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Collaboration in logistics is said to be achieved when two or more companies,including the logistics service providers, enter into a strategic partnership and exchange or share resources with the goal of making decisions and undertaking logistics-related activities that will generate benefits that they cannot (or only partially) generate individually. The level of collaboration can range from information exchange,joint planning, joint execution, to strategic alliance (Audy et al. 2010).
There are a variety of collaborative activities in the supply chain, including logistics collaboration, which can be grouped into two main categories according to their structure: vertical and horizontal (Simatupang and Sridharan, 2002). Vertical collaboration takes place between partners (typically suppliers and customers) located at different levels of the supply chain, while horizontal collaboration refers to partnership between two or more unrelated or competing organizations that operate at the same level of the supply chain (Barratt, 2004).
Vertical collaboration has long been the dominant focus in logistics operations largely due to the prevalence of the supply chain management concept since 1990s.Supply chain management often requires tight and seamless integrations between different independent parties along the vertical chains for the purpose of better demand and supply matching to drive down cost and increase quality and service.This mainly focuses on the coordinated flow of materials and information throughout the whole chain, using joint decision-making processes and the management of relationships between partners to achieve success (Christopher, 1992; Mangan et al. 2008). The need to improve supply chain integration places increasing pressure on the logistics operations, which act as the physical links that connect the fixed points in the supply chain (Coyle et al. 2003), and hence is a key integral process in contributing to the overall goal of successful supply chain management (Ellram,1991). Morash and Clinton (1997) note that effective supply chain integrations often stress the importance of time compression, which will result in more frequent logistics deliveries so as to cut down the stock holding at each channel echelon, as well as faster transit time that helps to shrink the pipeline inventory hence saving costs and increasing responsiveness. In the meantime, many supply chains are moving towards the adoption of a just-in-time concept (Ohno, 1988; Womack et al. 2007),and this also brings out more significant challenges in terms of managing the logistics activities both effectively and efficiently. These challenges and incentives arising from the supply chain management largely stimulate the need to organize the logistics operations towards more collaborative approaches, involving both upstream and downstream players working together to plan and execute the logistics flows better across the supply chain echelons. Thus, logistics vertical collaboration has often been considered to be the key area for investigation and development, both by practitioners and researchers.
There is extensive academic research on the aspects of vertical logistics collaborations in supply chains. For instance, Stefansson (2006) and Knemeyer et al. (2003) investigate the different types of 3PLs (third party logistics — a provider of outsourced logistics services that encompass anything that involves management of the way resources are moved to the areas where they are required <Africk and Markeset, 1996, Foster, 1994>) and the relations with supply chain partners to facilitate better organized logistics flows across the supply chain. Meanwhile, Tate(1996), Moore (1998) and Lambert et al. (1999) discuss the critical success factors for logistics partnerships, such as information sharing, fairness, trust, etc.; Stank et al.(2003) measure the collaborative logistics performance, such as supplier operational effectiveness, costs, customer satisfaction and loyalty, etc., resulting from such collaborative partnerships. There are also a large number of studies on the specific types of logistics vertical collaboration models between manufacturers and retailers.(e.g. Waller, et al. 1999; Slikker, et al. 2005; Tyan, et al. 2003; Esper and Williams,2003, etc.) Among these works, two of the classic collaboration models have been widely researched and practiced: Vendor-Managed Inventory (VMI) and Collaborative Planning, Forecasting and Replenishment (CPFR). A brief illustration of these is given below to offer a taste of the typical kinds of issues that vertical logistics collaboration deals with.
Vendor-managed inventory (VMI) is a collaborative logistics replenishment model that is widely utilized in IT and the retailing industry. In this model, the downstream customers of the products (normally retailers) share the point of sales data (POS) directly with the product suppliers, instead of supplying inaccurate forecasts,while suppliers often fully take over control of the responsibility for the planning, replenishment and management of their customer’s product inventory, usually at the customer’s warehouse, although the ownership is still kept by suppliers until the final consumption is pulled through by customers. By operating in this way,significant benefits can be reaped such as increased shelf availability for customers,and reduced inventory costs resulting from better demand-supply matching (Chopra and Meindl, 2007, Salzarulo, 2006). Disney and Towill (2003) demonstrate at an operational level how the adoption of a collaborative vendor-managed inventory strategy can also have a beneficial effect on transport optimization and on increased flexibility.
