By James A. Cooke
Despite numerous cost-cutting tactics and strategies over the past decade, many businesses still find it difficult to control rising supply chain expenses, especially for freight transportation. That’s why the idea of “shared supply chains” is starting to attract more attention. If companies could somehow work together to share warehousing and transportation expenses, they might be able to leverage “economies of scale.” One example of this would be “co-loading” in which shippers would put their shipments on the same truck.
One key barrier to shared supply chains has been the legal issue of “anti-trust” as companies are barred under U.S. and European Union law from colluding together to raise prices or thwart marketplace competition. Most companies co-loading in Europe and the handful of companies doing so in the United States have set up that arrangement through a third-party logistics provider (3PL) on the assumption that a middleman acts as a shield.
But a group in the European Union has offered another approach – setting up a trustee to coordinate the shippers involved in co-shipping arrangement. It should be noted that consumer packaged goods companies in Europe pioneered shared supply chains a decade ago as a way to increase replenishment deliveries to retailers while still shipping full truckloads. Until recently, European companies engaged in shared transportation have all used 3PLs.
The European consortium “Collaboration Concepts for Co-modality” also known as “CO3” has proposed that these co-shipping arrangements can be set up under the umbrella of a “neutral trustee.” It’s currently developing a proposed legal framework for companies to share supply chains using a trustee. The consortium was formed in 2010 with grant funding from the European Commission, which views collaborative transportation as way to ease road congestion, reduce dependence on foreign oil and curb emissions of carbon dioxide.
The framework would spell out guidelines for collaborating on transportation and warehousing to avoid violations of European antitrust laws. It would also describe procedures for how shippers can work together, as well offer guidelines as to how companies can share both costs and financial gains from collaboration. The consortium plans to release its final document in 2014.
In addition to development of a framework, CO3 has sponsored several pilots in which a trustee oversees the co-shipping as a way to demonstrate the economic value of these practices. The pilots have involved truck, rail and short-sea shipping for both finished goods and raw materials. In some cases, the shipments have gone to the same consignee and in other cases, the shipment went to one company’s facility and then onto a nearby location for the second company.
Because European governments are promoting social policies such as curbs on greenhouse gases, the European Union seems willing to overlook potential antitrust issues at least for now. In the United States, however, anti-trust still remains a potential legal barrier to a trustee-run shared supply chain. Still, distributorships would be wise to keep an eye on developments in this area in the event that the law changes.
James Cooke is the editor of CSCMP’s Supply Chain Quarterly magazine, the premiere journal of global thought leadership for supply chain professionals. He has been writing and reporting on the best practices in supply chains for more than 30 years.Tagged with tED