A framework for horizontal cooperation in logistics.

S. Verstrepen, M. Cools, F. Cruijssen, W. Dullaert

Logistics Service Providers (LSPs) are facing many problems such as fierce global competition, rising petrol and labour prices, the proliferation of products with shorter life cycles and the ever increasing expectations of customers. As a result, the number of bankruptcies of small and medium sized LSPs has steadily been rising over the last decade. Horizontal cooperation (also known as “alliance formation” or “co-opetition”) is a potential remedy for many of these challenges. Partnerships between companies that operate at the same level of the market have proven to be useful to cope with difficult circumstances and to amend the efficiency and competitiveness of participating LSPs. Except for a small number of successful cases in North America, horizontal collaboration in logistics is mainly gaining momentum in Western Europe. In Belgium and the Netherlands, the European logistics centers of gravity, the authors are aware of over 30 formal logistics partnerships. Through close collaboration, the partnering LSPs aim at increasing productivity, e.g. by optimizing vehicle capacity utilization, reducing empty mileage and cutting costs of non-core/supporting activities to increase the competitiveness of their logistics networks (Cruijssen et al., 2005). The literature on horizontal logistics partnerships is well developed for maritime shipping and the airline industry. In contrast, the literature on horizontal partnerships in logistics on the landside is still in its infancy. This is a “new frontier” in logistics, gaining strong attention both in research and in practice. However, it is also a highly complex and risky business. The recent difficulties faced by a number of high profile initiatives in this area (e.g. Distrivaart, Foodned,…) illustrate this point. The authors conducted extensive research concerning the strategic drivers, dimensions, characteristics and critical success factors of collaborative logistics networks. This resulted in evidence that the successful creation and management of horizontal partnerships is a controllable process with a number of clear success and failure factors, rather than a matter of chance. In this paper a survey study on horizontal cooperation in Belgium and the Netherlands (see Cruijssen et al., 2005) is extended with a series of in-depth interviews to identify external and internal drivers for horizontal cooperation in logistics. These support the development of a framework for classifying horizontal cooperation in logistics. To date, literature lacks such an encompassing framework for horizontal cooperation in logistics. This paper is further organized as follows. In Section 2, the internal and external motivating factors for horizontal cooperation are discussed. Section 3 provides a typology for horizontal cooperation forms arising in practice. A stage-wise description of the development of horizontal partnerships is presented in the fourth section. Finally, in section 5 we draw the most important conclusions. The contribution of this paper is threefold. First of all, it presents an overview of the most important motives that LSPs may feel to start up a horizontal cooperation. These motives can be both internal and external to the company. Horizontal cooperation may e.g. help to cope with difficult market circumstances such as strong demand fluctuations, new competition from Eastern European LSPs, and the customer requirement of one stop shopping. Horizontal cooperation can also be used to pursue ambitious company goals such as serving new geographical regions, improving customer service, and a better utilization of existing infrastructure and assets. This diverse collection of motives has brought about a whole range of heterogeneous cooperation initiatives in practice. Second, a typology supporting LSPs in their search for a suitable structure for cooperation is developed based on distinguishing cooperation characteristics encountered in practice. When this choice is made, the dynamic process of cooperation in practice begins. The third contribution therefore consists of a description of the life cycle of a cooperation. This life cycle is divided in four phases: Strategic Positioning, Design, Implementation and Moderation. Each of these are necessary phases and in turn consist of multiple tasks that should be carried out carefully in order to make the cooperation a success. This research thus indicates that successful horizontal collaboration is not a random event: it is a manageable process that can be deliberately planned and controlled. At the same time, this paper aims at stimulating cooperative behaviour in the highly fragmented and competitive Western European logistics sector. We believe that this is a useful, and maybe even necessary, step that LSPs can take to cope with the increasingly difficult market conditions. A positive side effect is that society and the environment will benefit from reduced (empty) mileage and congestion.

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