Characteristics of collaborative business models

CO³ POSITION PAPER: CHARACTERISTICS OF COLLABORATIVE BUSINESS MODELS Andrew Palmer, Heriot-Watt University Maria Jesus Saenz, Zaragoza Logistics Center Tom van Woensel, Eindhoven University of Technology Eric Ballot, Mines ParisTech (Additional support from WP3 partners DINALOG and ITENE)

Effectiveness Supply Chain

Sustainability

Cross Supply Supply Supply Chain Chain Chain Optimisation Supply Chain

Efficiency

The presented foreground was generated with the assistance of financial support from the European Union : The research leading to these results (Deliverable D3.1) has received funding from the European Union's Seventh Framework Program ([FP7/2007-2013- SST-2011-RTD-1-7.6)] under grant agreement n°284926 Deliverable D3.1 June 2012

CO³ Project www.co3-project.eu contact@co3-project.eu

a.palmer@hw.ac.uk Logistics Research Centre School of Management and Languages Heriot-Watt University Edinburgh, UK EH14 4AS Page 1 of 63

Executive Summary: CO³ Position Paper about Characteristics of Collaborative Business Models - Initial Framework The EU funded ‘Collaboration Concepts for Co-modality’, or ‘CO3’ in short, has the aim of developing, professionalising and disseminating information on the business strategy of logistics collaboration in Europe.

IDENTIFYING COLLABORATIVE BUSINESS MODELS As part of the CO3 project this report has been produced to identify those characteristics that can contribute to a successful collaborative business model. It focusses specifically on the cultural, philosophical and operational aspects of companies who currently collaborate horizontally in one form or another, and compares this with companies who have yet to consider, or have rejected, this approach.

The methodology involved developing an interview protocol which was based on existing literature from a wide range of sources. The literature considered the cultural and operational aspects of collaboration and this identified the key elements to be included in any discussions with companies. Individual companies were selected for interview based on a range of criteria including:    

Different industry sectors Retailers, manufacturers and logistics service providers Multi national and local operations Range of transport modes

In total 30 companies were interviewed in four countries. Some of the companies were duplicated in order to understand different perspectives. These individual interviews were supplemented by focus group seminars involving people who also represented a wide range of logistics related activities. They were split into breakout groups and given a set of questions to discuss. The members of each group were made up of representatives from multiple industry sectors, and at least one logistics service provider (LSP), so that there was a balance between depth and coverage. All the sessions were recorded.

The elements derived from the literature, and used in the interviews, covered aspects of company culture, including the corporate environment and managerial philosophy, the drivers for, and components of, collaboration. This philosophical and cultural analysis was supported by operational and supply chain characteristics.

MAIN CHARACTERISTICS From the discussions there was no clear definitive model of a successful collaboration because all companies behave differently. However, there were certain Page 2 of 63

elements that had to be in place to make a successful outcome more likely. Two characteristics that stood out were transparency and trust. All the literature and the vast majority of companies stated that trust was paramount. There had to be a belief that all the companies in a partnership would work as a team and that they are together for the benefit of each other in the concept of mutuality and solidarity.

Companies in a collaboration needed a similar culture, similar business objectives and a desire to make collaboration work. For many of the companies interviewed CSR and the environment are key pillars of their mission statement and those that are likely to collaborate will have targets for CO2 reduction. The increasing competitive environment will force companies to find efficiency improvements and the main drivers are cost reduction, customer demands and the need to maintain or improve service levels.

If these drivers are present in the company then the main driving force behind horizontal collaboration are key people within a company. If these individuals have many years of logistics experience, know their operations extremely well, take an active part in external logistics events, and there is clear support from top management, then the chances of achieving a successful collaboration with a partner are greater. One of the main barriers to collaboration was finding the right partners.

Many companies relied on logistics service providers to suggest partners or ad hoc opportunities, and others attended various “speed dating� meetings, with varying levels of success. Some of the interviewed companies undertook a form of due diligence to ensure any partner they found was economically, financially, operationally and legally healthy.

PREFERENCES In terms of preferences the manufacturing companies nearly always said that their priority was to collaborate vertically with customers if possible. This is understandable because of the perception that this ties the manufacturer to the customer as well as providing more efficient transport. When it comes to horizontal collaboration then companies would always prefer a non-competitor, before a semi and full competitor.

As well as the need for trust and finding the right partners, the top barrier to collaboration was internal politics and a company’s own organisation culture. Large companies particularly were more likely to be fragmented and have internal divisions who were not collaborating, and have to overcome a silo mentality.

GAIN SHARE With the current levels of collaboration all the gain share mechanisms between partners are fairly simplistic relying on a basic percentage allocation of savings, or a logistics service provider setting rates which reflect the opportunities for collaboration. With the exception of France, legal contracts between shippers

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involved in horizontal collaboration don’t exist, though shippers would have legal contracts with LSP’s.

COMPANY CULTURE As well as company culture there had to be operational synergy between partners.

This meant that the vehicles used had to be compatible, the area covered by these vehicles and sizes of loads had to be complementary, and the products had to be compatible with each other and the vehicles being used. One of the key operational areas was service levels. This was considered in the interviews as a major concern given the pressure from customers for more frequent, faster deliveries of smaller quantities. This makes companies continuously search for new ways to improve their service levels without incurring higher costs. Many of the interviewees agreed that horizontal collaboration could be of benefit in these circumstances.

TRANSPORT MODE Road was by far the dominant mode of transport for the companies interviewed.

There were a few instances of rail freight movement but the companies felt that services across Europe tend to be nationally organised and there is a need to make it work more effectively across Europe. The companies wanted rail services to better understand the needs of shippers and provide a commercial level of services INITIAL BUSINESS MODEL The outcomes from the interviews have resulted in an outline business model encompassing three distinct phases. The first is exploration which is the initial stage of companies recognising the potential benefits of collaboration, examining the key elements described in this paper, and sharing relevant ideas and opportunities with each other. The second phase is assimilation which transforms the ideas from the first phase into a workable collaboration. Finally, exploitation applies the assimilated knowledge to create new processes that benefit the relationship and their common logistics flows.

This deliverable has focussed on the characteristics of companies and examined the issues, drivers, barriers and components of collaboration in order to develop an initial framework and outline business model. The next steps will focus more on the operations of these companies interviewed so that improvements can be made to the model. Discussions with more companies, and additional focus group meetings, will test out these improvements.

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Table of Contents Executive Summary: ............................................................................................................................................... 2 1.

2.

3.

4.

5.

Introduction ................................................................................................................................................... 6 1.1

Background ........................................................................................................................................... 6

1.2

Scope of the deliverable, aim and objectives ....................................................................................... 7

State of the Art .............................................................................................................................................. 8 2.1

Elements of collaboration ..................................................................................................................... 9

2.2

Examples of horizontal freight partnerships ....................................................................................... 12

Methodology................................................................................................................................................ 15 3.1

Development of the interview protocol ............................................................................................. 15

3.2

The companies interviewed ................................................................................................................ 15

3.3

Focus group meetings ......................................................................................................................... 16

3.4

Secondary data.................................................................................................................................... 16

Initial Collaboration Framework .................................................................................................................. 17 4.1

Elements of the framework ................................................................................................................ 17

4.2

Outcomes from the interviews and focus group meetings ................................................................. 17

4.2.1

Company culture ........................................................................................................................ 17

4.2.2

Company culture – corporate environment ............................................................................... 18

4.2.3

Company culture – managerial philosophy ................................................................................ 20

4.2.4

Collaborative environment ......................................................................................................... 21

4.2.5

Collaborative components ......................................................................................................... 26

4.2.6

Operational characteristics ........................................................................................................ 28

4.2.7

Supply chain operations ............................................................................................................. 30

Horizontal Collaboration Business Model .................................................................................................... 34 5.1

Introduction ........................................................................................................................................ 34

5.2

Dynamic .............................................................................................................................................. 35

5.3

Next steps............................................................................................................................................ 36

References ............................................................................................................................................................ 37 Appendix A – Examples of collaboration partnerships ......................................................................................... 38 Appendix B – CO3 collaborative attitudes interview structure ............................................................................ 41 Appendix C – The companies interviewed ........................................................................................................... 63

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1. Introduction 1.1 Background The EU-funded project CO3 (Collaboration Concepts for Co-modality) aims to develop, professionalise and disseminate information on the business strategy of logistics collaboration in Europe. The goal of the project is to deliver a concrete contribution to increasing vehicle load factors, reducing empty movements and stimulate co-modality, through collaboration between industry partners, thereby reducing cost and transport externalities such as congestion and greenhouse gas emissions without compromising the service level. The project will coordinate studies and expert group exchanges and build on existing methodologies to develop legal and operational frameworks for collaboration via freight flow bundling in Europe.

Furthermore, the project consortium of knowledge institutes and specialised industry players will develop new business models for logistics collaboration. The developed tools, technologies and business models will be applied and validated in the market via pilot studies. Finally, the CO3 consortium will promote and facilitate matchmaking and knowledge-sharing through conferences and practical workshops to transfer knowledge and increase the market acceptance of collaboration.

The core of the CO3 project is what is referred to as the applied research cycle. This cycle has been set up as a continuous learning and feedback loop between the models and tools needed for supporting collaborations, the most suitable business models for groups of companies wanting to collaborate and finally the actual test cases for collaboration. These elements are developed under individual work packages as shown below.

Toolbox

Pilot projects

Business models

FIGURE 1: THE CO3 APPLIED RESEARCH CYCLE

One of the work packages within the CO3 project is aimed at identifying appropriate business models for inter- and intra supply chain collaboration which are based on the use of co-modality and exploiting capacity. This includes: 1. Establishment of the characteristics of joint business models for inter- and intra supply chain collaboration.

2. Development methods that can be used to generate successful joint business models for inter- and intra supply chain collaboration.

3. Determination of the set of criteria for verifying the successful validation of business models.

4. Creation of tools for joint business models suitable for inter- and intra supply chain collaboration.

5. Integration of the key learning experiences and findings of this work with other parts of the CO3 research cycle including tools and technologies and the orchestrated case studies.

This deliverable within the business models work package has attempted to identify the issues, barriers and benefits, and in particular the opportunities, for consolidated co-modal movements, by interviewing individual companies, holding focus group sessions and examining the extensive literature on the subject. A Page 6 of 63

business model for collaboration and fully based on the use of co-modality should outline how it delivers value, considering the revenues, costs and profits. Most research on business models focuses mainly on only one focal company and does not usually describe the business models of collaboration or alliances.

Literature on alliances focuses on governance aspects and hardly on the way the business model is constructed or the way value is created in the market place by these innovative joint business models. In this deliverable four organisations located in four different EU countries have been involved in identifying appropriate collaborative business models: Heriot-Watt University, Zaragoza Logistics Center, Eindhoven University of Technology and Mines ParisTech. The Dutch Institute for Advanced Logistics (DINALOG) has been looking after the administrative aspects of the work, and another organisation, ITENE, are also involved with this element work.

1.2 Scope of the deliverable, aim and objectives The scope of this deliverable is restricted to horizontal collaboration between companies and specifically in connection with freight transport. In order to maximise the success of a collaboration it is essential to understand a number of issues such as why there is a need to collaborate, with which companies would it be best to collaborate, which activities are most suited to collaboration and what are the key elements of collaboration. The aim of this deliverable has therefore been to develop an initial framework that can help identify potentially successful collaborative relationships, which can then be applied to one or more generic collaborative business models. The results of this study have been based on the business model characteristics of companies that currently have various degrees of horizontal freight transport collaboration, and have been compared with companies whose current collaborative activities are limited and tend to be vertical in nature. In order to achieve this aim the methodology of this deliverable has been to • • • • • •

develop an interview protocol identify diverse companies to interview interview individual companies arrange focus group meetings analyse the results from the interviews and focus group meetings develop an initial framework and preliminary business model

The interview protocol has been developed to try and understand a company’s attitude to horizontal collaboration, whether it is the strategic, cultural and/or operational issues that affect the decisions, and whether there are sufficient drivers and collaborative components in place to enable collaboration to occur. The initial framework and preliminary business model will help identify a strategic fit between companies and to help move that potential partnership through to a successful collaboration.

By developing a fixed interview template and protocol, the learnings from interviews held in various countries and industries can be efficiently compared and summarised, and combined with the more theoretical results described in the operational framework paper (Cruijssen, 2012). In this way a coherent and complete overview of both the ‘hard’ and the ‘soft’ elements of collaboration can be established.

Together, these insights will be transferred to the pilot projects work package so that the example projects can benefit from the results and be moderated in the standardised approach developed by the joint CO3 consortium.

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2. State of the Art Eurostat data (2012) show that about 24% of all road freight kilometres driven in the European Union (27 countries) are by empty vehicles, and that the average vehicle is loaded to 56% of its capacity in terms of weight (European Environment Agency, 2010). Together these two observations result in an overall efficiency score of European road transport of around 45%. The cost of this inefficiency has been estimated at about €160 billion (Cruijssen, 2012). In many instances products are volume constrained so the weight utilisation factor can be misleading. Nevertheless, it is important to get the right balance between heavy and light products on the vehicle to obtain the maximum capacity utilisation by weight and volume.

Depending on the size of vehicle, the density ratio for this varies between 200 and 300kg/m3. Using collaborative partners with the right mix of products would enable this higher capacity utilisation to be achieved. This would not only make transport more cost efficient, but would also reduce their environmental impact. The percentage of vehicles running empty also needs to be qualified. There are vehicles for which it is very difficult to obtain a backload such as car transporters, liquid tankers which need to be cleaned after each delivery, and cement mixer lorries, though even the utilisation of these vehicles might be improved through creative thinking and innovative engineering. There is also an imbalance in movements between certain regions. With palletised goods vehicles, empty running is less, with a figure of 19% quoted by one major logistics service provider in the UK. This, they said, varied from 5% in the centre of the country where it was relatively easy to find a backhaul, to 30% in the more remote parts of the country. In Europe the modal share of road dominates despite its environmental impact. Collaboration is a way to build flows compatible with trains, barges or short sea shipping operations. This use of multiple transportation modes has the potential to significantly change the environmental footprint with a reduction up to 60% of CO2 in France as a result of low “carbon” electricity.

There are a wide range of papers covering the topic of logistical collaboration and the key ones are discussed in a full state of the art paper produced as part of the CO3 project (Cruijssen, 2012), but for completeness, relevant aspects will be briefly discussed in this section. Logistical collaboration takes many forms and is interpreted by companies in many different ways. From the 1990’s vertical collaboration, the supply chain approach, involving a supplier customer relationship began to establish itself, typically involving stock management such as vendor managed inventory, collaborative planning forecasting and replenishment and efficient consumer response. This gradually extended to the transportation area with customers taking on the collection of goods from suppliers (factory gate pricing) in order to make their vehicle use more efficient by reducing their empty running, and suppliers wanting to strengthen their customer relationships by sharing their routes with customers. At the start of the 2000 decade increasing concerns were expressed about sustainability and the need to reduce carbon dioxide emissions. This resulted in various pressures from government, non-government bodies, consumers and retail customers.

These factors, together with statistics showing poor utilisation of vehicles, the constant increase of transportation and fuel costs, a general economic downturn and a focus on cost reduction, have encouraged companies to find better transportation solutions for supply chains Simply sharing trucks, or to use a logistics service provider, does not mean that companies collaborate, but there is certainly an added value from this activity coming from more efficient truck utilisation.

Collaboration involves a level of communication between the partners which can be an “arm’s length” high level knowledge exchange, but can include increasing levels of interaction from synchronised planning to network integration.

Whilst the focus of this paper is on external collaboration it is clear from the literature, and from discussions, that many organisations have still not achieved internal integration of their activities. Large companies particularly suffer from poor internal communication, do not fully understand their own processes, and involve delegated tasks which impact other departments but over which an employee has no control because of silo mentality (Barratt, 2004).

