About 1.5 million people commute to the island of Manhattan each workday. All start from different locations around the tri-state area but end up in the same place. The idea of all these commuters arranging their own way into New York City without the benefit of mass transit is unthinkable.
Now, let's look at today's retail supply chains, where we have tens of thousands of companies, all shipping to the exact same retail distribution centers. Instead of sharing a supply line, each company manages its own parallel line of supply. For some reason, this isn't unthinkable, it's business as usual.
As a community of supply chain partners, consumer goods manufacturers, retailers and third party logistics providers, we need to overcome the barriers to collaborative logistics and shift our mindset from "ME" to "WE."
WE is powerful.
We see it in our neighborhoods when four neighbors pool their money to buy power tools that each will use just a few times a year. Individually, they save hundreds as they reduce their capital purchases by 75%.
We see it in the workplace when co-workers car pool. Gas savings alone top $2,500 per year, not to mention the benefits of extended vehicle life and reduced road congestion and pollution.
We see it in societies when one person's vision (think Mandela) inspires hundreds, then thousands, then millions to incite change.
And yes, we see it in supply chains when shippers decide to co-locate inventory and consolidate outbound LTL freight with other shippers to create fully-loaded truckload shipments that cut costs 30%.
But in today's supply chains, WE is more the exception than the rule.
Today, ME dominates.
We invest our time to achieve incremental gains in individual supply chains when the real opportunity to drive out time and costs is to change the model for how consumer goods get to market. That means going from discrete, company-managed infrastructures to shared supply chain infrastructures managed by neutral 3PLs with the ability to bring together like shippers with complementary storage and freight profiles. In this new WE-centered model, major challenges, like talent recruitment and systems investment and support, disappear. And daily logistics challenges become easier to solve:
- Heavy freight is combined with another company's lighter freight to cube out trailers;
- Skilled workers are "borrowed" from other areas to address demand spikes;
- B2C orders are shipped at hugely reduced parcel rates by your 3PL partner, who secures discounts by aggregating its collective freight volume.
WE is the future.
We've created a monstrous spider web of redundant supply lines moving to the same retailers. The current model is not supportable long term.
Companies can't afford it. Small and mid-sized firms need to look at logistics as a shared service, a model which is known to reduce costs 15% or more.
Shareholders won't stand for it. The smart ones understand that products that compete on the store shelf but don't compete in a warehouse or a truck trailer.
And our planet can't support it. The projected increase in freight emissions through 2040, if left unchecked, will be 190 million metric tons – the same greenhouse gas impact as adding 39 million passenger vehicles to the roads (Environmental Defense Fund).
KANE collaborative distribution campuses, which bring together like shippers co-locate inventory and co-load freight, are a step in the right direction. And partnerships such as the one between competing confectionery companies Hershey's and Ferrero Group to make joint use of warehousing, distribution and transportation in North America clearly signal the start of something big.
The shift from ME to WE in the supply chain is inevitable. The faster we get there, the better.
Collaborative Distribution: How to Save Millions and Embrace the Green Revolution