transportationreport
BY MARK B. SOLOMON, SENIOR EDITOR
come together
For all its potential, the
“collaborative distribution”
concept has yet to live up
to its billing. Some say
that’s about to change.
IN THE WORLD OF SUPPLY CHAIN MANagement, the bridge connecting strategy and execution can sometimes be a long and rickety span.
For example, take the concept of “collaborative
distribution.” It has been around for years, has frequently been cited for its potential benefits, but
has never really lived up to its billing.
The theory works like this: Convince clusters
of small to mid-sized manufacturers to shutter
their individual warehouse networks and stop
shipping via less-than-truckload (LTL) service, and instead centralize their inventories in
one vast third-party-controlled warehouse,
where orders from retailers can be consolidated into a single full truckload and shipped
once a week direct to a customer’s warehouse.
Manufacturers that would otherwise lack the
volumes to ship full truckloads would commingle their freight with other shippers’
cargo, thus combining one week’s worth of orders into a single delivery and avoiding the higher
costs of having to ship a few stand-alone pallets via LTL. They would also boost their cash flow by
sharing the warehouse and DC infrastructure with other manufacturers and eliminating the costs
of operating their own facilities.
Retailers would benefit by receiving a truckload of goods once a week rather than accepting shipments on multiple trucks over several days. This streamlines their supply chains and better aligns
their delivery schedules with weekly inventory replenishment cycles. They would also realize reductions in fuel consumption and their carbon footprints by taking trucks off the road and cutting
vehicle-miles traveled.
But while some companies—and the consultants supporting them—boast of mastering the strategy, the real-world implementation has in the past left many practitioners feeling frustrated.
Successful execution, experts say, requires that competing manufacturers pull together for the good
of the whole; that retailers shift from fragmented, silo-driven ordering practices to a uniform, synchronized order approach; and that information technology (IT) be sophisticated and functional
enough to tie it all together. While there has been significant progress made on the IT front, the first
