THE FIFTH CONFERENCE MOVE - LOGISTICS POWERHOUSE
Reconsidering the ground rules of logistics
—Alex Van Breedam The fact that the world economy is currently dwindling into a recession could in some cases be considered as an opportunity, rather than as a threat. At such rare moments of creative destruction the global logistics industry is forced to reconsider its ground rules and traditional ways of working, and radical new ideas can gain ground. In the area of supply chains and logistics, like in most other areas, improved and tighter collaboration is on top of the agenda.
Moreover, the winning companies and economies of tomorrow, will be those that are the swiftest to adapt to the new global playing field by creating strong alliances and by working together to consolidate their supply chains. Horizontal collaboration, even between (semi-) competitors, and the bundling of freight flows across multiple companies, is expected to reshape the logistics landscape in the next decade. By clustering specific logistics activities and consolidating supply chains, significant economies of scale can be achieved in terms of efficiency (logistics cost), effectiveness (customer service) and environmental sustainability (carbon footprint). The traditional belief in supply chain management used to be that simultaneous improvements in all three of these dimensions is impossible to realize. Even in large multinational corporations, there exist too many tradeoffs; freight volumes and activities are just too small or fragmented. As a result, a company that wants to guarantee high service levels and just-in-time deliveries to its customers pays a stiff price. It cannot use cheaper or more sustainable modes of transportation such as rail or inland shipping. Because it has to ship its products in half empty vehicles, the company will also be held accountable for a relatively high CO2-emission or carbon
footprint. For several years now, the logistics world has been adamantly pleading for more collaboration as the only escape from this deadlock. Until today, a major obstacle on the road towards collaboration was the lack of a neutral go-between that owns the necessary methodologies, technologies and credibility to enable collaboration between independent players, sometimes even competitors. This neutral go-between will act as an orchestrator, a community manager.
with respect to their position in the supply chain, a neutral referee is required to manage the collaboration and to guarantee an objective redistribution of the gains. The orchestrator will play this role of neutral referee among the participants of the community. With respect to the bundled supply chain, the orchestrator could even be considered as its supply chain manager. As with the traditional onecompany supply chain, logistics service providers
If these ideas and concepts turn out to be realized in the next decade, a new market will emerge: a market for the cross-company supply chains. If these ideas and concepts turn out to be realized in the next decade, a new market will emerge: a market for the cross-company supply chains. This new market will exist beside the traditional supply chain market in which a company only manages its own supply chains. If some flows appear to be insufficiently efficient, effective or sustainable, a company can decide to bundle these flows with those of other companies in order to form a new cross-company supply chain. Hence, different shippers share a cross-supply chain and thus participate in a community. As these shippers are peers
will continue to play their role in the cross-supply chain market. The operation of a cross-supply chain is comparable to that of a traditional supply chain. However, this horizontal collaboration also requires an attitudinal shift among the logistics service providers. Logistics service providers must accept that they operate in a transparent mode towards the community. Also some of their processes and their ICT needs to be adapted to cross-supply chain operations. Given these barriers, the opportunity that goes with operating cross-supply chains is huge: a new market based on partnerships
and gain-sharing more than on subcontracting relations, leading to higher and more sustainable margins. Clearly, the market for crosssupply chains could eradicate a great deal of costly imperfections out of the traditional logistics market by substantially improving efficiency, effectiveness and the sustainability of supply chains and thus creating a multiple-win effect for all parties involved. Undoubtedly, this would be beneficial both for enterprise and society. The question is not ‘if’ this new market of crosscompany supply chains will emerge, but ‘when.’
Alex Van Breedam is CEO of Tri-Vizor, a cross-supply chain orchestrator. He previously led the Flanders Institute for Logistics and was principal author of the Extended Gateways plan.
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