repetitiveness.”

In other words, when there are fairly limited arrangements, and I agree that there are a decent number of these one-off arrangements out there. But aren’t those one-off efforts just scratching the true collaboration potential?

Potential cost savings have only marginally impacted the development of collaborative strategies. The capacity situation to me seems perpetually too dynamic to be a sustaining catalyst. Will we still be chasing this same vision for yet another 20 years?

But wait! We have a new wild card in the deck: Green supply chains and sustainability. Might this finally be the driver that puts transportation collaboration into high gear? Could we even have some of it mandated by government? I say yes and yes, but am out of space. More on this very soon.

Would you add new collaboration types to our four varieties? Why do you think Collaborative Transportation has never really taken off? Should we have some sort of standards about how savings should be allocated? Will Green make it happen? Let us know your thoughts at the Feedback button below.

Let us know your thoughts.

Web Page/Printable Version of Column

***Upcoming Videocast ***

Innovation in Supply Chain
Execution Videocast Series

April 14 , 2009

Part 3: Transportation
Management for the New Era

***Transportunities 2009***
On-Line Expo & Conference

Key Note Speakers:
Dr. Chris Caplice, MIT New Opportunties and Challenges in Transportation Management

Dan Gilmore, SCDigest What's New in Transportation Management Systems?

Dr. David Simchi-Levi,
The Role of Supply Chain Nework Design and Carbon Emissions in Transportation Management

Excellent New Breakout Session!

Transportation and the
Green Supply Chain

April 7th & 8th, 2009
10:00 a.m. - 4:00 p.m. CST
(Both Days)

Next Generation Supply Chain: Integrating Planning and Execution

Download this ground-breaking report from Chief Supply Chain Officer Insights

This Week's Supply Chain News Bites Only from SCDigest

Supply Chain Graphic of the Week: Substituting Items Smartly

This Week's Supply Chain by the Numbers - Copper Prices, Woods Pallet Standards, Pick and Pack, Enterprise/SC Software Growth


Perhaps three is a charm for investors on Wall Street as stocks continued their rebound for the third week running.  With only two exceptions, our Supply Chain and Logistics stock index finished last week on a favorable note.

In the software group, Descartes was up 12.7%, followed by Ariba (up 7.6%).  In the hardware group, both Intermec and Zebra had moderate gains for the week (up 3.0% and 3.7%, respectively).  It was a great week in the transportation and logistics group as Yellow Roadway soared 59.5% (up 114.5% in just the last month).      

See full stock report.

Each Week:

-Global Supply Chain
-Distribution/Material Handling
-Trends and Issues

Weekly On-Target Newsletter
March 31, 2009 Edition

Gilmore's Daily Jab

No Need to Worry about Protectionism against China Right Now

Huge Looming Deficits Mean US Desperately Needs Chinese Government to Buy US Bonds, and We Just Cannot Tick them Off

THIS WEEK ON Distribution Digest


HolsteHolste's Blog: Will We See More Automated Mixed Case Palletizing in the DC?

>> Top Story!: Shippers Dodge a Bullet, for Now, as Fire Marshals Group Tables Wood Pallet Classification Changes
>> Vendor News: New DC Labor Schedule Optimizer from Manhattan Associates

Gilmore: Fred Berkheimer of Unilever Hangs 'Em Up

>> Quicksilver WMS Case Study fom HighJump

Which of these countries is not in the "G-20" countries that met this week in Europe to solve the world's economic ills: Indonesia, Spain, or Saudi Arabia?

A. Click to find the answer below


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We received a number of letters on our piece on Technology that will Dramatically Impact Supply Chains, featuring the interesting thoughts of futurist Jack Uldrich on robots, nanotechnology, RFID, cheap supercomputers and more.

That includes our feedback of the week from Jeremy Hammant of the UK's LCP Consulting, who says we often hear about technology that will be rapidly adopted, but it rarely turns out that way, a point also made by Tom Moore of Warehouse/Transportation.

Ou friend John Hill of TranSystems says big changes are afoot, and sends a YouTube link that sums up some of these incredible global changes.

You can read all these and more below.

Feedback of the Week - On Natural Gas Cars:

How many times have we heard about a new technology that was going to revolutionise the world of business! For the majority of businesses (in all sectors) the challenge is getting their existing technology investments to deliver value - and that's everything from warehouse automation through to ERP implementations. All too often companies get seduced by the technology "silver bullet" that will solve all of their supply chain problems. Unfortunately, supply chains are more complicated than that.

The solution to the problem, whatever it may be, will invariably require investment in people, process change and physical infrastructure as well as technology. Beware any technology vendor that says otherwise! 

Jeremy Hammant
LCP Consulting

More on New Technologies:

I personally feel that it is high time Supply Chain Managers start looking seriously at Management Technologies which they are applying to their businesses rather than focusing on IT solutions. In the prevailing situation, this has become even more imperative. Theory Of Constraints is one such Management technology which I think is extremely relevant now and most of the predictions about “Supply Chain Management traps “ which Dr. Goldratt has made in the past are getting revealed in the present crisis.

In the absence of correct Management technologies, a fast-speed IT solution is like having a Mercedes Benz car without knowing how to drive it differently than a Fiat!

Girish  J. Bhave

I am not sure I agree with technology spreading as fast as the water lilly.  The speed at which technology makes an impact will be tempered by people -- people often believe that tangible assets are much easier to justify than information technology.  Consider these examples:

  • Inventory optimization software vs. having more inventory 
  • Routing software vs. excess miles
  • Optimized load building vs. inefficient loads

In each of these cases, the products are proven to work and be cost effective but adoption has been far from universal.

Tom Moore
Transportation|Warehouse Optimization

Quiet Logistics is a 3rd Party Fulfillment house.

We recently made a complete and irrevocable commitment to robots in the warehouse. Our QuietCenters are based on robotic drive units (Bots).

Our premise is simple: Each $20,000 Bot replaces nearly $2m in labor over its useful life. Robots don't tire, complain, unionize or make mistakes. They work 24-7 and do not need vacations.

In addition, they only need an empty warehouse floor-space laid out in a 40' x 40' checkerboard grid and they are immediately productive at throughput rates equivalent to the most highly-automated facilities in existence.

If we add or lose a customer, we deploy new or redeploy existing, respectively, BOT battalions where they are most needed in our network of facilities. We locate in any building with more than 11' clear and fill any space above that with mezzanines and vertical lifts, which the robots ride up and down without assistance.

The system is entirely portable, replicable, deployable in fewer than 8 weeks, and can handle complex Value Added tasks that are common in Fulfillment; kitting, assortments, shrink-wrapping, gift-wrapping, tagging, and special labeling and packaging. It requires less capital to buy and less cash to operate than traditional automation.

This is not in the future; this all exists today and is being used by the likes of Staples, Walgreens, and Zappos. Any executive that is thinking of investing in blue steel or bolting another conveyor/sorter/carousel to the ground, is wasting their employer's money.

Oh, and yes, the robots are quiet.

Bruce Welty
Quiet Logistics

Tagging onto your coverage of Mr. Uldrich, thought that you might like to see the video at the link below:  (Titled Did You Know?)

Though some of the content may be apocryphal, there is little doubt that exponential change is already well underway.

John M. Hill
Vice President/Senior Consultant


Q. Which of these countries is not in the "G-20" countries that met this week in Europe to solve the world's economic ills: Indonesia, Spain, or Saudi Arabia?

A. Spain

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