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2.1 Elements of collaboration Barratt (2004) discussed elements of collaboration from the view of culture, strategy and implementation as shown in figure 2 below. It is important that collaboration takes into account strategic elements to ensure that any collaboration can work in the long term. This involves resource and commitment, intraorganizational support, the corporate focus, the business case, and technology. Cultural elements are treated as supporting components, such as trust, mutuality, information exchange, openness and communication. These elements will be defined and discussed later in the report. In the core element of collaboration it is vital to manage change from a status quo, or possibly silo culture, to a collaborative culture by considering five factors including cross-functional activities, process alignment, joint decisionmaking, and true supply chain metrics.

Source: Barratt, 2004, p.36 FIGURE 2: THE ELEMENTS OF COLLABORATION Lambert et al. (1996) presented eight key elements designed to identify successful supply chain collaborative partnerships. Although this categorisation was developed for vertical supply chain relationships, it can also be related to horizontal collaboration. This categorisation involves planning, joint operation controls, communications, risk/reward sharing, trust and commitment, contact style, scope and financial investment, as shown in figure 3 below. This theory, based on the degree of collaborative relationship between partners, are classified from low to high, high being those that are most integrated.

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Planning

Partnership component Style Level Content

Joint operating controls

Measurement

Ability to make changes

Communications

NON-ROUTINE

DAY-TO-DAY Organization

Low

Medium

High

On ad-hoc basis.

Regular scheduled.

Systematic: both scheduled and ad hoc

Focus on projects or tasks.

Sharing of existing plans.

Focus is on process.

Focus is on relationship.

Performed jointly, eliminating conflicts in strategies.

Performance measures are developed independently and results are shared.

Parties may suggest changes to other systems.

Measures are jointly developed and shared focused on individual firm’s performance.

Performed jointly and at multiple levels, including top management; objective is to mesh strategies; each party participates in other’s business planning.

Measures are jointly developed and shared focused on relationship and joint performance.

Very limited, usually just critical issues at the task or project level.

Conducted on ad-hoc basis between individuals.

Primarily one-way.

Balance

Parties may make changes to other’s system after getting approval.

Conducted more regularly done at multiple level; generally open and honest.

Parties may make changes to other’s system without getting approval.

Planed as part of the relationship; occur at all levels; sharing of both praise and criticism; parties “speak the same language”.

Limited number of scheduled communications; some reutilization.

Two-way but unbalanced.

Systematised method of communication; may be manual or electronic; communication systems linked.

Balanced two-way communication flow

Joint modification of individual systems.

Joint development of customised electronic communications.

Some tolerance for short-term loss.

Willingness to help the other gain.

Fairness is tracked year to year.

Partner is given more trust than others, viewed as “most favoured supplier”.

High tolerance for short-term loss.

Commitment is to a longer term relationship.

Commitment is to partner’s long-term success; commitment prevails across functions and levels in both organizations.

Cover a longer time frame.

Contracts are very general in nature and are evergreen, or alternatively the entire relationship is on a handshake basis.

Contract does not specify duties or responsibilities; rather, it only outlines the basic philosophy guiding the relationship.

Activity covered by relationship represents significant business to both parties.

Use of individual system.

Electronic

Risk/ reward sharing

Loss tolerance Gain commitment

Trust and commitment

Contract style

Scope

Investment

Commitment to fairness Trust

Very low tolerance for loss.

Limited willingness to help the gain.

Fairness is evaluated by Transaction.

Commitment to each others’ success

Trust is limited to belief that each partner will perform honestly and ethically.

Commitment of each party is to specific transaction or project trust must be constantly “re-earned”.

Timeframe

Covers a short time frame.

Coverage

Contracts are specific in nature.

Share

Contracts are more general in nature.

Desire to help other party gain.

Fairness is measured over life of relationship.

There is implicit, total trust; trust does not have to be earned.

Activity of partnership represents a very small share of business for each partner.

Activity represents a mode share of business for at least one partner.

Value-added

Relationship covers only one or a few value-added steps (functions).

Multiple functions, units are involved in the relationship.

Multiple functions and units are involved; partnership extends to all levels in both organizations.

Critical activities

Only activities which are relatively unimportant for partners’ success.

Activities that are important for each partner’s success are included.

May jointly own low value assets.

Activities that are critical for each partner’s success are including.

Financial

Technology

There is low or no investment between the two parties.

No joint development of products or technology.

Limited personnel exchange.

People

High value assets may be jointly owned.

There is significant joint development; regular and significant joint R&D activity.

There is some joint design effort and there may be some joint R&D planning.

Extensive exchange of personnel.

Participation on other party’s board.

Source: Lambert et al., 1996, p.11 FIGURE 3: PARTNERSHIP COMPONENT LEVELS These three levels of collaborative integration are also illustrated by Lambert et al. (1999) in figure 4 below.

These were established for vertical collaboration but can be considered suitable for horizontal collaboration. The vast majority of current examples of horizontal collaboration in practice can be Page 10 of 63

considered arm’s length in that they operate at a loose or casual level without any form of contract or rules, and with limited communication. At the other extreme is horizontal integration which can be considered as a merger between companies.

Source: Cruijssen et al., 2007, p.25 FIGURE 4: HORIZONTAL COOPERATION AND THE LEVEL OF INTEGRATION (INSPIRED BY LAMBERT ET AL., 1999) The three intermediate levels of integration have been labelled Type I, Type II, Type III. Type I consists of partners who know and trust each other; they coordinate their activities and planning on a limited basis.

The collaboration partnership may be short-term; and a single division of each company may focus on one single activity. Type II collaboration maintains a longer collaborative relationship. The scope of collaboration for the participants is not only to coordinate, but also to integrate part of their business planning. The horizon is of a long though finite length and multiple divisions or functions of the companies are involved. Type III collaboration refers to those organizations which have a significant level of integration, and each company treat others as an extension of its own business unit. There is no end date for this kind of collaboration.

The literature on different enterprise cultures and their compatibility is vast. In the context of horizontal collaboration, an important aspect is the cooperative culture of enterprises, which affects the way enterprises in an alliance interact with each other. The success of collaborations also depends on the cooperative culture within a firm. Koppers et al. (2008) define cooperative culture as the specific set of ability, willingness and awareness of a firm and its employees to work in collaboration with other firms to offer customer-oriented solutions. It is influenced by the seven factors shown in Figure 5.

FIGURE 5: INFLUENCING FACTORS OF COOPERATIVE CULTURE IN FIRMS (KOPPERS et al, 2008) The seven factors illustrated in Figure 5 are interpreted as follows: – – –

Goal orientation: collaboration partners strive and pursuit common goals; Leadership: appropriate leadership arrangements put the employees in the position to collaborate with the collaboration partners, e.g. encouragement of teamwork; Division of work: division of work resulting in workload reduction for each collaboration partner; Page 11 of 63

– – –

–

Transparency: if partners have access to collaboration-related information without loss, delay or distortion, transparency exists; Trust: a corporate culture based on trust enables the employees to trust external collaboration partners; Understanding: a shared understanding for the business and current situation of the collaboration partner advances the success of collaboration. The knowledge of the collaboration partners business’ allows the partner to analyse their strengths and weaknesses and coordinate them accordingly; Experience: experienced benefits and issues within collaboration can be taken into early consideration of collaboration planning.

This framework only analyses how enterprise culture is influenced. The detailed profile of cooperative culture and the interaction of different types of cooperative culture need intensive investigation to guide collaborative practices.

A systematic framework would help facilitate the whole collaboration process, from estimation, establishment, performance evaluation, through to long-term relationship. A systematic perspective also serves as a guideline in investigating horizontal collaboration. Collaboration has a life cycle from the time of engagement to disengagement / further development. Simatupang and Sridharan (2002) introduce the lifecycle of collaboration with four primary processes. First, the engagement process aims to identify the strategic needs, find the right partners, and set mutual agreements concerning performance. The second process involves forward-looking planning of resources, tasks, and capabilities for future requirements.

Third, supply chain members perform daily operations to effectively meet the requirements of short and long-term goals. This is the implementation process in which the members execute the planning and to assess the overall performance. Fourth, the evaluation process is to evaluate and decide either to modify or to terminate the agreements.

At the beginning of horizontal collaboration, adequate feasibility tests are needed to avoid unnecessary waste of monetary and time investment. Naesens et al. (2009) proposed a strategic decision-support framework for the implementation of horizontal collaboration and used the analytic hierarchy process (AHP) to develop this framework. An adaptation of this framework is used in this report.

The elements of collaboration discussed in this section highlight the key factors to consider when trying to assess the appropriateness of collaborative partnerships and to assess the likelihood of their success.

2.2 Examples of horizontal freight partnerships There are numerous examples of collaboration in Europe but relatively few are horizontal freight based collaboration. Given that horizontal collaboration is a current innovation in logistics, the categories of adopters are innovators, early adopters, early majority, late majority, and laggards (Rogers 1962, p. 150) where innovators are the first individuals to take a risk and adopt an innovation. The companies listed in Appendix A may fall in this category. This list represents an example of the range of types of collaborations, identified from the literature, but as with any dynamic sector some of these may be out of date. There are 25 cases and they can be categorised as follows:    

FTL movements with backhauls/fronthauls to reduce empty running – 6 cases Consolidation of deliveries to common customers using a LSP – 13 cases Consolidation of deliveries to common customers organised by shippers themselves – 1 case Co-modal collaboration – 5 cases

These examples cover single and multiple country operations as shown in the pie chart below.

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1

1 UK

1

France

1 1

9

Poland Czech Republic

1

Europe wide

1

Italy Norway

1

Italy/Germany 2

France/Netherlands Netherlands/Hungary 6

FIGURE 6: COUNTRY COVERAGE OF COLLABORATION CASE STUDIES Optimizing truck loads through collaboration routinely achieves cost savings and efficiency gains of between 6% and 10% according to Transport Intelligence (Graham, 2011). As logistics operators working on the same level of supply chain co-ordinate their logistics planning and operational process to achieve higher synergy, the cost efficiency of the whole coalition improves. ECR France (2012) introduces a case of horizontal collaboration among three manufacturers: Bénédicta, Banania, and Lustucru. A collaborative partnership between Bénédicta and Banania began in 2004 with the support of a logistics service provider FM Logistics, when a cooperation synergy was identified. Lustucru joined the coalition in 2006. The three companies have manufacturing locations near to each other in the north of France, and deliver to, and store products in, the same distribution centre operated by FM Logistics in Longueil-Sainte-Marie. They also serve the same customer RDC of Carrefour. FM Logistics consolidate their deliveries in a shared warehouse and operates joint distribution. The average delivery frequency has been increased by 34% and this allows more flexibility for logistics planning and reduces the inventory cost. The average vehicle fill rate also increased by 15% compared to the fill rate before cooperation. The storage cost also decreases due to a 16% reduction in average stockholding in the RDC. This collaborative relationship improves not only the cost efficiency, but also reduces the environmental footprint. This collaboration is on-going and FM Logistics currently operate three more on a similar basis with between four and seven partners.

There are other successful implementations of collaboration in Europe. Graham (2011) states that the Culina Group has crafted a successful collaborative solution that has been embraced by both competing and non-competing dairy goods manufacturers in the UK. Originally formed in 1994 to provide 0-5◦ C temperature controlled supply chain services, the Culina Group markets its services to a broad range of dairy producers, including such brands as Muller, Danone and Kraft. Each customer fills a truck with its own dairy products, and Culina then picks up the truckload and delivers it to its own RDC. There, the customers’ dairy products are stored until they are combined with products from other manufacturers, and the combined truckloads are then delivered to a supermarket chain’s RDC.

The Institute of Grocery Distribution (2011) introduces a collaborative relationship between two competitors: Nestlé and United Biscuits. Obstacles such as cultural, brand protection, safeguarding product integrity are resolved by a series of meetings. Successful transport sharing resulted from detailed planning of the internal stock movement, the customer delivery and the invoicing procedure.

Cruijssen et al. (2007) present the case of eight Dutch producers of sweets and candy. They consolidate and delivery their goods by 3PL on a daily basis to improve the efficiency of their delivery processes. The primary objective is reducing the delivery cost, but at the same time, the customer service is also improved since that the reduced delivery number results in reduction of unloading and handling costs.

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In the UK and France there are a number of major retailers that use primary consolidation centres (PCC’s) receiving quantities from small volume suppliers. They are used to ensure full loads are moved from the PCC's to retailers RDC's. Some suppliers hold stock at the PCC's at their own cost which is called off when the retailer requires it. Although the retailer runs the PCC, typically through a LSP, the suppliers still own the stock until it is despatched from the PCC. However, this couldn’t be considered as horizontal collaboration because there is no communication between the suppliers. The LSP is merely providing a service. An example of this is Carrefour who, since 2009, has operated Collaboration and Consolidation Centres (CCC’s). These logistics platforms, subcontracted to a number of LSP’s, aim to consolidate flows from small and medium suppliers to regional warehouses. From there, the products are shipped together to the supermarket chain’s RDC. The CCC also stocks products at the suppliers’ expense. Even, if it not exactly a “spontaneous” collaboration between suppliers, due to the particular position of the third party: a major customer, the CCC seeks the same objectives as horizontal collaboration, but with a different approach. Today, 500 food suppliers to Carrefour conduct replenishment deliveries to 10 consolidation centres operated by several LSP’s.

The world’s third largest retailer, Tesco, has created a Knowledge Hub which is claimed to be the world’s largest ever on-line collaboration between retail suppliers. This is a web site which is available to be used by the retailer’s top 1,000 suppliers. Whilst not currently used for transport collaboration, it is designed to reduce the energy costs, waste and environmental impacts of the products Tesco buys, ultimately cutting 30 per cent of the carbon emissions from the supply chain by 2020. Through the hub, Tesco and its suppliers can explore challenges and opportunities, with suppliers sharing know-how and experience, sourcing information and learning through online discussions, forums, meetings and presentations. It therefore has the potential to develop and be used for transport collaboration in the future.

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3. Methodology 3.1 Development of the interview protocol Based on a review of a wide range of papers, a set of interview questions was developed covering the key areas of company culture, collaborative environment, collaborative components and operational characteristics. The draft of this interview protocol was discussed by all CO3 partners in this work package and was tested on an independent consultant in order to improve the structure and content, and best approach its objectives. The protocol was used for semi structured interviews with a range of companies across Europe to identify characteristics most suited to a collaborative partnership. A CO3 paper detailing the development of the interview questions and guidelines has been produced and is attached for reference in Appendix B. The main goals of these interviews were to • • • • •

Identify the motivations and strategic goals Identify the ‘soft’ or human factors that play a role in the start and life cycle of a collaboration project Gather industry and country views on collaboration Gather necessary information for developing the correct business models for collaboration Attempt to characterise the archetypical collaborator and the archetypical non-collaborator.

The outcome from the interviews will be used to motivate companies to collaborate and help them find their way in the possible support programs and potential partner selection steps

3.2 The companies interviewed The selection process criteria consisted of: •

• • • • •

Large companies that offer the possibility of different horizontal collaboration opportunities due to the various types of freight transportation they manage (road transportation, rail transportation or intermodality) Managers of different departments of the same company to learn from their different perspectives Companies from different sectors which have contrasting demanding areas (long distance transportation vs. last-mile transportation) Foreign international companies to analyse how global group culture is transferred to local management Retailers or manufacturers that can identify horizontal collaboration opportunities between two or more of their suppliers Logistics service providers (LSP’s) who can provide a different perspective on horizontal collaboration

The partners have interviewed a range of companies including 11 who are present in Gartner’s supply chain top 25 for 2011. In total 30 companies were contacted across Europe and visited to understand their characteristics and obtain their views on horizontal collaboration in freight transport. The company names are listed in Appendix C. These companies covered a range of sectors as shown below.

• • • • • • •

3 beverage manufacturers (2 alcoholic, 1 soft) 4 food manufacturers 3 non food FMCG manufacturers 4 FMCG retailers 5 LSP’s covering various market sectors 2 automotive manufacturer 1 home appliances manufacturer Page 15 of 63

• 5 industrial manufacturers • 3 chemical companies Although it is not possible to generalise from this sample, and no statistical selection techniques have been applied, it does provide a good range of sectors from different countries to illustrate the requirements and key issues associated with horizontal collaboration.