In the USA, the widely adopted Collaborative Planning, Forecasting and Replenishment (CPFR) model in supply chain management has also been extended to have a logistics and transport dimension. Initially, the CPFR model mainly stressed the importance of the accuracy of the forecast (demands, orders, and sales),which can be improved by having upstream suppliers and downstream customers working more closely (VICS, 2004). Later, however, it was extended to incorporate logistics and transport planning, leading to the development of the “Collaborative Transportation Management” (CTM) model. Sutherland (2003) defines CTM as“a holistic process that brings together supply chain partners and logistics service providers to drive inefficiencies out of the transport planning and execution process”.In particular, CTM is responsible for the conversion of “order forecasts” that are deployed through CPFR into “shipment forecasts”. Karolefsky (2001) adds that CTM constitutes “the missing link” of supply chain collaboration. It means that the “order forecasts” stated by CPFR cannot be fulfilled without the effective development of“logistics forecasts”. More importantly, CTM includes not only the concept of building strong relations between sellers and buyers, but also includes logistics service providers (Esper and Williams, 2003).
While many aspects of vertical collaboration in the supply chain have been considered, much less attention has been devoted to horizontal logistics collaboration. The next section therefore gives a thorough examination of the state of art development in this new area.
According to Cruijssen (2006, 2007b), logistics horizontal collaboration (LHC) refers to the active collaboration between two or more firms that operate at the same level of the supply chain and perform comparable logistics functions. It is noticeable that in the logistics and transport marketplace, generally LSPs consider horizontal collaboration to be an interesting approach to reduce costs, improve services, or protect market positions, among other things (Cruijssen et al. 2007a). Mason et al.(2007) point out that logistics and transport provision often has to be reactive to a fluctuating demand, and if the relevant assets can be additionally deployed on parallel supply chains, their utilization rate goes up by spreading the fixed costs of the assets among more activities, thus producing a more attractive business proposition. There is therefore considerable opportunity for research into horizontally collaborative solutions in the field of logistics.
While vertical logistics collaborations have already been covered by an abundant body of literature, research on horizontal collaboration in logistics is still in its infancy(Cruijssen et al. 2007a; Schulz and Blecken, 2010).
To identify the most relevant contributions of LHC, a search was performed among the key international journal data bases (Business Source Premier (EBSCO),ProQuest , ABI, Emerald, Web of Science (WOS), Science Direct, Google Scho lar),looking for the term horizontal collaboration/cooperation/partnership/alliance AND logistics/freight/transport(ation)/delivery/distribution within titles , key-words and the abstract of the paper. The following sub-sections will discuss the relevant literature in broadly chronological order. The major research focus and contributions will be illustrated.
LHC was first addressed by Caputo and Mininno (1996), who suggested that,apart from close collaboration between partners along the vertical supply chain,more effort should be devoted to collaboration at the horizontal level of the supply chain, and that considerable gains could be reaped if all related logistics activities could be initially optimized before they were transferred to the next level of the supply chain. In fact, it is argued that horizontal collaboration between institutions located at the same level of the supply chain is one of the important preconditions for setting up a more efficient vertical integration programme in the supply chain. Particularly,various potential policies for coordinated activities of horizontal collaboration between shippers or distributors are proposed, such as cross-sharing warehouses,standardization of packaging, part numbers, joint distribution, and purchasing. There were no real cases of implementation of these strategies in the 1990s, however,indicating that the majority of the practitioners and researchers at this time were unaware of this innovative business concept.
Entering into the 21st century, some researchers began to take notice of this innovative idea for operating logistics, with a few studies of some initial practices based on this new collaboration concept. Both Bahrami (2002a) and Hageback et al.(2004) undertook case studies to examine the cost savings from the economies of scale that can be explored from a particular collaboration strategy called “collaborative transportation” that aims to effectively merge partners’ respective distribution activities with the purpose of increasing transport asset utilization, shipping frequency and reduce costs. Both studies identified the positive results realized by implementing such collaboration in their logistics operations and advise that such real life horizontal collaboration practice can bring significant cost reductions ranging from 2.4% to 9.8%and to over one-third depending on how it is organized and scaled up.
Later on, more case studies of the different kinds of collaboration practices in the industry were illustrated by Mason et al. (2007). Examples such as coordinated pallet distribution and collaborative commission of logistics IT services are proven to generate unique value beyond the traditional practice. Their case study emphasized the point that the newly innovative business models built on the concept of horizontal collaboration have the potential to further optimize logistics operations and enhance value solutions, thereby challenging many traditional methods for managing logistics.
Since 2007, a growing awareness of the LHC concept and practice has attracted more studies. Among these, a great portion has specially focused on investigating the opportunities provided by and impediments facing LHC. With respect to the benefits of horizontal collaboration in logistics, the idea that cost reduction is one of the most relevant benefits is widely accepted, while the perceptions of the barriers to conducting LHC tend to vary given the specific operational scenarios.
