When looking for ways to increase supply chain efficiencies, few strategies have the cost and emissions savings potential of collaborative distribution or shared shipping—where companies pool freight resources to reduce the amount of truck trips required to move supplies or products. As the Guardian noted in a recent article on Ocean Spray and Tropicana’s shared shipping collaboration, companies stand to annually save billions of dollars and cut over a hundred million tons of climate pollution by adopting this strategy.
A recent Logistics Management report–Getting From “Me” to “We”: Creating a Shared Infrastructure for Product Distribution–dug deeply into this topic too. It shared several examples of how leading companies are implementing this strategy. The example that stood out to me involved CVS, Kimberly-Clark and Colgate.
Finding the right supply chain partners
Suppliers had approached CVS about the opportunities available through collaborative shipping. CVS agreed to undertake a pilot to see how it could help foster this type of arrangement for goods flowing into its network.
The retailer set criteria to identify companies to pilot the concept. The criteria included product compatibility, proximity of supplier distribution centers, complementary order patterns, overlapping customer network and culture fit. CVS chose to run the pilot with Kimberly-Clark and Colgate.
Before the pilot, Colgate and Kimberly-Clark both shipped directly to CVS. Each company had excess trailer capacity. As the image below demonstrates, by collaborating, the inbound trucks to CVS became better utilized. This resulted in fewer overall truck trips (109 less), lower emissions (28 tons avoided) and increased business value for all parties (7% lower inventory, 2% fewer out-of-stocks and better forecasting).
According to the Logistics Management report, the three companies now follow a four-step process:
- CVS analyzes replenishment needs and combines orders that optimize trailer weight and cube.
- Colgate shuttles product from its distribution center to a nearby Kimberly Clark DC and unloads the tail of the Colgate trailer.
- Kimberly-Clark then fills that trailer with its products and ships to CVS.
- The dedicated carrier invoices both Kimberly-Clark and Colgate based on the percentage of total pallets shipped by each company.
This and other examples highlighted in the Logistics Management report are compelling, but the best evidence to me about the growing interest in collaborative distribution is that I’m learning about other projects from publications outside the logistics/shipping field, including the academic journal Science.
Similar shipping needs = big opportunity
Proctor & Gamble was highlighted in a recent Science article about the “physical internet”–an advanced form of collaborative distribution practices. Through a physical internet, companies move goods through an open global logistics system that is significantly more efficient, sustainable, adaptable and resilient than today’s logistics system. The management systems needed to enable a mature physical internet are being developed at leading research institutions and in cross-company collaborations, such as between P&G and Tupperware.
Both companies have manufacturing facilities and distribution centers (DC) in Belgium. Both were also sending products to Greece from their Belgium DCs. The distances and routes in these moves were well-aligned for co-loading their shipments.
The products matched well too. P&G had heavier products that were using 95% of the weight capacity of each move, but only 50% of the volume capacity. Tupperware, however, had lighter product that was using 85% of the volume capacity, but only 30% of the weight capacity.
By co-loading this freight, Tupperware and P&G were able to avoid 200 tons of climate pollution, increased asset utilization and save 17% on total lane costs.
With big players like CVS and P&G embracing collaboration, it is clear that there are significant, near-term cost savings and emission reductions benefits to be gained by looking for opportunities to collaborate on shipping. If your company isn’t yet embracing these strategies, it is leaving money on the table.