Using the interview protocol as the basis, all the interviews began with a general introduction to the company and any collaborative activities undertaken by the company. The interviews were recorded so that the interviewee could present material in any form to ensure a free flowing discussion. The interviewer interspersed with prompts to ensure the focus was on collaboration, the interview protocol questions were being addressed, and additional insights could be gleaned.

3.3 Focus group meetings th

Focus group meetings were held at Cranfield University on March 14 2012 and at the High Level Industry th Board meeting in Amsterdam on April 17 2012. The attendees of these meetings were split into groups and given a set of questions to discuss. The aim of these breakout sessions was to find out each group members attitudes towards collaboration by getting them to think about the questions listed below and to understand the differences in attitudes between different industry sectors. Each breakout group was recorded, and their permission to do this was obtained. It is important to get a balance between depth and coverage so each group was made up of representatives from multiple industry sectors, and at least one logistics service provider. It was also important to avoid any individuals dominating the conversation, so that all members could contribute. A facilitator for each group was provided and briefed as to the requirements.

The questions covered were: 1.

2.

3.

4.

5.

6.

7.

What type of company and their characteristics are most suited to horizontal collaboration?

What are the drivers/outcomes in a company that would encourage collaboration? An example of these may be: a. Cost reduction b. Improved service levels c. Sustainability d. Smaller more frequent deliveries, etc.

What are the barriers to collaboration and how might these be overcome?

What roles should LSP’s play in encouraging collaboration? What role should trustees/orchestrators play? Do LSP’s feel threatened by the use of a non-LSP trustee/orchestrator?

Use of alternative modes of transport – what role should they play in encouraging collaboration?

What are the most important legal barriers for horizontal collaboration?

What do you consider the most important aspect of gain sharing? e.g. fairness, stability of the group, ease of understanding, etc.

3.4 Secondary data The secondary data consisted of assimilating a wide range of published material including academic papers, commercial journals and reports, and institution/government papers. In total over 600 papers on collaboration were identified of which 60 were particularly relevant to the subject of horizontal collaboration in freight transport. Many of the key papers have been discussed in the CO3 position paper (Cruijssen, 2012), but for completeness selected papers relevant to this deliverable have been discussed in chapter 2.

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4. Initial Collaboration Framework 4.1 Elements of the framework

FIGURE 7: HIERARCHICAL STRUCTURE FOR EVALUATING STRATEGIC FIT (BASED ON NAESENS et al, 2009) The interviews were held with the purpose of describing the impact of these elements in the context of horizontal collaboration, which then allowed the development of a model of horizontal collaboration and its dynamics. This model is expected to encourage best horizontal collaborative practices to establish longterm relationships with sustainable outcomes.

4.2 Outcomes from the interviews and focus group meetings 4.2.1

Company culture

“Whether written as a mission statement, spoken or merely understood, corporate culture describes and governs the way a company's owners and employees think, feel and act.” Quoted in www.entrepreneur.com.

Companies are constantly evolving to try and grow through new products, new markets, mergers and acquisitions. Inevitably the corporate culture will adapt to these changing situations but within the company there will be dysfunctional elements, or legacies, based on historic circumstances. Culture change is uncomfortable for some people because company culture controls the individual more than the individual controls the company culture. Company culture is probably the most important factor in collaboration but it is also the most difficult to identify. It is most commonly seen as a statement of the organisation’s values, marked by how people in the company relate to one another, how information is communicated, how people feel about their work, how the company values them, and how the company relates to the world. According to Bliss (1999) a company’s corporate culture is composed of the following elements: • • • • • •

Employee motivation and loyalty Internal communication patterns Methods of decision-making Operating styles Organisational philosophy Organisational structure Page 17 of 63

It is crucial to understand people’s attitude towards horizontal collaboration so this section examines the role of company culture in the context of horizontal freight collaboration

4.2.2

Company culture – corporate environment

Industry sector In the UK analysis all the manufacturing and retailing companies are in the fast moving consumer goods sector, and are multinational in operation. FMCG companies represent a large proportion of freight movements in Europe and are sophisticated in their logistics operations. The FMCG companies selected for interview all collaborate vertically with their freight transport movements to a greater or lesser extent, typically on backhauls and fronthauls to reduce empty running, and a few collaborate horizontally as well.

However, all these collaborations are fairly limited and are typically bilateral.

In the Spanish analysis five senior manager interviewees were selected under the criteria of diversity. Each of the companies operates in a different region with diverse infrastructural availabilities. They were at different stages of horizontal collaboration, and managing various types of freight transportation.

In the Benelux analysis a number of companies were interviewed across three different market sectors. All companies in the industrial category outsourced their logistics completely because they want to focus on their core competences, and outsource as much as possible that is not in their core competence. The consequence of this observation is that the industrial manufacturers are not involved in horizontal collaboration in terms of sharing logistics. There were, however, two companies involved in joint distribution projects. All the industrial manufacturers interviewed are involved in vertical collaboration in terms of knowledge exchange together with their customers and suppliers. In the chemical industry group the capital intensity of the products is lower and volumes in transport have a bigger influence on the total cost of the company. Here, a very clear example of horizontal collaboration in joint distribution has come forward. The companies in this group are open for new possibilities in horizontal collaboration. In general, however, it is not a common way of working except for the SWAPS (this means that demand of a customer is satisfied by another party). These occur in normal business where competitors efficiently look who is the nearest to a customer and it is also used when a facility is temporarily down for maintenance. A competitor can then make sure that the facility is able to meet the demand of the customers. This is a very common activity in the industry and has always existed. Companies in this group are careful in sharing sensitive information because of the fear that their knowledge can be used by competitors. Vertical collaboration in terms of knowledge exchange is also important for these companies.

In France, four companies from three sectors were interviewed: one retailer, one LSP and two FMCG suppliers. The LSP is unique compared to the others interviewed in that it is a seller of horizontal collaboration, seen from their point of view as a competitive advantage. This company runs four collaborative partnerships and their contribution is significant not only because they have succeeded four times but also because they have tried and failed even more times.

The sector of a company determines its competitive frame, its legal position and its available infrastructure within a country, i.e. its environment. According to its environment, a company will find different drivers/barriers towards collaborative attitudes. A driver is any kind of stimulation coming from the environment or from inside the organization, that encourage a company to find a partner to start a horizontal collaboration. A barrier is any kind of obstacle to establish the cooperation once a company has decided to search a partner, or any kind of threat to the efficient exploitation of this cooperation. Thus, a barrier could be, for example, technical incompatibility with potential partners. The interviews showed that besides common drivers for every company, such us cost reduction or sustainability, each sector has, at various times, specific drivers, such as increased regulation on CO2 emissions. This legal imposition would force the companies to find solutions for reducing their footprint and may see the potential for horizontal collaboration. Drivers and barriers are described later on in this section.

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Ownership Both the diversity of its sector and ownership were important criteria in the selection process of the companies to be interviewed. But whilst the industry sectors tend to determine the potential for horizontal collaboration, the ownership did not prove to be an influential element. The various analysed companies using horizontal collaboration practices tended to do so autonomously from its ownership. In fact there were instances in which the main board of multinational companies expressed concern about some of the country or local practices, but when they saw the benefits started to look at horizontal freight collaboration opportunities in other countries. Multinational companies now seem to have a higher maturity and awareness about the potential benefits of collaboration in order to be able to enlarge the scope of their logistics network optimization.

Structure The structure of the firm is essential to determine how any new collaboration will be adopted within each company. Depending on the companies’ structure, the internal spread of the collaboration will be driven upstream or downstream. We have detected from the observations that the strategic and operational alignment of procurement functions with purchasing functions within a company are drivers for further promoting collaborative actions with external partners. In the end, the collaboration will be always implemented operationally, but all parts from the organization can learn from the partner and having an efficiently structured flow of knowledge within a company can speed up the assimilation of new concepts.

Environment & CSR For many of the companies interviewed CSR and the environment are key pillars of their mission statement. However, merely stating these objectives, and the level to which they are carried out, vary. The position of the environmental and corporate social responsibility within the mission statement determines whether they are important drivers and outputs for the company. After interviewing the managers of the different firms, it became clear that they have very specific objectives on environmental responsibility improvements. The relevance of the CSR as a driver or output for horizontal collaboration will depend on the expected objectives. If a manager or a department has, as an annual objective, a reduction of 8% in their CO2 emissions, a manager will certainly consider the possibility of logistics collaboration more than a manager that has no incentive on sustainable actions. However, the pure objective for reducing CO2 emissions does not appear as a unique goal and usually it is considered a secondary issue combined with efficiency and/or service improvement goals.

Competitive Environment The increasing competitive environment will force companies to find efficiency improvements. One effective solution is horizontal collaboration. Seeking efficiency means a strong competitive environment is one of the main drivers for collaboration. Interestingly, this potential is not always achieved, as one of the retail supply chain managers interviewed mentioned: “There is significant potential from horizontal collaboration for making transportation more efficient among our suppliers but we are not exploiting it”. In the FMCG sector, retailers are putting pressure on suppliers to deliver smaller quantities more frequently in order to keep stock levels at a minimum. However, retailer’s operations, such as their ordering profile and booking in times, are not always conducive to collaboration. It is essential that retailers play an active role in assisting suppliers to collaborate by allowing some flexibility in their operations. Purchasing also need to have a greater awareness of the supply chain so that purchase quantities reflect the optimum supply chain cost as well as the other costs such as product, storage and inventory holding cost.

Commercial discussions between a supplier’s sales team and a retailers purchasing team can be confrontational and not conducive to a collaborative environment so it is important to involve logistics with the purchasing function because when procurement works in isolation, or awareness, of the freight movement implications, this inhibits the opportunities for suppliers working in partnership.

There are some sectors in which transportation, and consequently logistics operations, may become the key issue for gaining strategic advantage over competitors. An example of this might be where the cost of an operation is a significant part of the overall product price, such as in the paper industry. However this

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could be limited by the size of the companies shipping these products. Therefore, any opportunity for optimizing the logistics operations like horizontal collaboration is an important advantage to deploy.

Business performance While size of the partner is not an element that influences the attitude of some of the interviewed companies towards collaboration, the business performance of a partner or potential partner is a key element that is examined. A few of the interviewees called it partner’s health. From the outset, managers will assign resources to identifying if their potential partner is economically, financially, operationally and legally healthy. They would never start collaboration with a company if they detect major risks of the other firm pushing them towards an unsafe situation for their own logistics operations.

Business objectives All firms have business objectives and they will only collaborate if it helps them to reach those objectives.

The companies willing to collaborate are likely to explore the symmetry between their objectives and the objectives of their partner. If the companies’ strategies are symmetric at some point, they will share business objectives and it will make them a better match for collaboration, given that they share similar outputs.

Gartner (2012) has shown that the top 5 supply chain business priorities for 2011 are ranked as: 1. Improve customer service 2. Target supply chain contributions to drive business growth 3. Innovation 4. Improve efficiency or productivity 5. Reduce costs Corporate or supply chain sustainability was ranked as seventh in the list.

All the companies interviewed, together with the focus group members, all stated a clear corporate and competitive strategy (internal drivers), slightly counter to Gartner’s, which is to: • • •

4.2.3

Reduce cost Maintain or improve service levels Reduce CO2 emissions

Company culture – managerial philosophy

Key People People are, and will be, the driving force behind horizontal collaboration. It is the individuals in a company or organisation who will enable horizontal collaboration to happen and ensure a successful outcome. From the interviews and focus group meetings it is clear that the role of top management, promoting horizontal collaboration from top down, is essential. Sometimes, when this is not occurring, a mental shift with the arguments from the CO3 initiative would be required. Emotions play a key role in whether or not an initiative is successful. It was suggested at a focus group meeting that it is easier for the younger generation to accept the concept of collaboration rather than older employees who still have a mindset steeped in competition. Members of the partner companies who are actively leading or operating the collaboration are especially aware of the importance and potential benefits of collaboration and particularly the opportunity to enhance the operation by adding other logistics or supply chain partners.

Key people more likely to collaborate:    

Have many years logistics experience Have a sound knowledge of operations Are pragmatic and prepared to share and take small risks Don’t get hung up on details Page 20 of 63

     

Are dedicated specialists with no other responsibilities Are very active in external bodies – work with industry, benchmark, share best practice Attend conferences, seminars, etc. to gain more knowledge from outside as well as within own market sector Are open minded, flexible and willing to think “out of the box” See logistics as non competitive Are totally supported by senior managers/directors

But some key people say they want to collaborate but are less likely to because they:       

Identify barriers without any solution for overcoming them Don’t have a ‘can do’ attitude Are unable to see the wider picture Usually raise the issue of service levels “We don’t want to give anyone a ‘leg up’”. They feel that their company offering is superior to any partners “Logistics is part of our competition” Have to convince senior managers

Key people, whilst important for establishing a collaboration, are not essential for continuing the relationship. If any key people left a company, the collaboration would still continue. If working successfully, this can be seen as a proof of the strength of the collaboration. Those individuals who are not an expert in logistics are more likely to use, and rely on, a logistics service provider to initiate ideas for reducing the cost of freight. Those individuals that have control over their freight transport have the opportunity to optimise the network, to reduce empty running and maximise vehicle fill. They can see the inefficiencies in their operation. Those companies that use logistics service providers often relinquish control of the transport operation which is why they rely on the LSP’s to initiate collaborative opportunities.

Resources In a collaboration context, the value of one partner’s resources stands in its compatibility with the resources of the other partner. The operational compatibility defines up to what grade two companies can engage their resources to be more efficient as a dyad. For example a company delivering chemical products could never share trucks because their product and transportation modes are not compatible. But a company delivering mattresses and a company shipping washing machines proved to be operationally compatible, because the transportation vehicle was compatible and their products could complement each other in the truck. Therefore, before starting horizontal collaboration practices, both companies would need to verify the operational compatibility of their resources in terms of:     

4.2.4

Skilled key people within the inter-organizational teams to draw the project for planning and further executing horizontal collaborative practices.

Equipment for aligning their operations.

Technology and software for information sharing and supporting joint decision making.

Transportation vehicles, as well as modes.

Logistics conditions for products.

Collaborative environment

Collaborative experience One of the outcomes from the interview and focus group process showed that all the individuals were fully aware of the concept of collaboration in general, but some had to be introduced to the concept of horizontal collaboration. In many instances the interviewed companies collaborative experience was limited to vertical collaboration, and in freight this was often restricted to trying to reduce empty running Page 21 of 63

by optimising backhaul movements. There was a desire from these companies to become more collaborative but they weren’t pro-active and seemed to be relying on hoping for ad hoc opportunities when they arise. Only a few of the companies interviewed were currently involved in horizontal freight collaboration but even this was limited to an arm’s length relationship. They were nearly all bilateral, and represented a relatively small proportion of both companies total supply chains.

The exception to this is in the oil and chemical industry where there is a level of horizontal collaboration referred to as SWAPS, which means that a customer’s demand is satisfied by another competitor company.

These occur in normal business where competitors efficiently look at who is the nearest to a customer, and it is also used when a facility is temporarily down for maintenance. A competitor can then make sure that the facility is able to meet the customer’s demand. This is a very common activity in the industry and has always existed. Companies in this group are careful in sharing sensitive information because of the fear that their knowledge can be used by competitors. One chemical company has a department called EST which is responsible for managing exchanges, swaps and tolls. There are rules and policies for the swap collaborations, and formal contracts are in place. However there is no infrastructure sharing or long-term commitment. This form of collaboration is purely opportunist and operates in a manner similar to a spot market.

A common factor for nearly all the interviewed companies using horizontal collaboration is that it came about as a result of informal meetings or some other unexpected circumstance. Managers from different companies within similar organizational functions and levels may have attended the same conference or workshop, or function. There, they talk informally about their businesses, commonalities and concerns and in some cases they get to know that they are shipping goods to the same area. Then perhaps they talk about the difficulties such as wanting to improve their service levels or having a surfeit of small deliveries.

