Collaborative Logistics and the Creation of Business Value
By: Les G. Brand
With volatile forecasts for many industries, manufacturing companies are finding unusual ways to reduce costs, eliminate waste and emissions, and maintain their stability. Logistics has become a growing area of interest, as made evidenced by BIFMA’s recent formation of a committee dedicated solely to supply chain management.
I am privileged to have been a part of an industry-first project, where two competing companies have partnered to create business value through the modification of their supply chains – working together to share resources and save time and money.
This project is proof that collaborative logistics is not a fancy buzzword. It is very real, and its proper application can save companies hundreds of thousands of dollars.
Working closely with Steelcase, we approached Haworth with the idea of collaboration. Although both companies’ logistics specialists knew that closer scrutiny of their logistics and transportation expenses would help their bottom lines, approaching and responding to a competitor about a collaboration project isn’t the easiest thing to do. It’s quite innovative, and we applaud both companies for breaking tradition and finding the value to move forward.
With the help of Supply Chain Solutions, Inc., Steelcase and Haworth identified that many of their loads were not moving from supplier to manufacturer at full capacity. Because both companies use many of the same materials in production and have a common supply base, it became evident that working together to share inbound logistics costs could eliminate waste in their supply chains.
It’s often been said that war makes strange bedfellows.
We began by piloting a cost-savings program in the Midwest. By reviewing supplier locations, and frequency of trips, this was further narrowed down to the route between West Michigan and Eastern Wisconsin. In addition, custom software for both companies was quickly put in place by Supply Chain Solutions, and was critical in allowing both companies the visibility necessary to see exactly where products were located throughout the process.
As we worked to extract information from both suppliers and carriers, we knew that the program hinged on making the transportation change seamless to both Steelcase and Haworth. The challenge was coordinating the efforts of multiple parties to achieve cost savings. It went much deeper than just negotiating lower costs with carriers – we actually changed the way that business was conducted.
Working with suppliers and carriers from both Steelcase and Haworth, we received their advance shipping notices directly and analyzed them for collaborative opportunities. If a shipment could be re-worked to save money, our team would review all of the shipments along the route and look for opportunities to build fuller loads.
Three major areas were affected by this process:
- Improved Lean Processes. The efforts for both companies resulted in a just-in-time strategy that kept inventory low.
- Elimination of waste from supply chain. Before collaborating, it was not unusual for Steelcase or Haworth to have trucks on the road that were underutilized by 30-70%. Wasted space equaled wasted dollars.
- Maintenance and improvement of Service Levels.
After realizing nearly 40 percent cost savings, Haworth and Steelcase considered the pilot project a success. The results have prompted another company, Trendway, to join in the collaboration. We expect the savings to be maximized when up to five companies traveling similar routes are involved.
While collaborative logistics is merely one facet of the supply chain management process, it is one in which results can be added to the bottom line almost immediately. As companies realize the opportunity to combine loads, reduce inventory and negotiate with their existing suppliers and carriers, the potential for savings will be unmistakable.
The success of the initial collaboration pilot program has prompted Supply Chain Solutions to expand the collaboration initiative to the rest of the West Michigan business community. As we take the first precarious steps towards a West Michigan Freight Collaboration Consortium, Supply Chain Solutions, along with Haworth, will be selectively seeking companies in the area with which to partner. These initial companies will help to establish the consortium, and in turn, stand to reap the benefits of drastic reductions in their transportation spend. Stay up to date and follow our progress as we work to promote collaboration AND business value among companies right here in Western Michigan, on our blog or on twitter at screen name SCSolutionsinc
Exporters and companies interested in expanding to new export markets have some news to put a little bounce in their step. With the recent announcement by the Chinese government that it will float its currency, effectively raising the value of its money and making exports more affordable to its vast markets of consumers, and the launch of a new joint effort between the United States Postal Service and the US Commerce Department to boost exports among small to mid-sized businesses, exports have become a hot topic. For more information see the links below.