Trend studies and watchers point out that collaboration in warehousing and transport is a main trend in the retail industry (Future Value Chain 2022). Transport collaboration is a joint effort from two or more business entities to realise synergies and related benefits in transportation.
There are some examples of successful collaboration in this field. However, more often there is a lot of talk about collaboration but the real benefits are not realised. In this blog we describe, based on our consulting experience, how to successfully deliver these type of projects in (non-food) retail distribution: transport from retail DC’s to stores and consumers. We will focus on the aspects which are specific to this type of collaboration. Prerequisites for any supply chain or horizontal collaboration are assumed to exist; trust, chemistry, board level support, accurate master data, etc.
The top 10 requirements to realise the benefits in transport collaboration in retail in a random order:
- Proximity of distribution centres
- Delivery window flexibility
- Planning needs to occur in unison (a control tower model)
- Collaboration on return logistics
- A TMS with sophisticated planning capabilities
- Balanced fleet selection (for the combined fleet)
- Collaboration on material handling equipment selection
- Use neutral or common trucks logos
- Business case based on the total supply chain costs
A neutral party is needed to facilitate the collaboration
- Proximity of distribution centres is a precondition
The distribution centres need to be ‘under one roof’ or in the same area to benefit from transport collaboration. Otherwise too much time is lost and costs made to transport shipment from one DC to another resulting in the introduction of transhipment points. In that case the set-up will be similar like the hub-and-spoke LTL and parcel networks offered by LSP’s and no additional benefits will be realised.
- Delivery windows flexibility of stores
Benefits are realised when planning has the greatest flexibility in selecting the day of delivery (alignment based on regions) and on time-windows (while respecting ‘legal’ and operational restrictions for stores and consumers).Using this flexibility in conjunction with a joint planning effort and the right TMS system will result in the best results. Support ‘right’ decision making by stores and consumers by offering different opportunities and their related logistic costs.
- Transport planners need to operate in a joint planning effort, ideally in the same location (control tower model (Supply Chain Control Towers)
Transport planning of all shipments needs to be combined (preferred) or when this is not possible aligned on a daily basis. Ideally the planners work together in a ‘control tower’ type of set-up to ensure trust, understanding, data sharing and group intelligence to achieve the greatest benefits. The planning itself is best done via dynamic routing to provide the planners and the systems with the most options for improvement. Depending on the selected delivery and return methods (for example click and collect) there is a potential to combine the planning of store and home deliveries.
- Collaboration on return logistics
A common mistake is to focus too much on the potential benefits in the delivery phase ignoring the impact of the return logistics, especially in retail. In this case return logistics can relate to products but also empty pallets, delivery carts or marketing accessories. Taking this into account for planning and drop-off/ storage is crucial for the business case and the successful operation.
- TMS needs to have sophisticated planning functionality
Planning of all shipments needs to be combined, based on dynamic routing and take into account planning restrictions of DC’s and stores. This can only be supported by a sophisticated TMS (TMS) with functionalities such as; Network Planning, Performance Management, Capacity Management, Asset and Fleet Management, Resource Management, Shipping Consolidation, Load Design, Dispatching, Order Execution, Order Status Information, Execution Monitoring, etc.
- Selection of the right fleet and/or carrier requirements
Transport collaboration will result in better use of transport capacity (fleet and drivers). Flexibility is still needed though regarding adaption of capacity on a yearly/weekly/daily basis and vehicle types to make fully realise related benefits. Due to the joint approach the current fleet and future fleet needs to be aligned between the partners to ensure the best mix of vehicles to deliver the goods.
- Selection and collaboration in the usage of compatible or the same transport materials
A high degree of occupation is key for transport; this becomes more complex when dealing with collaboration. Data availability, correct master data will become crucial. TMS systems can help with the planning of the truck, but matters are complicated when both parties use dissimilar material handling equipment for transport within the trucks, leading to suboptimal planning. A combined or compatible transport material handling setup is required to ensure the full benefits.
- Use neutral or common truck logos
A consequence of transport collaboration is that one truck/driver will deliver shipments at stores or even customers of different retailers. Marketing and sales managers might feel not comfortable with this set-up. Having a different company logo on your door step or perhaps even the logo of a competitor will stir some commotion in the organisation. Using a common brand (like LSP’s do) or neutral trucks and outfits for drivers can help to overcome these issues. This does mean that truck marketing needs to take a backseat.
- Business case based on overall supply chain costs
Savings on transport costs (which might be in the 5-20% range) need to be calculated in a reliable way using planning tools and simulation of the cooperation for a specific time period. Savings will not only relate to operational costs (trucks/drivers) but also planning and supporting staff members. Potential additional costs can arise in distribution centres and stores due to increased pressures of flexibility and extension of working hours. Furthermore, investments in TMS systems need to be properly supported by the business case to be able to present the full and honest picture to the management of participating retailers.
- A neutral party is needed to facilitate collaboration
In order to find the right partner(s) but mainly to facilitate the collaboration once a partner has been found it is advised to use a neutral party to mediate and facilitate. Even when two parties start collaborating with the best of intentions, small bumps in the road or simply the complexity of the transport project or business case can cause a collaboration to fail or stall. Using a neutral facilitator with experience in managing and understanding transport collaboration in the retail context will, amongst others, ensure that benefits are realised, planning is accelerated and best practise collaboration is used to avoid common mistakes are avoided.
Using the best practise requirements combined with the standard collaboration prerequisites will ensure the realisation of the full sustainable benefits of transport collaboration in a retail environment. To learn more about Capgemini Consulting’s experience and possibilities on transport collaboration please contact Rob van Doesburg or Jeffrey Blaas.