This was the starting point for most of the horizontal collaborations. One interviewee suggested that horizontal collaboration started in response to a crisis. During a transportation strike, the providers from an automotive industry could not ship the materials and were nearly forced to stop production. But a firm from a completely different supply chain, which found out about the manufacturers problem, suggested that they ship the automotive provider’s materials on their half filled trucks. It opened a way for further cooperation.

Drivers of collaboration The companies identified the following drivers for collaboration which originate from within the industry sector or from pressure such as corporate social responsibility (CSR), from the competitive environment and the business objectives:

        

Increased regulation (coming from industry sector) Increased differentiation (coming from competitive environment) Increased competition (coming from competitive environment) Sustainability (coming from CSR) Demanding customers (coming from industry sector and competitive environment) Cost reduction (coming from business objectives) Maintain or improve service levels (coming from business objectives) Reduce CO2 (coming from CSR and business objectives) Maintaining/Increasing market share

Using a 1 to 5 Lickert scale the table below summarises how the interviewees perceived the impact of these drivers for enhancing horizontal collaboration, varying from 1, which means it does not encourage companies to consider starting a collaboration, up to 5, which means it strongly encourages horizontal collaboration. No driver was calculated to be low or very low.

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DRIVERS

VALUES

Cost reduction

4.6

Demanding customers

4.4

Service level

4.2

Increased differentiation

4.0

Increased competition

3.4

Increased regulation

3.4

Reduce CO2

3.2

Sustainability

3.0

TABLE 1: PERCEIVED IMPACT OF DRIVERS Partner preferences The interviewees where asked with which kind of companies they would consider collaborating. They all recognised two main priorities when selecting a partner. One was having a synergy in their distribution networks, sharing common destinations being of paramount importance. The second driver shared by the interviewees was the learning process. Companies wishing to enter a new market, or trying to improve their services in a demanding area they do not efficiently exploit, find it very profitable to collaborate with other companies that have the know-how in that particular area. Other relevant criteria for partner selection would be their level of excellence in logistics operations. They would use the partner as a benchmarking tool for evaluating their own operations thus creating an incentive for improving them. They are willing to learn with and from the horizontal collaboration relationship, so they tend to see further knowledge share beyond the distribution collaboration. Their preferences do not only focus on operational potential but also on learning potential.

In many instances, particularly in the FMCG sector, there were a high proportion of full load movements. In this instance companies would look to reduce empty vehicle running by finding suitable backloads. For many this meant suppliers looking at vertical collaboration with customers. Since vertical collaboration has been going for many years, and is typically bilateral in nature, this was deemed to be the easiest option and was actively sought. Horizontal collaboration is relatively new so the companies currently not using this approach would only countenance horizontal collaboration with non competitors. In certain instances companies may consider horizontal collaboration with semi competitors, and in the worst case horizontal collaboration with competitors. Thus, the interviewees have shown a preference for not working with competitors. Horizontal collaboration is seen as an excellent idea as long as it gives a competitive advantage, meaning your competitor does not do it. Nevertheless, most of them have recognised that this approach is at the innovator stage and their attitudes may change in the future. If a high level of trust could be established they may consider working with competitors. One retailer commented that they would never say they wouldn’t work with competitor retailers; it’s just not a priority at the moment. There are other areas in the supply chain they still need to focus on.

One retailer suggested that there were three types of competitive collaboration. One was direct as in horizontal collaboration with a competitor; another was indirect where an LSP operated on behalf of several competitive companies, and the third was classified as non physical in which competitors shared best practice and benchmarked their operations.

Horizontal collaboration is still in its infancy and as such customers, competitors, etc. are likely to be keeping a close watch on any company involved in a collaborative partnership. It is possible, therefore, that some companies may only collaborate with partners who are not only compatible in terms of company culture and operational synergy, but also have compatible brands. Some companies may not want to be associated with a weak or incompatible brand as it might affect their image.

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Attitudes towards HC The business attitudes of the potential partner are a key element in any collaboration. All interviewed managers have definitely declined to collaborate with any company that has not shown solidarity and whom they can trust. have Adopting the definition of trust as one party’s “confidence in the goodwill” of an exchange partner (Ring and Van de Ven, 1994), the interviews have shown that the companies would never cooperate with a partner they cannot completely trust or does not have a good reputation. Another major concern of longterm collaboration has been the element of solidarity. A common remark in the interviews has been the fear of being left behind when facing difficult situations. On this point the term solidarity arises. It is defined as “a bilateral expectation that a high value is placed on the relationship (and) it prescribes behaviours directed specifically toward relationship maintenance” (Heide and John, 1992, p.36). As long as solidarity exists, the problems that arise can be solved as a team, and both companies will work together to achieve the common objectives. But during discussions with some of the interviewees, the question arose: “What if it is always me who puts the major efforts on that team to solve the problems?” This topic, which is common in any kind of collaboration, has been treated in the literature as mutuality. “Even if the efforts, costs and benefits are not always evenly shared, they balance out in the long term” (Lado, Dant and Tekleab, 2008). This mutuality between partners is essential to establish a successful collaboration.

The only way to judge the trust, solidarity and mutuality of a company is by analysing their business attitudes. These are essential elements before starting any collaboration discussions. Usually, these features in a relationship are detected from previous experience or reputation.

Perceived barriers Three of the top four supply chain obstacles listed by Gartner (2012) in their 2011 survey were: 1.

2.

3.

Difficulty or inability to coordinate and synchronize end-to-end supply chain processes Lack of visibility across the supply chain Supply chain network complexity

There are a wide range of barriers mentioned by the companies interviewed, who do not collaborate horizontally, that are perceived to be problematical. These are listed below.                 

Competition law Fear of losing competitive advantage Technical incompatibility Organisation culture/internal politics Peoples capability and skills Which companies to partner Poor knowledge of internal flows Lack of cross network visibility Fear of the unknown Lack of trust Costly in time and effort Service expectations Dependency on external support Managerial inertia Lack of infrastructure Brand incompatibility Physical network

In many instances these barriers are “gut feel” and are not based on any concrete evidence. Significantly, fear of losing competitive advantage was cited by many companies, but freight transport collaboration means that volumes from different companies can be combined in such a way as to improve service, reduce inventory, improve asset utilisation by reducing empty running and achieving greater capacity Page 24 of 63

utilisation, improve the environment in terms of reduced carbon emissions and congestion and reduce costs. Those companies that collaborate are therefore likely to achieve competitive advantage refuting the issue raised by a number of companies visited that collaboration would impact their competitive advantage. Some of the larger companies interviewed had two or more divisions within the company operating independently. Internal politics was cited as a reason for difficulties in collaboration between company divisions. This brings into focus the importance of people’s attitudes and managerial philosophy to overcome these problems.

The interviewees were also asked to rate the perceived impact of barriers using a scale of 1 to 5 with 1 being very low and 5 very high. The following table shows the results of this assessment: BARRIERS Own organisation culture/internal politics

VALUES 4.1

Lack of trust

4.0

Hard to find partners

3.6

Managerial inertia

3.4

Costly in terms of time and effort

3.3

Technical incompatibility

3.3

Poor knowledge of internal flows

3.2

Fear of losing competitive advantage

3.2

Increased complexity of operation

3.2

Lack of cross network visibility

3.1

Peoples capability and skills

3.0

Fear of the unknown

2.7

Free-riding

2.6

Service expectations

2.4

Competition law

2.3

Gain sharing

2.3

Dependency on external support

1.8

Difficult to distinguish own company in group

1.6

TABLE 2: PERCEIVED IMPACT OF BARRIERS From the concerns expressed it is apparent that many companies have not yet fully understood the concept of horizontal collaboration. It appears that some companies are sceptical about the benefits afforded through closer integration with other companies. Some companies talk about cost-savings they need to make in the supply chain but consider less favourably the benefits gained from horizontal collaboration and are more likely to highlight the risks associated with the heightened dependence on collaboration. At the very least, potential collaborative companies must have a shared perspective of the merits of such close ties. Thus, the challenge becomes one of forging a common view in which both sides can accomplish compatible goals. The question then arises as to who will orchestrate the roles and responsibilities of the collaboration members. Interpreting comments from some companies, it seems that companies themselves are less able to fill this leadership role as they appear to lack both vision and commitment to the advantages of horizontal collaboration, and there is a fear that one company might dominate the partnership. Not all trading relationships should be collaborative and it is perfectly acceptable to engage in arm’s-length transactions provided that such behaviour is appropriate. These findings do imply that trust, transparency and commitment are of vital importance.

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4.2.5

Collaborative components

Many of the companies interviewed are not collaborating horizontally, and for the companies that are, many of them are bilateral in nature. Consequently, whilst these components are essential consideration for successful collaborations, they may not be a current priority for many companies.

Level of relationship The companies interviewed were all at different stages of horizontal collaborative practice. There are three different levels of relationship between partners according to their level of knowledge. A first stage would be the point at which they recognise another company as a potential working partner. Once they start an initial, successful, working relationship and get to know the partner better there is less reticence to share more information. At a third stage, the relationship is strong enough to think about a long-term venture, and considering the other company’s logistics department as an extension of their own. The current horizontal partnerships were nearly all at, what could be described as, arm’s length, though certain partnerships in France had a more complex contractual arrangement involving shared means and facilities without any end date.

The most common, and essential, enabler for collaboration is transparency and trust. These two factors are related, since transparency between collaborating companies means that they need to trust each other. It is easier to gain sufficient trust between collaborating companies if the companies have a non-competitive status. It takes time to get to know people, to understand their abilities and beliefs, and to work together in a collaborative partnership. A relationship has to develop such that there is total belief in the partner’s logistics experience and abilities. As one interviewee involved in horizontal collaboration said “We have to get on extremely well. Can I call him an idiot and vice versa? – Yes I can.”

The representatives of the companies interviewed all seek supply chain partners who are trustworthy, have integrity, and who “know our business” – characteristics that imply “fair dealing”. Certainly, both trust and commitment serve to offset the risks of opportunistic behaviour in which one company acts in their own best interest to the detriment of their supply chain partners (Anderson and Narus, 1990; Lewis, 1995; Spekman and Sawhney, 1990).

Type of collaboration Vertical collaboration was an activity undertaken by the majority of interviewees. As stated above, the majority of those interviewed in a horizontal collaborative partnership were based on a limited exchange of information and in ad hoc arrangement.

As described by Lambert et al. (1999) there are three types of collaboration depending on their level of integration. The interviews showed that the companies are willing to integrate their processes depending on the level of relationship with their partner. According to Lambert’s types of collaboration, in the first stage of the knowledge level, the companies would focus on short-term cooperation, such as joint distribution or line haul, back loading, purchasing/tendering group, etc. In the second level of the relationship, as the interviewees recognised to be willing to share more operational information, they could try with synchronized planning, multimodal collaboration, synchro-modality, or warehouse/cross dock sharing. At the last stage of the relationship level, where the companies have established a deeper understanding of each other through continuous relational learning, they are opened to share sensitive information. It would allow them to start long term relationship, such as network integration, joint investments or collaborative innovation.

Technology The level of technological changes made because of the collaboration varies greatly between cases. It depends on the level of their operational compatibility. The more compatible from the beginning, the less they have to invest in technological changes. The less compatible from the beginning, the more they have to invest on technological changes, in which case it is necessary to calculate benefits and return on investment.

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Communication Communication is essential for a good relationship. The sharing of information allows for transparency and this build trust. It also helps the collaboration to run more smoothly by ensuring a cohesive and effective partnership. For those companies currently involved in horizontal collaboration there is regular communication at the operational level. This is typically by telephone and email. At the planning level, senior managers tend to meet periodically, typically every three months, and discuss strategic matters.

There is also ad hoc communication between the senior company representatives as and when issues or unexpected problems arise. Regular communication also reinforces the relationship, allowing the airing of grievances.

Entry and exit rules With the limited bilateral collaborations currently operating entry and exit rules have not been a significant issue, though one company did say that it would be very difficult to leave the current partnership.

However, as horizontal collaboration becomes more commonplace, it is possible that the changing circumstances of one company may make it unsuitable for it to stay in a group. It is also possible that other companies may want to join the collaboration, or the consortium itself wants to expand the group. There will be legal and operational consequences to this entry and exit. Both aspects will be further discussed in the CO3 research being currently undertaken and this will cover the gain sharing and legal implications as well as legal framework of the collaborative group. But these issues will always have to be settled by the partners so a solid relationship must exist so that the synergy can be maintained. Any company wishing to enter the group must have the requisite levels of collaborative elements such as trust, synergy, etc. From the interviews undertaken, the exit criteria should be explicitly discussed, quantified and included in the contract of agreement to ensure the sustainability of the relationship for the companies remaining in the group. Some of the terms for the exit rules may be: lack of accomplishment of service levels, consistent lack of transportation volumes for sharing the logistic flows in a sustainable way, or even lack of proactive actions to improve the joint flows.

Legal At the current level of horizontal partnerships contracts between shippers are generally not used, the exception being one very specialist Dutch company, and in France with some collaborative partnerships.

Trust is of paramount importance. However, as horizontal collaboration develops and grows, legal contracts will become a necessity. “The effective implementation of normative contracts relies on the establishment and use of behavioural rules” (Lado, Dant and Tekleab, 2008), such as the ones mentioned above: trust, solidarity and mutuality. Many of the interviewees believed that a formal contract with penalties and strict rules will transform the initial idea of a collaboration into a service engagement.

Nevertheless, legal issues are going to be further investigated in the CO3 research project.

Gain sharing/financials In discussions with the various companies there are no definite rules for gain sharing. In vertical collaboration savings are randomly allocated ranging from a 50/50 basis to a 70/30 basis in favour of the customer. Where a LSP is used, the shippers rely on the LSP to set rates which are satisfactory to both parties. As pointed out in the CO3 position paper (Cruijssen, 2012), “a well-constructed gain-sharing mechanism can ensure stability of the consortium but only if every participant provides enough synergy to the group”. Some of the interviewees said that they would enter a horizontal collaboration as long as there is a fair sharing mechanism according to the contribution of each partner. Since they tend to reject the idea of collaborating with direct competitors, the equivalent cost reduction between partners becomes a secondary issue as long as they could save what they expected and as long as both partners contributed to achieve the desired outcomes: efficiency (cost savings), flexibility, service level, innovation and sustainability. As with the legal issues, gain sharing and value sharing will be analysed in the next steps of the CO3 project.

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Risk sharing Everybody identified potential risks in horizontal collaboration. The one raised most frequently was that of being late because the partner did not have their products ready on time in accordance with the service and time commitments of the customer. For some collaborations a conflict of interest may occur when service levels are very similar between partners. There may be concerns about one company having a priority over another, so compromises may be required and, if necessary, set out in a legal document.

Those in a horizontal collaboration were quite prepared to take a short term hit for the benefit of the partnership as long as it wasn’t too significant. Several interviewees commented that risks must be managed and minimised, and were appropriate included in any legal document.

Main goals The interviewees indicated that the main potential outcomes or benefits that could be obtained from horizontal collaboration were:  







Efficiency: Increasing the efficiency of freight distribution implies reduced costs and this can be achieved by economies of scale derived from the common shipments.

Flexibility towards the customer demands: The more frequently a company can ship goods to customers, the more flexible it is to client demands. In this case flexibility refers to the capability of a shipper to give a rapid respond to customer demands.

Service levels: Improving service levels means fulfilling the customers wishes. In this case the service levels can increase if the frequency of deliveries also increases and as long as the partners shipments do not end up in delivery delays.

Innovation: It means building more effective processes within the supply chain and in freight distribution. Horizontal collaboration gives companies the opportunity to learn from each other and with each other and inspire their operations departments.

Sustainability: Defined in this case as the reduction of CO2 emissions due to the reduction of empty and half filled trucks for freight transportation.

Depending on the industry sectors requirements and business objectives each firm emphasised different goals, although they all agreed these outcomes were major benefits.

4.2.6

Operational characteristics

Size of company The companies interviewed were mainly large multinational operations. There were suggestions from members of the focus group that smaller companies would be less likely to collaborate because they would be less likely to have a specialist logistics director and would therefore have less awareness of the latest developments in logistics such as collaboration. They would also be more likely to subcontract their transportation to LSP’s and have greater reliance on them to come up with efficiency saving suggestions.

