Horizontal logistics collaboration: decreasing costs through flexibility and an adequate cost allocation strategy

Abstract

When entering a horizontal logistics alliance, companies can expect a significant cost decrease. In this paper, we show that when the partners in an alliance adopt a flexible attitude (i.e. allow changes to the terms of their deliveries), the total cost can be further decreased. We argue that the method used to allocate the total cost to the different partners should therefore encourage such flexibility. A case study of three companies in Belgium achieves a 25.83% decrease in transportation costs. Allocating this collaborative gain with the Shapley value, the individual gains range from 19.01% to 37.56%. By allowing changes to delivery dates and allowing large orders to be split into several deliveries, the partners in the alliance can increase the collaborative gain and their individual gains. The Shapley value is found to encourage flexibility.

Integration of the cost allocation in the optimization of collaborative bundling

“….). In Vanovermeire et al (2013a) and Vanovermeire et al (2013b), we show that, basing the cost allocation on the marginal costs, indeed gives the best incentives to increase cooperative productivity. Both papers discuss how incentives should be given to companies to behave in a flexible manner, i.e., allow time window constraints to be relaxed, as this results in an increased collaboration gain.…”

“…This implies that the collaboration gains should exceed the economies of scale that can be achieved by traditional consolidation and groupage provided by many third-party logistics providers. In Vanovermeire et al (2013a) and Biermasz (2012), it is argued that collaborative bundling differs from traditional consolidation or groupage in that it allows for the active synchronization of shipments. This implies that the coalition can decide to delay or expedite some orders of its partners if this results in a lower total transportation cost or is otherwise beneficial.…”

Does size matter for port coopetition strategy? Concept, motivation and implication

“…This made it difficult to find an agreement to collaborate on and influenced the motivations to collaborate severely as well as the type of collaboration chosen. Only horizontal coopetition (Vanovermeire et al 2014) is applicable on markets where ports are competitors and no complementary collaboration is applicable in contrast to the suggestions (Hwang and Chiang 2010). This is due to the fact that there are no commercial agreements between the port authorities up to now.…”

Analysis of quantitative models of horizontal collaboration in supply chain network design: Towards “green collaborative” strategies

“…Also, Vanovermeire et al [55] studied the allocation of projected gain due to collaborative strategies, to different partners. Their study achieved a 25.83% decrease in total transportation cost, and allocating this collaborative gain with the SHAPLEY VALUE method, the individual gains range from 19.01% to 37.56%.…”