This was also one of the conclusions from the interviews. However, there was also a feeling that large companies may have similar issues. They were more likely to be fragmented and have internal divisions who were not collaborating, and have to overcome a silo mentality and internal politics.

When deciding on whom to partner with, the interviewees generally did not identify the size of the partner’s company as a driver nor as a barrier. For FMCG retailers the use of a primary consolidation centre is restricted to smaller suppliers. One LSP mentioned that it’s not possible to mix suppliers with different sizes, as the operations are not similar. In fact both equal and unequal sized companies offer potential opportunities to collaborate. It all depends on the organizational symmetry, operational compatibility and managerial synergy. It can be better understood with an example from one of the interviews. A large retailer situated in Madrid has improved their distribution efficiency throughout nearly the whole of Spain.

However they have identified some improvement potential in northwest Spain, where a smaller company has a significant logistics expertise and a market dominance in that region. The retailer wished to collaborate with the smaller company for the last-mile distribution and would also offer their significant Page 28 of 63

expertise that the small partner could use and implement. That retailer would also cooperate with any other company, large or small, from northwest Spain to reduce empty running by backhauling or even filling up trucks together when needed for the same routes. Other interviewees along the European geography shared this point of view, suggesting that size is not a significant issue and it is more important to be operationally compatible. However, a contrarian view was suggested by one French company who said that only companies of similar size could collaborate effectively because they needed supply chain similarities such as number of warehouses, level of direct shipment to store, picking rate, etc. If a large company collaborates with a small one the preparation costs and dependence on the large company could ruin the process. This is all part of ensuring there is operational synergy between the partners.

Product characteristics One of the key factors in a collaborative relationship is that the products have to be compatible. The discussions highlighted instances of an automotive manufacturer sharing vehicle parts with a shoe manufacturer and a home appliances manufacturer shipping washing machines together with mattresses.

However, there are certain limitations on compatibility and examples were given of food stuffs would not share loads with cleaning products because of odour contamination, or personal care paper products would not be shipped with glass bottles because of the risk of breakage and spillage. There were also legal aspects such as alcohol being shipped bonded (duty unpaid) which would inhibit the sharing of such goods.

Consideration also had to be given to the height and weight of products as to whether or not they could be double stacked. Most important of all in sharing loads is the issue of complimentarity. Two or more products shipped together should be complementary in terms of weight and volume. It is important to get the right balance between heavy and light products on a vehicle to obtain the maximum vehicle capacity utilisation by weight and volume. The density ratio for this is about 288kg/m3. Using collaborative partners with the right mix of products would enable a higher capacity utilisation to be achieved.

One outcome from the interviews tended to suggest that low value, bulky products with high logistics costs are more suited to collaboration as long as the other factors such as culture and operations are compatible.

Seasonality Seasonality can be seen as a threat to planning efficiency but it can be also an opportunity. Some resources may not be needed at certain times of the year so this offers greater potential for collaboration. Two companies who have examined their demand and distribution network, and found it to be operationally compatible, can exploit this synergy by negotiating better combined distribution contracts. The inefficiencies of peaks and troughs due to demand variations in two or more companies can be smoothed resulting in a better use of operational resources needed for the logistics operations.

Managerial control It is important that a single company does not assume overall managerial control of a collaboration.

Managerial synergy is an essential element of collaboration between firms, meaning that joint management is better than the sum of each company’s individual control. Therefore, all companies willing to collaborate should find a partner with whom they can share control.

Service levels Service frequency was considered in the interviews as a major concern given the increased demanding expectations of customers and the actual economic cost of delivering. Historically, in the FMCG sector, customers ordered day 1 and suppliers delivered day 3. Currently, it is generally customer order day 1 and suppliers deliver day 2, but there is now pressure for same day delivery. The pressure from customers for more frequent, faster deliveries of smaller quantities makes companies continuously search for new ways to improve their service levels without incurring higher costs. Many of the interviewees agreed that horizontal collaboration could be of benefit in these circumstances. For companies with small delivery volumes, cooperating with a company with a similar delivery profile would produce cost and service level efficiencies. This would also enable a greater flexibility towards customer demands. However, it may also be an advantage to have partners in a collaboration with dissimilar service levels. An example might be one company A, who moves goods daily between two locations partnering with another company B, who Page 29 of 63

moves weekly between the same two locations. In this situation company B has the opportunity to improve their service level at virtually no cost, and company A has the flexibility to incorporate company B’s product to suit and maximise the load volumes.

Despite this, some of the companies not involved in horizontal collaboration still said that they would not consider this method for customer deliveries because of tight and restrictive service level constraints.

However, they might consider it for non-urgent inter depot movements.

Processes The sharing of information between the collaborating companies is also an enabler for collaborating.

Transparency is gained only when the information sharing between the companies is functioning. At the start of a collaboration limited data is shared between partners. But once the collaboration foundations are well established, and the operation is seen to be successful, companies tend to share more information about their processes in order to benefit the cooperation. This way they are likely to learn from one another and will be able to improve the operations. Data shared with partners on promotions is a more sensitive area and is kept to the minimum necessary to ensure a smooth operation.

Synergy The attractiveness of a target group for a potential collaborative partnership depends on the synergy potential that exists between them. Synergy is the key for a profitable and sustainable horizontal collaboration. The collaboration only makes sense if the result of a partnership is better than the sum of all the individual companies in that partnership. In order for a collaboration to be successful the profile of the logistics operation has to be compatible in terms of the types of transport, volumes and loads moved, time windows and the locations visited.

Synergy can also involve the company philosophy and managerial approach. Managerial synergy is the way in which attitudes, approach and information is passed through the various levels in an organisation such that it is spread downstream in the form of efficiency. Synergy can also come from co-ordination of the logistics planning and operational processes. If the same managerial synergy exists in a collaborative partnership then success is more likely.

4.2.7

Supply chain operations

Network All successful horizontal collaborations are dependent on the symmetry of the partners’ networks. If two companies have a similar profile of volume, loads and locations then vehicles have the potential to be used more efficiently. This element is one of the main supply chain characteristics enabling cooperation. With the right symmetry companies can benefit from improved capacity utilisation and reduced empty running.

Operating within the same logistics cluster, i.e. facilities close together, can enhance capacity utilisation, and facilities that are dispersed but within each other’s delivery areas can reduce empty running by backhauling loads.

A successful horizontal collaboration of type II or type III (Lambert et al, 1999) may require a change in network configuration thus making horizontal collaboration a strategic issue.

The dispersion of a company’s demand area within a country or across Europe requires knowledge of the entire area and a good infrastructure to get the goods delivered, or that companies utilise the expertise of someone with knowledge of the region. Either way this represents an opportunity to introduce horizontal collaboration, because if the infrastructure is advanced and reliable (for instance railway transportation), there will be opportunities to collaborate, and if the knowledge of a region is limited companies will have to use companies with local knowledge and learn from their performance.

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Modes of transport In Europe 76% of all tonne kilometre movements are by road with the remainder sent by rail and water.

The EU is encouraging movement away from road but this percentage has only reduced slightly over many years. Certain shippers and products are more suited to intermodal movements. Bulk and semi-bulk commodities are traditionally moved by rail and water, but there has been an increasing amount of containerised traffic. One of the chemical industry companies interviewed has an outsourced global transportation network and all modes of transport are used.

Rail freight services across Europe tend to be nationally organised and there is a need to make it work more effectively across Europe. An example from a focus group meeting was one company moving high value goods from Spain to Northern Europe. They used to use trains but they were very unreliable, sometimes taking up to 4 weeks to arrive, and they also experienced theft. They now use a boat to Rotterdam which takes 5 days, resulting in a significant reduction in working capital. Another example was given at one of the focus group meetings about a train service being used by one FMCG company during a peak trading period. In one instance, goods were being sent to Poland but the train did not have a return load and so it waited at the destination terminal. This meant that it was not available for another outward journey, and the company had to quickly hire in road based vehicles. In another instance bad weather forced a freight train into sidings. The goods in transit were lost for almost a week because the rail company could not say where the train was located. It is negative examples like these that inhibit companies from using multimodal services. Rail services need to better understand the needs of shippers and provide a commercial level of services. There are, however, many successful examples of rail freight services such as that of a consortium of Dutch flower producers who send goods overnight by reefer rail wagons. By encouraging collaboration amongst shippers rail services have the opportunity of generating a larger market share of freight movement, but they have to significantly improve their offering.

For intermodal rail freight services in the UK to be competitive with road haulage, road feeder movements to and from rail terminals must be short relative to the rail trunk haul. However, the relationship between feeder and trunk haul lengths is highly dependent on market conditions which makes it difficult to estimate the break even distance (Kim and Van Wee, 2011). One of the interviewees explicitly mentioned: “We’re unable to have a sensible economic conversation with the rail provider. Rather than giving a single delivered price, it’s a complex web of rail and road costings”. Currently, in the UK, Scotland is the dominant destination for FMCG rail movements, typically starting from DIRFT at Daventry, because of the distance involved. Generally speaking, the further away a depot is from a rail terminal, the longer the rail distance needs to be to remain competitive with road. There is resistance to use rail in the UK from some companies because:     

Our depot isn’t near to any rail freight terminal Rail infrastructure is poor in some countries Loading gauge or height wrong Service levels cannot be met Not economic

Vehicle characteristics In the same way that products need to be compatible for an effective collaboration so do the vehicles used to transport the products. This is particularly important when it comes to backhauling. With the drive for more sustainable road freight there are a wide range of different vehicle types and sizes that can be used by companies. Apart from standard tractor trailer units there are also draw bar vehicles, mega trucks (longer heavier vehicles), double deck trailers, etc. to choose from. There are many considerations that need to be taken into account such as the need for vehicle insulation, curtain sided side loading, rear barn door or roller shutter opening, whether loading and unloading is by dock or fork lift truck, the height of vehicle, etc. Obviously the vehicle weight characteristics must match the products being transported.

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FTL/LTL movements For many companies interviewed a significant majority of movements were full loads (FTL). It was difficult to verify what was meant by full loads because invariably there would be small amounts of space available on a vehicle if full loads were volume constrained, and significant amount of space available for weight constrained vehicles. Volume constrained vehicles generally meant that the maximum tare weight was unlikely to be achieved. The companies generally looked for backhaul opportunities to reduce empty running and this usually meant vertical collaboration. FTL could mean a single point to point movement or it could mean a multi drop route. The former were generally supplier to depot or inter depot movements.

The latter generally applied to FMCG manufacturing companies serving customers, and some retailer deliveries. Depending on the distances, service levels and locations involved, these single point to point FTL movements may be suitable for multi modal transportation.

For the remaining less than full truck load (LTL) movements, companies who operate their own fleet would either send out unfilled vehicles, or may subcontract those loads for consolidation with other companies to try and minimise the transportation cost. With the emphasis on CO2 reduction, offering LTL to a logistics service provider for consolidation is becoming more commonplace. In this instance companies are often unaware with whom they are consolidating their loads so this cannot be called collaboration.

Use of logistics service providers A significant number of shippers interviewed, particularly manufacturers, use logistics service providers (LSP’s). Some shippers have argued that LSP’s don’t encourage collaboration, they have low levels of creativity and innovation, and take few risks, but this could be because their margins are low and contract terms are often too short, typically two years, and therefore won’t make any investment. There was a general feeling amongst shippers that LSP’s were less likely to innovate. However, this was countered by one LSP who believed that they are in a unique position to develop collaboration opportunities with customers because:               

There are less competition issues compared to manufacturers or retailers collaborating between themselves Many of the larger LSP’s have an existing customer base with whom they could have collaboration discussions They have a unique overview of global logistics operations to help to map, model and identify opportunities There is an opportunity to understand, in an independent way, the commercial opportunities between competing companies There is an opportunity to crystallise these into a closed book offering to release defined value to collaborators often at LSP risk They have significant experience of constructing contractual commercial agreements to ensure delivery of service and cost targets They are used to working in a risk and reward commercial environment e.g. no reward unless collaboration delivered There are mechanisms for managing performance e.g. balanced scorecards already in place They are experienced in working in a wide range of commercial mechanisms; open book with fixed fee, gain share, closed book, risk and reward based KPI systems Vast range of experience on different fee or reward mechanisms Skilled at logistics modelling and optimisation Used to working in collaborative environments, e.g. if P&G run a warehouse with a competitor 3PL, or in house and a another LSP provides transport services Full range of dynamic planning and supply chain visibility and optimising tools, e.g. Paragon, Isotrak, TMS etc.

LSP can and does operate at both 3PL and 4PL level i.e. can operate own vehicles dedicated or shared user, but also operates significant large business entirely 4PL It is a core business focus for LSP’s

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One of the LSP companies interviewed functions as an orchestrator of horizontal collaboration. They design platforms in which the logistics of different companies are combined to obtain cost benefits. In another LSP company, horizontal collaboration in logistics is common. They are involved in projects which involves joint distribution with competitors. A major factor in one FMCG manufacturer’s decision to appoint an LSP was its ability to facilitate collaboration with other major FMCG manufacturing customers.

Two shippers who are already part of a collaborative logistics arrangement made possible through their LSP providers, talked about the benefits of their collaborative arrangements. However, these shippers had to ask for the service from their LSP’s and this required commitments, which can create barriers. One of the shippers said , “I want to date everyone to maximise my enjoyment, not get married. Today, you have to get married in the shipping world.”

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5. Horizontal Collaboration Business Model 5.1 Introduction Analysing the results from the interviews following the structure of criteria, sub-criteria and elements presented in the previous section, it became clear that the dynamics of horizontal collaboration between two or more companies follows three different phases (exploration, assimilation and exploitation) and is triggered or threatened by diverse environmental elements, called drivers or barriers. The different drivers from the corporate, competitive and collaborative environment will stimulate the exploration, which implies a set of practices that allow the horizontal collaboration potential partners to recognise and share relevant ideas and opportunities with each other. Assimilation involves practices that transform these new ideas and combine it with existing processes within the company. Finally, exploitation applies the assimilated knowledge to create new processes that benefit the relationship and their common logistics flows, not just one partner.

Specific questions about most desired benefits and outcomes from the collaboration defined very clear on which of those the Horizontal Collaboration should focus its efforts: Efficiency, Flexibility, Service Level, Innovation and Sustainability. During the three phases of the dynamics of the relational learning, both collaborative partners will face relational concerns, defined in the framework as elements or antecedents that the horizontal collaboration partners should asses in order to reach a sustainable and productive relationship. These elements have been reviewed in the formerly referenced academic literature.

Thus, the interviews have enabled to classify these elements into four levels:  Essential elements: without which no collaboration would get started. These are trust, solidarity, mutuality and dependence.  Improvement elements: the ones that help in building up a collaborative group which is more efficient than the sum of the individual firms. These are organisational compatibility, managerial synergy and operational symmetry.  Framework elements: the ones that define the legal and operational structure of the collaboration. These are contracts and type of collaboration.  Distributive element: the one that deals with the fair partition of the collaborative performance, gain sharing or even value sharing.

The next figure will help in understanding how the model was designed and the relationships between the different elements.

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FIGURE 8: INITIAL HORIZONTAL COLLABORATION FRAMEWORK

5.2 Dynamic Exploration-Assimilation-Exploitation: The purpose of this model is to enable a continuous improvement of both companies’ supply chain. The benefit of a horizontal collaboration is huge but only reachable if the companies in the collaborative partnership are willing to work on a continuous relational learning environment. This means exploring together the potential improvements of both supply chains, assimilating each one internally the changes they have to make to enable the collaboration, exploiting efficiently together again and sharing fairly the outcomes of this venture.

This dynamic can be understood with an example coming from the interviews: 



Given a partner A from the home appliances industry and a partner B from the mattresses’ industry, which share a common low demanding area, they face the opportunity to collaborate in order to improve the delivery frequency towards their customer. Their driver for collaboration is to send two half trucks each two days, better than one full truck each four days or one truck half loaded each two days.

In the exploration phase they will first of all evaluate the others economic and corporate performances to know if they can trust their partner. They should verify if their business philosophies, objectives or corporate cultures are well aligned, termed as organizational compatibility. This would imply the interchange of the “company’s values portfolio” between the two companies. Then they will study their potential synergy. This means in what way the dyad can be more efficient than the two firms individually. Analyzing their demand patterns they will identity when and in which routes they can collaborate to be potentially more efficient, fully loading trucks and improving their flexibility towards the customers. They will also study their operational compatibility in terms of the degree of alignment of their resources, like handling and transportation equipment or technology, among others. In this Page 35 of 63







case, if their distribution nodes are close enough and if their packing and delivery specifications are compatible. Finally they will face the framework elements: identifying the optimal type of collaboration and contract according to their needs. This will end up with a well-structured gain (or value) sharing of the collaboration outcomes.

Then it will be time for assimilating the changes that have to be done. Both companies will have to train their human resources for the collaboration in order to move from top to down into the inter-organizational teams that are going to work together. They will also adapt their current processes and information systems to the new requirements. It is a process they do internally within each of the two organizations but taking into consideration that the final purpose is to work together.

In the exploration phase both companies start with the collaborative actions. It is time for exploiting the cooperation potentials. After exploring the processes they have to change and assimilate those changes internally, they can finally align and share the transportation flows and profit from the advantages it offers in terms of frequency and service levels. If cost reduction is the primary and almost unique goal of the collaboration, then gain sharing will be the mechanism for quantifying the interchanges. However, if the primary goals are sustainability, improving service or learning from pioneers, then a more advanced value exploiting mechanism should be deployed.

This dynamics is placed in a continuous improvement loop, due to the dynamics of both firms’ business that allows relational learning take place, where the outputs from the exploitation are the starting points for a new exploration. There will be always potential improvements for any of the supply chains. That is why two partners should always be aware of the possible upturns of relational learning.

5.3 Next steps Questions that are still open and need to be further investigated in the next phase of this work package: •

Gain sharing: With vertical collaboration the savings are generally apportioned on an agreed simplistic basis. With horizontal collaboration, some companies rely on the LSP running the collaboration to set individual partner rates which reflect the volumes moved. However, in order to assure the sustainability of a horizontal collaboration relationship, particularly where there are more than two partners, a gain sharing mechanism must be established and agreed by the group. The next phase of this project will need to include the work undertaken in the tools and technologies work package to test out the gain sharing mechanisms with the companies involved in the first phase.

•

Modes of providing service by logistics operators: How an open-book model facilitates the role of the LSP as a neutral actor for facilitating logistics network optimisation? This model would facilitate the fairness and transparency between all the actors in order to learn about how to enhance the right operational mechanisms in order to guarantee the best feasibility to the effort. Which dynamic of the open-book model is most suited to a horizontal collaboration relationship?

•

How to determine the balance between cost, service and inventory. This triangle has financial implications for warehouse and inventory management when better flows of transportation are taking place. If the transportation frequency is increased due to the implementation of horizontal collaboration strategies, a part of the cost savings comes from having fuller trucks, but there are other implications since there is less inventory on average, due to lower safety stocks.

This deliverable has focussed on the characteristics of companies and examined the issues, drivers, barriers and components of collaboration in order to develop an initial framework and outline business model. The next steps will focus more on the operations of these companies interviewed so that improvements can be made to the model. Discussions with more companies, and additional focus group meetings, will test out these improvements.

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References • • • • • • • • • • • • • • • •

•

•

• • • • • • • •

Anderson, J.C. Narus, J.A. (1990). A model of distributor firm and manufacturer firm working partnerships In: Journal of Marketing Volume 54, No.1, pp.42-58 Barratt, M. (2004) Understanding the meaning of collaboration in the supply chain, Supply Chain Management: An International Journal 9(1): 30-42.

Bliss, W. G. (1999). Why is corporate culture important? Workforce, 78, 8-9.

Cruijssen, F, Dullaert, W and Fleuren, H (2007). Horizontal Cooperation in Transport and Logistics: A Literature Review. Logistics and Transportation Review 43(2): 129-142.

Cruijssen, F, Dullaert, W and Joro, T (2009). Freight transportation efficiency through horizontal cooperation in Flanders. International Journal of Logistics: Research and Applications 13(3): 161-178.

3 Cruijssen, F, t'Hooft, D, Barbarino, S, Verstrpen, S and Fumoso, A (2010). CO : Collaboration Concepts for Co-modality. Transport Research Arena Europe 2010, Brussels.

Cruijssen, F (2012). Horizontal collaboration: A CO3 position paper. www.co3-project.eu.

Cruijssen, F and Palmer, A (2012). CO3 collaborative attitudes interview structure. www.co3project.eu.

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Kim, N. S., Van Wee, B., (2011). The relative importance of factors that influence the break-even distance of intermodal freight transport systems, Journal of Transport Geography, doi:10.1016/j.jtrangeo.2010.11.001 Koppers, L., S. Zelewski, and M. Klumpp (2008). Social production factors in supply chain cooperations. In Proceedings of the 15th International Working Seminar on Production Economics.

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Lambert, D., M. Emmelhainz and J. Gardner (1999). Building successful logistics partnerships. Journal of Business Logistics, 20(1), 165-181.

Naesens, K, Gelders, L and Pintelon, L (2009). A swift response framework for measuring the strategic fit for a horizontal collaborative initiative. Int. J. Production Economics 121: 550-561.

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August

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Appendix A – Examples of collaboration partnerships Food: Nestle UK and United Biscuits (UB)

Region: UK Case 1 (Sources: ECR UK – Transport Collaboration Guide, 2011 and IGD, 2011) Food & Retail: Nestle, Mars and Tesco

An issue for Nestle UK deliveries is the empty running for backhaul from the North of England to the DCs in Leicestershire, two or three trucks return to the North empty every day. UB face the similar problem. “UB deliver loads on a daily basis to Yorkshire from its NDC close to Nestles DC in the Midlands”. There was a potential opportunity for both Nestle and UB to improve the empty running if a third party could operate the opposite transport flow. This opportunity was found in 2007 when they realized they had opposite flow so they could collaborate to avoid empty running.

Reduce the environmental impact of their delivers of Christmasand Easter confectionery to Tesco.

Region: UK Case 2 (Source: Logistics manager.com, 2009)

Food & Retail: Coca-Cola Enterprises Ltd (CCE) and Boots plc

The purpose of this activity is “to examine the flow of key products from manufacturing through their distribution networks to stores”.

Region: UK Case 3 (Source: Institute of Grocery Distribution (IGD) (2007), ECR UK Collaborative Green Distribution ) Automotive: Bridgestone and Continental

Region: France

Both Bridgestone and Continental are tyre manufactures. The companies shared a single regional distribution centre (RDC) outside Orleans, France and outsourced distribution operational activities jointly. Both companies want to reduce the transport cost by reducing ordering frequency, optimizing distribution channels and sharing DCs while maintaining the high level of customer service.

Case 4 (Sources: Presentation given by Philippe Godin, and Phil Shaw, Horizontal Collaboration in Action – The Tyre Market and Graham, 2011) Retail & FMCG: FM Logistics, Carrefour (Poland) and FMCG suppliers Region: Poland Case 5 (Source: Psaraftis, 2010 )

Railroad: Carpathia Express Project

Region: Czech Republic Case 6

(Source: Rumler, Miroslav. Reliant s.r.o., 2008)

Food: PepsiCo & Main Suppliers

Region: UK Case 7 (Sources: ECR UK – Transport Collaboration Guide, 2011 and IGD, 2011) Food & Others: European Central Coffee Terminal (ECCT) at Sara Lee Region: Europe Case 8 (Source: IGD, 2010)

The sales volume in Polish FMCG market has started to increase since 2005; this led very frequent orders for producers placed by retailers. LSP had to put more operational effort into handling more orders at the same time while maintaining the former service level. However, LSP faced a significant problem – transportation costs increased due to less than truckload (LTL) cost-effective transport and increased fuel prices. Moreover, traffic jam and congestion needed be taken into account during the FMCG distribution process. Furthermore, Polish conventional trade occupied a high market share; and their logistics processes are inefficient and costconsuming. FM Logistics, as a LSP and Carrefour in Poland wanted to “regroup flow of goods from the food industry and heading for the same points of delivery on purpose of reducing operational costs”.

During the 20th century, rail transport developed slowly in the Czech Republic. Compared with historical data on rail transport, freight volumes have declined by 50% and this trend lasted until 2002. It was estimated that the annual revenues of rail freight provider would decrease by 17% from 2002 to 2004. Consequently, “some local rail tracks have been closed”, and a number of manufacturers have moved their operations to other markets or shut down railway sidings. Combining environmental elements and the need for innovative services, the Carpathia Express Project was launched by Carpathia Group, “an independent train operator owned by three established freight forwards from the Czech Republic and Germany in cooperation with three national railroad operators”. The aims were to improve logistcs practice, to raise overall standards across Europe, to set high standards for logistcs education and practice, to create economic growth and job opportunities as a result, and achieve a better match between EC policy and business decisions.

PepsiCo collected raw material from its main suppliers to meet the requirements of six of its seven plants through daily communication between the two parties in order to ensure “cost effective collection and continuity of supply to the production plants” which equals 180-190 collections in a week from 14 collection points. “Due to rising costs and service issues over potato supply to its plants in Leicester, Pepsi Co undertook a benchmarking exercise to evaluate whether to invest in fleet and resource to integrate deliveries as front haul on the way to the farms and stores rather than run empty to the collection point”

Green Coffee was imported from South America, Africa and Asia and distributed to the 10 main roasting facilities in Europe, entering in 12 different ports. “Each plant had their own container inventory close to the factory and main ports”. “Re-routing of sea-containers from coffee country origins to the European coffee factories of Sara Lee” (IGD, 2010). To find a centralised distribution network from the country of origin in South America, Africa and Asia and improved service level from the original places. The team has detected that the distance travelled would increase if all the products were delivered on land. Therefore, it was necessary to convert simple overland transport mode to intermodal.

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Case 9

FMCG & Retail: The horizontal collaboration in the supply chain – Four participatants, Johnson & Johnson (J&J), GEODIS, COOP and Colgate-Palmolive (CP) Co. were involved in “logistics platforming” this collaborative activity. COOP Italia is the biggest customer for CP in Italy. COOP and CP have discussed transport collaboration issues and made an agreement to establish a collaborative model to optimize Region: Italy network. This collaborative model involves all factors, manufacturers, LSP and retailers to improve inventory level, distribution operations and sustainability of supply chains.

(Sources: Presentation given by Massimo Visconti and Antonio Bianchi, The Horizontal Collaboration in the Supply Chain – “Logistics Platforming”, 2nd June 2010 and ECR, 2010) FMCG & Retail: The process of transport collaboration – Unilever and Tesco Region: UK

Case 10 (Sources: ECR UK – Transport Collaboration Guide, 2011 and IGD, 2011) Food & Retail: Sainsbury’s and Nestle

Region: UK Case 11 (Sources: ECR UK – Transport Collaboration Guide, 2011 and IGD, 2011) Food: Coca-Cola Drikker AS – intermodal transport on long distances Region: Norway Case 12

Nestle and Sainsbury’s identified and implemented a number of standard backhauls in 2007. Sainsbury’s fleet based in Maidstone found a further opportunity to “collect bottled water from the Nestle warehouse in Dunkirk and deliver to Nestle in Bardon”, it was necessary to buy four box trailers in order to meet the different load restraint and weights required. In addition, the fleet is able to adjust timing in order to “match spare tractor capacity in the off peak times at Maidstone” in the regular flow. This opportunity initially aims to “facilitate Sainsbury’s to collect volume from Nestle at Rugby that was transhipped to Maidstone via 3PL”.

Coca-Cola Drikker AS (CCD) was established in 1996 which is responsible for “sales, production and distribution of Coca-Cola products in Norway; and it is the largest supplier of non-alcoholic beverages in Norway”. The aims were to 1. Balance and optimize “trade off between transport cost and service” and considering location elements. 2. Implement environmentally-friendly transport.

(Source: European Intermodal Association, 2008)

Plastics: Customer driven supply chain collaboration

Region: Poland Case 13 (Source: European Intermodal Association, 2008)

Automotive & Electrical: Michelin & Whirlpool

Basell Orlen Polyolefins Sp. Z o.o. (BOP) is a Polish polyolefin manufacture in Plock. BOP’s business strategy is has economic, social and environmental aspects; while the company pays more attention to safe work. The limited availability of silo trailers drived BOP to implement intermodal transportation. Moreover, BOP puts emphasis on environment-friendly activities to “meet the highest environmental standards in sector”. BOP aims to “meet customers’ expectations by offering high quality products and logistics solutions suitable to their requirements”. It is important to deliver products to clients in different geographical regions using the most effective strategy. Therefore, BOP implements “projects of supply chain reconfiguration” in the assistant of advanced logistics solutions.

Common equipment types, high volume, balanced flows

Region: Italy - Germany Case 14 (Source: Giventis, 2011)

FMCG: Georgia Pacific & BAT

Unbalanced flows, high one way costs (BAT)

France - Holland Case 15 (Source: Giventis, 2011)

FMCG & Electrical: S J Johnson & Electrolux

Different equipment requirements (cube v weight), different carrier base, balanced flows

Region: Holland - Hungary Case 16 (Source: Giventis, 2011)

FMCG & Food: Kimberly Clark, Kellogg's and Tetley Tea

In conjunction with LSP's Norbert Dentressengle & LPR, low value:high costs, KC full loads a few times a week reduced to part loads daily. When combined with Kellogg's and Tetley Tea to make daily full loads, obtain better service levels at reduced costs, 7% cost saving stated

Region: UK Case 17 (Source: Logistics Manager, Oct 2011)

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FMCG: Kimberly Clark & Unilever

Warehouse sharing, operated by K&N

Region: Holland Case 18 (Source: Logistics Manager, Oct 2011)

FMCG & Food: Kimberly Clark & Kellogg & Sara Lee

Warehouse sharing, operated by FM Logistic

Region: France Case 19

FMCG & Retail: Asda & Unilever

Region: UK Case 20 (Sources: ECR UK – Transport Collaboration Guide, 2011 and IGD, 2011) Food: Cadbury and Premier Food

It has taken about 12 months to set up a joint service with Cadbury & Premier Foods even though the two companies have the advantage of having a location on the same shared user site. The innovation will allow both companies to offer a more frequent delivery to their customer in common – a supermarket in the north

Region: UK Case 21 (Sources: The Shippers' Voice ⋅ May 4, 2010)

Food sector: Bénédicta, Lustucru, and Banania

Operated by FM Logistic

Pooling of 3 suppliers within a common warehouse and a coordinated planning to deliver customer. The objective was delivery frequency and cost reduction by improvement of truck fill rate

Case 22 Region: France

Washing powders: Henkel, Colgate and Reckitt-Benckiser

Pooling of 3 suppliers within a common warehouse. The objective was cost reduction.

Operated by Khune & Nagel Case 23 Region: France

Retail: Carrefour Consolidation Centres

Pooling of small and medium suppliers within a warehouse The objective was to reduce inventory in distribution centres and delivery cost.

Case 24 Region: France

FMCG: B/S/H, Carrefour, Decathlon

Trains and trucks’ fleet operated with intermodal containers Shift flows from road to trains to reduce lead-time, cost and emissions.

Operated by TAB Case 25 Region: France

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Appendix B – CO3 collaborative attitudes interview structure

CO3 COLLABORATIVE ATTITUDES INTERVIEW STRUCTURE Frans Cruijssen, ArgusI BV Andrew Palmer, Heriot-Watt University

CO3 is a coordination action sponsored by the seventh framework programme (FP7-SST-2011-RTD-1-7.6) Deliverable D2.2 April 2012 f.cruijssen@argusi.org Rivium 2e straat 24 PO Box 5102 2900 EC Capelle aan de IJssel T: +31 (0)20 2620011 M: +31(0)6 1186 5008

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TABLE OF CONTENTS

Introduction ........................................................................................................................................... 43 Mapping collaborative industry attitudes ............................................................................................. 44 The Operational and Supply Chain Characteristics factor ..................................................................... 45 The Collaborative Components factor ................................................................................................... 47 The Collaborative Environment factor................................................................................................... 52 The Company Culture factor .................................................................................................................. 55 Summary and Conclusion ...................................................................................................................... 57 Literature ............................................................................................................................................... 58 The Interview Protocol........................................................................................................................... 59

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INTRODUCTION As a starting point for the CO3 project, the position paper by Cruijssen (2012, available online via www.co3-project.eu) provides an overview of the most relevant aspects for horizontal collaboration projects, based primarily on academic literature. It discusses all relevant knowledge aspects of horizontal collaboration, empirical opportunities and impediments, gives a description of the development process, roles and responsibilities of the key actors, and describes available tools and technologies.

The paper arrives at four key messages that are important for developing and maintaining successful horizontal collaboration projects. Firstly, it is argued that a fair gain sharing mechanism is essential for long term success and survival of a collaboration project. This is especially true when collaboration takes place between competitors. Secondly, it is important that the collaboration is supported and formalized by the correct legal documents in which the most important rules of engagement are agreed and that makes sure that the collaboration does not result in a breach of any (anti-trust) laws. Thirdly, the CO3 project advises potential collaborators to stick to a structured stepwise development process. Although it is virtually impossible to describe all potential routes towards collaborative success, which depend on the specifics of the companies involved, the pace of development, impact etc., the CO3 project does aim to develop, describe and implement the ideal setup of a logistics collaboration project. This should be generic enough to fit most practical cases. Finally, it is argued that there is a need for a specialized entity to setup, manage and develop a collaboration. If such a neutral, transparent and trusted party is not present, there is a severe risk that not all parties will efficiently work together in the long run on a fair give and take basis. The main keywords for such a party, referred to as a trustee, are neutrality, transparency and safeguarded confidentiality of data provided.

The paper by Cruijssen (2012) provides a good overview of the relevant design aspects of a collaboration project. As such, it can serve both as an introductory text for academics interested in the topic and as a guidebook for practitioners wishing to start a collaboration. However, although it provides useful tools and techniques, the paper assumes that the players act as purely rational decision makers. This is unfortunately not always the case. Collaboration truly is people business. In the end, it is humans that decide whether to engage in it or not, how intense the collaboration will be, if they are willing to share etc.

To also get a good feel of how and why people collaborate or not, the CO3 project has also interviewed key industrial decision makers in most of the European countries where CO3 partners are active, such as the United Kingdom, the Netherlands, Belgium, Germany, France, Spain, Italy, Austria, the Czech Republic, Denmark, and Sweden. Given on the one hand the broad topic of horizontal collaboration and on the other hand the limited time that is usually available to conduct an interview at senior management level, the method of a semi-structured interview was selected. This means that the interviews are not a list of closed ended questions, nor are they unstructured, such that the interviewee is simply given a license to talk freely about whatever comes up. Semi-structured interviews offer topics and questions to the interviewee, but are carefully designed to elicit the interviewee’s ideas and opinions on the topic of interest, as opposed to leading the interviewee toward preconceived choices (Zorn,

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2010). They rely on the interviewer following up with probes to get in-depth information on topics of interest.

MAPPING COLLABORATIVE INDUSTRY ATTITUDES By developing a fixed interview template and protocol in the toolbox work package, the learnings from interviews in the business model work package in the various countries and industries can be efficiently compared and summarized, and combined with the more theoretical results described in the operational framework paper. In this way we aim at composing a coherent and complete overview of both the ‘hard’ and the ‘soft’ elements of collaboration. Together, these insights will be transferred to the pilot projects work package so that the example projects can benefit from it and be moderated in the standardized approach developed by the joint CO3 consortium.

The main goals of the interviews are to: 

Identify the ‘soft’ or human factors that play a role in the start and life cycle of a collaboration project  Gather industry and country views on collaboration  Gather necessary information for developing the correct business models for collaboration  Attempt to characterize the archetypical collaborator and the archetypical noncollaborator.

The outcome from the interviews will be used to motivate companies to collaborate and help them find their way in the possible support programs and potential partner selection steps In the remainder of this report we will introduce the semi-structured interview protocol step by step. The most relevant aspects that are possible to discuss in an interview of about one and a half hours, are covered in the following sections, along with the questions that are formulated for these aspects. The four aspects are based on our interpretation of the framework developed

by Naesens et al. (2009), see FIGURE 2 .

Evaluating collaborative attittudes

Company Culture

Collaborative Environment

Collaborative Components

Operational Characteristics

Supply Chain Operations

FIGURE 2: RELEVANT ASPECTS OF COLLABORATIVE ATTITUDES BASED ON NAESENS ET AL. (2009)

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THE OPERATIONAL AND SUPPLY CHAIN CHARACTERISTICS FACTOR One of the most commonly heard hurdles for horizontal collaboration is the difficulty of combining loads with different operational characteristics. It is true that most products have its own specifics in terms of handling, temperature control, load carrier, danger, contamination etc.

It is certainly true that some combinations of products simply don’t go well together. Indeed, it is not allowed to transport chemical products in the same container or vehicle compartment as food products. And tanker or livestock trucks can obviously not be used to transport palletized shipments. In addition, distribution centers that serve different customer areas usually cannot efficiently share their transport capacity. And as a final example, it is not easy to find backloads from certain areas in the outskirts of the European Union in some times of the year. So if companies have to ship their products to those areas, there might simply be no opportunity for collaboration.

As a general rule it can be said that the more standardized a product is from a logistics point of view, the easier it will be to find a matching partner. Examples are palletized ambient LTL flows that can be distributed jointly or FTL flows in opposite directions that can be combined to avoid empty backhauling. However, if products have more demanding characteristics such as dangerous goods or temperature controlled flows, it might be more difficult to find partners, but if such a matching partner can be found, the absolute savings are typically also higher.

Knowing these limitations, it is all the more important to know the specific characteristics of companies and products from the start of a project. Therefore in the interview protocol a number of questions are incorporated that map these characteristics of the companies. This ensures that if these companies are actually entering a CO3 case, they are matched to a partner company that has a matching product and logistics profile.

Questions in the interview protocol – all interviewees: Q Q Q Q Q Q Q Q Q Q

Company name: Industry sector: Contact name: Function of the person being interviewed: What are the products and customers of the company and their specific characteristics such as service frequencies?

What is the size of the company (this location and worldwide, € and employees)?

What are the country(ies) of operation?

What is the function1 of this location in company network (e.g. European distribution center, cross-dock location, factory, (regional) head-office, etc.)?

Which load carriers are in use? (%) Which mode of transport is used for inbound and outbound? (%) What is the FTL/LTL share?

In the interviews we focus on shippers, or when relevant on LSPs that ‘act as shippers’ in the sense that they consider opening up their transport order base to find matching flows with other companies.

1

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Questions in the interview protocol – only for current collaborators: Q

What type of transport flows are involved in the collaboration, where, frequency, mode of transport?

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THE COLLABORATIVE COMPONENTS FACTOR A second important factor for the possibilities of horizontal collaboration is the way in which a company relates to other companies in its industry, i.e. the competitive environment of the company.

Horizontal logistics collaboration can either be competitive or non-competitive. Noncompetitive horizontal collaboration occurs when collaborators that are not active in the same market work together. If the partners are servicing the same industries, they are direct competitors and the collaboration is referred to as competitive horizontal collaboration. In competitive horizontal collaborations, specific barriers are sometimes created by power plays among competitors, thereby inhibiting horizontal collaboration regardless of cost or other benefits. Therefore, when the synergies are comparable, non-competitive collaboration can be preferred over competitive collaboration. FIGURE 3 which is taken from Barratt (2004) gives the various possibilities.

FIGURE 3: SUPPLY CHAIN COLLABORATION TYPES BASED ON BARRATT (2004)

Usually it is easier to collaborate with companies outside one’s own industry than with direct competitors, although obviously the overlap and synergy with competitors is promising by its nature since clients and delivery addresses can be identical. The dangers of mistrust and legal aspects however make it seem more reasonable to sacrifice a little synergy for the sake of the likelihood or even feasibility of a long lasting partnership.

In some cases horizontal collaboration is actually enforced by a vertical supply chain partner.

For example in grocery retailing or Do-It-Yourself chains, typically the market power lays with the retailer downstream the supply chain. To optimize their processes they might force their

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suppliers to combine deliveries. In this case it is a vertical relation that enforces horizontal collaboration, aimed at improving the logistics service delivered to retailer.

Maybe the most promising competitive situation for horizontal collaboration is the case of semicompetitors. These can be defined as companies active in the same industry, delivering to the same (types of) customers, but without cross-price elasticities between the main products of these companies. One example of this could be producers of hardware and electrical tools delivering to Do-It-Yourself stores. These products might even be complimentary, i.e. have negative cross price elasticities. Such combinations benefit from the fact that they deliver products with the same logistics characteristics (ambient, palletized,‌) to the same addresses, thereby generating strong synergies. Moreover, there is likely to be less mistrust among the partners, since they do not compete with each other in the stores.

Especially when there is a threat of competitive behavior in a partnership, the role of a trustee2 is important. The trustee can be very useful for the collaborating group for example on the topics of contract type selection, supplying and/or using the IT systems supporting the collaboration, advising on entry and exit rules, implementing fair gain sharing, organizing regular communication, etc. Placing these tasks in the hands of a single trusted, transparent and impartial trustee will increase the probability of long-lasting success of the collaboration. It is however possible that some of these tasks are actually conducted by, for example, one of the shippers or logistics service providers in the collaboration, or that the task allocation is somewhat implicit, i.e. based on how the collaboration started, and not changed since. gives a graphical illustration of how the various roles in the operational framework work together to manage and operate a horizontal collaboration. See the position paper of Cruijssen (2012) for more details. This picture can be used at the start of the interview to sketch the starting points and introduce some basic terminology.

FIGURE 4

Facilitators

LSP2 LSP 1

4PL

Knowledge institutes

LSP N

Industry organizations

Contractual relation Transport execution

Governments Facilitation

Trustee SHP 1

SHP 2

SHP 3

Online function

Offline function

FIGURE 4: THE VARIOUS ROLES IN A HORIZONTAL COLLABORATION

Depending on the competitive environment of a company, collaborations are likely to be intense or not. If there is strong competition between companies, probably the best result of horizontal 2

See the operational framework position paper for more details on the trustee function.

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collaboration can be that, on an irregular basis, knowledge is shared or loads are combined. On the other hand, if there is enough trust and no competitive danger among the collaborators, more intense forms of collaborations can take shape.

Lambert et al. (1999) identify three types of collaboration depending on the level of integration of partners (see FIGURE 5 ). Although this categorization was initially designed for vertical supply chain relationships, it can straightforwardly be translated to accommodate horizontal collaboration. This spectrum is completed on the left-hand side by Arm’s length collaboration, and on the right-hand side by Horizontal integration, which are not considered to be genuine horizontal collaboration in the context of this report. However, it can be stated that horizontal integration, or a merger, is in fact an extreme case of horizontal collaboration.

Horizontal Cooperation

Arm's length

Type I Cooperation

Type II Cooperation

Type III Cooperation

Horizontal integration

FIGURE 5: HORIZONTAL COLLABORATION AND THE LEVEL OF INTEGRATION (INSPIRED BY LAMBERT ET AL., 1999)

A Type I collaboration consists of mutually recognized partners that coordinate their activities and planning, though to a limited degree. The time horizon is short-term and the collaboration involves only a single activity or division of each partner company. Type II is a collaboration in which the participants not only coordinate, but also integrate part of their business planning.

The horizon is of a long though finite length and multiple divisions or functions of the companies are involved. In Type III collaborations, the participants have integrated their operations to a significant level and each company regards the other(s) as an extension of itself.

Typically, there is no fixed end date for such a collaboration. Type III collaborations are often referred to in literature as ‘strategic alliances’. TABLE 1 describes the three types identified by Lambert et al. (1999) together with some examples for horizontal logistics collaborations.

Relationship Description The organizations involved recognize each Type I other as partners and, on a limited basis, coordinate activities and planning. The partnership usually has a short-term focus and involves one division or functional area within each organization.

Type II

Example Data exchange Joint distribution or line haul Back loading Purchasing/tendering group Maintenance group

The organizations involved progress Synchronized planning beyond coordination of activities to Multimodal collaboration integration of activities. Although not Warehouse/cross dock sharing expected to last “forever,” the partnership has a long-term horizon. Multiple Page 49 of 63

divisions and functions within the firm are involved in the partnership.

Type III

The organizations share a significant level Network integration of integration. Each party views the other Joint investments as an extension of their own firm.

Typically no “end date” for the partnership exists.

TABLE 1: TYPES OF RELATIONSHIPS (LAMBERT ET AL., 1999)

In the interviews it is important to sketch these various types of collaboration intensity to give the interviewees a good idea of what the possible forms of collaboration are. This avoids situations in which people have very specific upfront ideas of how a collaborations should look like, together with the barriers this might bring.

After explaining the various roles and responsibilities in a collaboration project and the different levels of intensity, the interviewer can use the following questions to understand the competitive environment and the collaborative components of the visited company.

Questions in the interview protocol – all interviewees: Q Q Q Q

How many true competitors do you have?

Rules or policies that determine the development of a competitive relationship - Are those changed with the time?

How do you differentiate your company with respect to the main competitor?

Can you suggest other companies and contacts that we can interview and/or are interested in setting up a collaboration?

Questions in the interview protocol – only for current collaborators: Q Q

When did your collaboration(s) start?

Type of collaboration ⎕ Vertical ⎕ Horizontal ⎕ Purchasing group ⎕ Joint distribution ⎕ Warehouse sharing ⎕ Joint linehauling ⎕ Joint customs clearing ⎕ IT development ⎕ Joint marketing ⎕ Knowledge exchange group ⎕ Other, please specify…………………………………………………………………………………………………..

Q Q

What is the level of intensity of your collaboration, for example, have you hired people at your company due to the collaborative relationship? Type I / II / III? How was the collaboration set up – what were the initiators or issues that caused it to be Page 50 of 63

Q Q Q Q Q Q Q Q Q Q

set up, who set up the collaboration, how were the partners selected, was there an orchestrator of some form Contact type: frequency, communication way (email, phone, meetings, minutes, informal activities) Is the technology that supports the relationship integrated in the company’s IT architecture?

Length of relationship, duration, intensity, how has it changed over time Are there rules for entry and exit?

If open, how are new participants selected?

Are you looking for support for your project?

How is gain sharing organized?

Communications - frequency, effectiveness, methods (email, phone, EDI) Is there a formal contract?

Contract style - legal construction of relationship (short agreement/informal/unwritten = strong relationship), conditions, and legal clauses to share information

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THE COLLABORATIVE ENVIRONMENT FACTOR As a third topic, the interviewer will discuss the collaborative environment of the company. This is done by means of three generic subtopics: previous collaboration experience, the assessment of potential benefits of horizontal collaboration and finally the assessment of barriers. Together, these elements give a good idea of a company’s position towards horizontal collaboration.

Previous collaboration experience strongly guides a company’s approach to new collaboration initiatives. Especially negative experiences may make companies think twice before entering a new initiative. However, the personal side is typically more important than the company side. If a particular employee has negative experiences with collaboration, he or she may not be inclined to try it once more. This however might not prevent a colleague to try it in for example a different region, product line or business unit. Finally, knowing if a person has been involved in collaboration efforts before will help the interviewer to better interpret statements made and to fine-tune the remaining questions.

If a company engages in horizontal collaboration, it does so because it hopes or expects to improve at least one of the three elements of the triple bottom line, i.e. cost, service and sustainability, without harming the other ones. Cruijssen (2012) discusses two studies3 in detail where potential opportunities were identified and empirically tested. We re-assessed and regrouped these opportunities to maximize their applicability to the industry interviews. Next to these opportunities, or drivers for collaboration internal to the company, there might also be external pressure to engage in horizontal collaboration. As mentioned earlier in this report there is the possibility that customers may stimulate or even force their suppliers to collaborate.

On a 5-point Likert scale, interviewees are asked to assess the applicability of the following internal or external drivers for collaboration, see TABLE 2 .

Internal drivers Cost reduction Incentives Improved service levels Marketing advantage Profit stability Growth Sustainability

External drivers Uncertain economic situation Increased competition Globalization Technological innovation Shorter PLC Increased differentiation Increased regulation Demanding customers

TABLE 2: DRIVERS FOR COLLABORATION

Similarly for the barriers, we ask the interviewee to rate potential difficulties of horizontal collaboration. Also these barriers can be internal or external to the company, see TABLE 3 .

3

Cruijssen et al., (2007) and Eye for transport (2010) Page 52 of 63

Internal barrier Fear of losing competitive advantage Technical incompatibilities expected Organization culture Peoples capability and skills Poor knowledge of internal flow data Fear of the unknown Partner accountability Costly in terms of time and effort required Modal shift if necessary might not meet service expectations Dependency on carriers Managerial inertia

External barrier Competition law Lack of cross network visibility Hard to find partners Free-riding Mistrust Gain sharing Difficult to distinguish company in a group Increased complexity of operation

TABLE 3: BARRIERS TO COLLABORATION

The discussion above results in the three groups of questions to be asked during the interviews.

The questions on previous collaboration experience and the barriers for horizontal collaboration are asked to all companies. The drivers are in principle asked to the companies that are actually engaging in collaboration. However, if it turns about to be relevant during the interview or if a company is contemplating starting a collaboration, also the drivers can be discussed with non-collaborators.

Questions in the interview protocol – all interviewees: Q Q Q Q Q

Any previous experience with collaborative relationships, issues, reasons, results?

In how many collaboration projects is your company involved?

Collaboration partners – with which companies, how were these selected, industry sector, level of competitiveness Symmetry - demographically similar, importance of each firm to the others success, relative size of the partners, market share, brand image, reputation, technological sophistication Are there any drivers of collaboration in the company - is there a belief that there will be significant benefits such as support for : ⎕ Cost reduction ⎕ Incentives ⎕ Improved service levels ⎕ Marketing advantage ⎕ Profit stability ⎕ Growth ⎕ Sustainability ⎕ Uncertain economic situation ⎕ Increased competition ⎕ Globalization ⎕ Technological innovation ⎕ Shorter PLC ⎕ Increased differentiation ⎕ Increased regulation ⎕ Demanding customers ⎕ Other, please specify Page 53 of 63

Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q

What are/have been the main enablers for collaboration?

Attitudes to perceived collaborative barriers Competition law Fear of losing competitive advantage Technical incompatibility Organization culture Peoples capability and skills Which companies would they not work with and why Poor knowledge of internal flow data (do they know their own business) Lack of cross network visibility (do they share goals and information) Fear of the unknown Partner accountability (level of trust) Costly in terms of time and effort required Modal shifts (might not meet service expectations) Dependency of shippers on carriers to solve the problem (larger the carrier, the poorer the visibility) Managerial inertia Hard to find partners Mistrust Gain sharing Free-riding Difficult to distinguish own company in group Increased complexity of operation

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Questions in the interview protocol – only for current collaborators: Q

What is the main goal of the collaboration?

Increased productivity Reduce non-core activity cost Reduce purchasing cost Specialization Improve service quality Tender on larger contract Protect market share Other, please specify:……………………………………

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THE COMPANY CULTURE FACTOR The final of the four factors to be discussed in the interviews, is maybe the most important and also the most elusive one. Company culture is made up by its history and by the individuals working for it. Depending on how open the key people of a company are towards innovations, horizontal collaboration can be promising or not. Therefore, the most important element on the company culture side that we want to test with the interviews is the human factor in horizontal collaboration.

For example, it makes a great difference if a company when engaging in horizontal collaboration first sends in their operational director, their customer service manager or their legal advisors.

Such aspects are almost impossible to quantify or generalize. The only way is to ask the key people and learn from their feedback. By asking the right open questions and by having a good discussion with the interviewee, the interviewer can get an impression of the openness of this company towards collaboration. And as a consequence, it becomes possible to make an assessment of this company’s attractiveness as a collaboration partner.

However, openness for collaboration is only a beginning. Once the first steps of a collaboration project have been taken, it can be seen if two or more companies actually make a good fit. This fit can be very good in terms of operational synergy, complementarity of goods, service improvement etc., but it will only work if people of all companies involved have some kind of positive rapport with each other. They do not need to be friends, but there must be something that we call a ‘cultural fit’.

Such a cultural fit is especially important in the context of intensive, long-term cooperative relationships. The cooperation only has a real chance of success when a certain ‘chemistry’ or ‘click’ exists between all sections of the partner companies. This means that successful cooperative relationships are not only characterized by a hard, business economics reality, but also by an emotional or psychological (soft) component.

With the interviews we will attempt to make a sketch of an archetypical collaborator and an archetypical non-collaborator. In order to be able to say something trustworthy about this, many interviews are needed and even then there will always be exceptions where successful collaboration arises in situations where it was not to be expected and likewise collaborations in ideal situations still may fail. However, as difficult it is to grasp the human factor, it is widely acknowledged that it is the most important determinant of success of a horizontal collaboration.

The following questions are proposed to map the company culture factor.

Questions in the interview protocol – all interviewees: Q Q

Company culture – what is their mission statement, is there a sense of purpose in the company, is it full of ideas, determination, charitable donations, information about key people and relationships Managerial philosophy and techniques - organizational structure, attitude towards employee empowerment, relaxed and informal clothes or totally organized and formally suited Page 55 of 63

Q Q Q

Environmental and sustainability attitudes: the ‘triple bottom line’ consists of profit, service and environmental impact 1 2 3 4 5 Willingness to change logistics contracts for the purpose of . . . . . collaboration Innovative projects with their more strategic collaborative partners: How do they involve the partner in new ideas and projects? And vice versa?

Questions in the interview protocol – only for current collaborators: Q Q

Information about key people and their relationship with equivalent in collaborative partners Which department is responsible for collaboration projects (sourcing, supply chain, strategy, operations, …)

Rate the level of involvement in the collaborative arrangement Level of trust Commitment Loyalty Sharing of sensitive information Joint operating controls - can they be changed by a partner for the common good?

Joint planning - development of strategic objectives Long term focus Risk sharing - willingness to take a short term hit for the benefit of the relationship

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1 . . . .

2 . . . .

3 . . . .

4 . . . .

5 . . . .

. . .

. . .

Yes/No . . .

. . .

. . .

SUMMARY AND CONCLUSION This report aims to be the bridge between the operational framework and the business models for horizontal collaboration. The interview results are an important element of the business models work package. By developing a fixed interview template and protocol, the learnings from the interviews in the business model work package in the various countries and industries can be efficiently combined and summarized. In this way we aim at composing a coherent and complete overview of both the ‘hard’ elements of collaboration, which are discussed in the operational framework and the ‘soft’ elements of collaboration, which will result from the industry interviews. Together, these insights will be transferred to the pilot projects so that these can benefit from the insights and be moderated in the standardized approach developed by the joint CO3 consortium.

The main goals of the interviews are to: 

Identify also the ‘soft’ or human factors that play a role in the start and life cycle of a collaboration project  Gather industry and country views on collaboration  Gather necessary information for developing the correct business models for collaboration  Attempt to characterize the archetypical collaborator and the archetypical noncollaborator.

The outcome from the interviews will be used to motivate companies to collaborate and help them find their way in the possible support programs and potential partner selection steps Four groups of questions can be used in the interviews to get a good impression of a company’s collaborative attitudes. Combined with the more operational data needed to assess potential synergies with other companies, this collaborative attitude will paint a complete picture of this company’s potential for collaboration success. The four groups of questions deal with 1) the operational and supply chain characteristics, 2) the collaborative components such as competitive pressures and the desired intensity of collaboration, 3) the collaborative environment made up by for example the drivers for and barriers to collaboration, and finally 4) the company culture.

These four groups of questions can be used in a semi-structured interview process to get a good qualitative view of the collaborative attitude of a company. It was explicitly not the intention to compose a fixed set of closed questions that the interviewer should stick to. This maybe be possible with the more objective and well-defined characteristics of a company, but hardly possible when topics such as cultural fit are assessed. Therefore, the list of questions should be used a guideline, rather than a strict list of questions that need answering. It is just as important that interviewees are given the opportunity to express their opinion on horizontal collaboration in the manner they consider most relevant. In this way, in about one and a half hours we can get maximum information out of the interviews.

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LITERATURE   

  



Barratt, M. (2004) Understanding the meaning of collaboration in the supply chain, Supply Chain Management: An International Journal 9(1): 30-42.

Cruijssen, F. (2012) Horizontal collaboration: A CO3 position paper. www.co3project.eu.

Cruijssen, F., M. Cools and W. Dullaert (2007) Horizontal collaboration in logistics: opportunities and impediments. Transport Research E: Logistics and Transport Review, 43(2), 129-142.

Eye for transport (2010) European supply chain horizontal collaboration – A brief analysis of eyefortransport’s recent survey.

Lambert, D., M. Emmelhainz and J. Gardner (1999) Building successful logistics partnerships. Journal of Business Logistics, 20(1), 165-181.

Naesens, K., L. Gelders, L. Pintelon (2009) A swift response framework for measuring the strategic fit for a horizontal collaborative initiative, International Journal of Production Economics 121, 550–561.

Zorn (2010) Designing & Conducting Semi‐Structured Interviews for Research, Waikato School of Management, University of Waikato, New Zealand,

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THE INTERVIEW PROTOCOL

The mission of CO³ is to force a structural breakthrough in the competitiveness and sustainability of European logistics by stimulating horizontal collaboration between European shippers. To achieve this goal, horizontal flow bundling and co-modality scenarios, designed to be repeatable and scalable, will be created in a number of test cases. To facilitate this, a number of company interviews are taking place to assess the attitudes towards collaborative partnerships. The focus is on horizontal collaboration and the results of the interviews will help identify suitable business models for successful collaborations. The interview points below consist of a number of questions but also points for discussion.

General Information - Context: 1 2 3 4 5 6 7 8 9 10

Company name: Industry sector: Contact name: Function of the person being interviewed: What are the products and customers of the company and their specific characteristics such as service frequencies?

What is the size of the company (this location and worldwide, € and employees)?

What are the country(ies) of operation?

What is the function4 of this location in company network (e.g. European distribution center, cross-dock location, factory, (regional) head-office, etc)?

Which load carriers are in use? (%) Which mode of transport is used for inbound and outbound? (%)

Corporate Environment - for all companies 11 12 13 14 15 16 17 18

Company culture – what is their mission statement, is there a sense of purpose in the company, is it full of ideas, determination, charitable donations, information about key people and relationships How many true competitors do you have?

Managerial philosophy and techniques - organizational structure, attitude towards employee empowerment, relaxed and informal clothes or totally organized and formally suited Environmental and sustainability attitudes: the ‘triple bottom line’ consists of profit, service and environmental impact Rules or policies that determine the development of a competitive relationship - Are those changed with the time?

Any previous experience with collaborative relationships, issues, reasons, results How do you differentiate your company with respect to the main competitor?

Are there any drivers of collaboration in the company - is there a belief that there will be significant benefits such as support for :

In the interviews we focus on shippers, or when relevant on LSPs that ‘act as shippers’ in the sense that they consider opening up their transport order base to find matching flows with other companies.

4

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⎕ Cost reduction ⎕ Incentives ⎕ Improved service levels ⎕ Marketing advantage ⎕ Profit stability ⎕ Growth ⎕ Sustainability ⎕ Uncertain economic situation ⎕ Increased competition ⎕ Globalisation ⎕ Technological innovation ⎕ Shorter PLC ⎕ Increased differentiation ⎕ Increased regulation ⎕ Demanding customers ⎕ Other, please specify For companies involved in a collaborative relationship - overview 19 20 21 22 23 24

25

26 27 28

Collaboration partners – with which companies, how were these selected, industry sector, level of competitiveness What type of transport flows are involved in the collaboration, where, frequency, mode of transport Information about key people and their relationship with equivalent in collaborative partners In how many collaboration projects is your company involved?

When did your collaboration(s) start?

1 2 3 4 5 Willingness to change logistics contracts for the purpose of . . . . . collaboration Type of collaboration ⎕ Vertical ⎕ Horizontal ⎕ Purchasing group ⎕ Joint distribution ⎕ Warehouse sharing ⎕ Joint linehauling ⎕ Joint customs clearing ⎕ IT development ⎕ Joint marketing ⎕ Knowledge exchange group ⎕ Other, please specify…………………………………………………………………………………………………..

How was the collaboration set up – what were the initiators or issues that caused it to be set up, who set up the collaboration, how were the partners selected, was there an orchestrator of some form Contact type: frequency, communication way (email, phone, meetings, minutes, informal activities) Is the technology that supports the relationship integrated in the company’s IT Page 60 of 63

29

architecture?

Length of relationship, duration, intensity, how has it changed over time

30

Level of relationship – categorise the level of involvement of the collaborative arrangement 1 Level of trust .

Commitment .

Loyalty .

Sharing of sensitive information .

Joint operating controls - can they be changed by a partner for the common good?

Joint planning - development of strategic objectives .

Long term focus .

Risk sharing - willingness to take a short term hit for the benefit of . the relationship 31

companies in the 2 . . . .

3 . . . .

4 . . . .

5 . . . .

. . .

. . .

Yes/No . . .

. . .

33 34 35 36

Innovative projects with their more strategic collaborative partners -: How do they involve the partner in new ideas and projects? And vice versa?

Which department is responsible for collaboration projects (sourcing, supply chain, strategy, operations, …)

Are there rules for entry and exit?

If open, how are new participants selected?

Are you looking for support for your project?

How is gain sharing organized?

37

What is the main goal of the collaboration?

32

Increased productivity Reduce non core activity cost Reduce purchasing cost Specialisation Improve service quality Tender on larger contract Protect market share Other, please specify:……………………………………

38 39 40 41 42 43 44

1 . . . . . . . .

2 . . . . . . . .

3 . . . . . . . .

4 . . . . . . . .

5 . . . . . . . .

What are/have been the main enablers for collaboration?

Can you suggest other companies and contacts that we can interview and/or are interested in setting up a collaboration?

Symmetry - demographically similar, importance of each firm to the others success, relative size of the partners, market share, brand image, reputation, technological sophistication Communications - frequency, effectiveness, methods (email, phone, EDI) Is there a formal contract?

Contract style - legal construction of relationship (short agreement/informal/unwritten = strong relationship), conditions, and legal clauses to share information What is the level of intensity of your collaboration, for example, have you hired people at your company due to the collaborative relationship? Type I / II / III? Page 61 of 63

Attitudes to perceived collaborative barriers – for all companies 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64

Competition law Fear of losing competitive advantage Technical incompatibility Organisation culture Peoples capability and skills Which companies would they not work with and why Poor knowledge of internal flow data (do they know their own business) Lack of cross network visibility (do they share goals and information) Fear of the unknown Partner accountability (level of trust) Costly in terms of time and effort required Modal shifts (might not meet service expectations) Dependency of shippers on carriers to solve the problem (larger the carrier, the poorer the visibility) Managerial inertia Hard to find partners Mistrust Gain sharing Free-riding Difficult to distinguish own company in group Increased complexity of operation

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1 . . . . . . .

2 . . . . . . .

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Appendix C – The companies interviewed

UK companies

Spanish companies

Dutch companies

French companies

Accolade Wines

Bosch Siemens Home

ABG

Carrefour

Coca Cola

Carrefour (twice)

A semiconductor manufacturer

FM Logistics

Diageo

Ford

Bausch & Lomb

Bosch Siemens Home

Kellogg

General Motors

DHL

Network 4S

Kimberly Clark

Dow Chemicals

Kuehne & Nagel

DSM

Marks & Spencer

IBM

Nestle

Kuehne & Nagel

Procter & Gamble

Nike

Tesco

Sabic

Unilever United Biscuits

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