Firstly, from the theoretical perspective, Cruijssen et al. (2007b) conducted an extensive literature review of the collaboration associated opportunities, impediments,and facilitators, drawing on general management and organizational theories, which provide some important implications for LHC. The major opportunities concluded for LHC can be categorized as (1) cost and productivity; (2) customer service; and (3) market position. For impediments, (1) partner selection; (2) determining and dividing gains; (3) negotiation position; and (4) information and communication technology(ICT) are the four main areas that can hamper LHC. In addition, major facilitators for horizontal partnership are identified as (1) information sharing; (2) incentive alignment; (3) relationship management; and (4) information technology.
To validate the literature review above, Cruijssen et al. (2007a) contributed a large-scale empirical survey on the opportunities and impediments for LHC and confirmed that most of the benefits and impediments drawn from the general literature are also well supported by LSPs. In particular, more than half of their surveyed LSP companies considered that by collaborating horizontally a company’s productivity on its core activities will have high potential to increase, hence reducing costs. The core activities in the context of LSPs can refer to similar (or overlapping) business such as sharing of truck capacity to decrease empty mileage, better usage of storage facilities and increased load factors. Interestingly, it was also found that customers do not expect LSPs to collaborate horizontally, since this might potentially jeopardize their own negotiation position in respect to individual LSPs as well as the vertical coordination process along the supply chain. Collaboration between LSPs is only encouraged when downstream customers could enjoy significant cost reductions. Therefore, horizontal collaboration in the context of LSPs is mainly a means for LSPs to increase their own productivity and cost efficiency, rather than as a reaction to requests from the demand side. The most significant barriers for LSPs, meanwhile, are identified as partner selection and fair allocation of shared workload and cost savings. The former indicates the lack of a structural approach for developing horizontal collaboration, while the latter reveals the issue of an imbalance in collaboration gains and bargaining power between partners.
The thorough studies contributed by Cruijssen et al. (2007a), (2007b) have apparently facilitated further work to explore the opportunities and impediments in respect to LHC. Several studies of these are discussed next.
Schulz and Blecken (2010) found that there is a difference in weighting the collaborative benefits between the commercial and public sectors. In the public sector,greater importance is assigned to lead-time reductions and quality improvement,in contrast with the unremitting focus on cost reduction in the commercial sector.In terms of the barriers, a different ranking is also identified. The most troubling issues in the public sector are about cultural differences, mutual mistrust, lack of transparency, inadequate resources, and treating logistics as a core competence and hence rejecting collaboration. Industry and market characteristics are therefore quite important contextual factors that can influence the focus of collaboration. Another important finding suggested that smaller sized organizations, in particular, can benefit more from the horizontal collaboration by gaining access to logistics services that would otherwise be impossible for them to access.
The benefits and barriers related to LHC have also been addressed by Hingley et al. (2011), who investigated the role of fourth-party logistics (4PL) to coordinate partners and optimize benefits (“A 4PL is an integrator that assembles the resources,capabilities, and technology of its own organization and other organizations to design,build and run comprehensive supply chain solutions”— Foster (1999). Key findings indicated a number of benefits that would improve the current logistics operations such as cost reduction, the potential for increased asset utilization, and the facilitation of a more environmentally friendly approach to distribution management. The study found, however, that only suppliers and LSPs are interested in participating in collaboration managed by 4PL, with retailers being very unwilling to support 4PL and LHC. There tend to be several underlying reasons for this: first, it was found that most retailers nowadays are large enough in size and scale through previous mergers and acquisitions and that they may, therefore, have arrived at a point of horizontal saturation with a general lack of motivation to participate LHC. Second,retailers’ predominant emphasis on sustaining the service level and protecting sensitive and confidential data makes them largely unwilling to collaborate and share physical distribution management with other retailers. Third, horizontal collaboration between upstream suppliers and between LSPs may negatively impact the service performance for retailers such as on-time delivery. In such a scenario, retaining supply chain control and secrecy means more to retailers than the cost efficiencies realized through horizontal collaboration and 4PL. This is in line with Cruijssen et al.(2007a), who pointed out that horizontal collaboration is mainly a means for LSPs to increase their own productivity and cost efficiency, rather than as a reaction to requests from the demand side. As a result, retailers as gatekeepers and channel leaders are motivated more to safeguard their own interests.
It is therefore hard for suppliers and LSPs to realize the synergic benefits from horizontal collaboration without seriously taking into account the retailer’s dominant power in the supply chain. An important question for future study is therefore how the collaboration practice at the supply chain horizontal level could be organized in ways that least endanger the vertical supply chain coordination and performance.
Cruijssen et al. (2010) further found that the current logistics market structure in Belgium is highly fragmented, which leads to significantly low efficiency for LSPs.LHC as a promising strategy can help to improve this overall efficiency. In addition,it noticed that LHC is more frequently considered by LSPs as a “defensive” strategy aimed at increasing operating efficiency and protecting market share, rather than an “offensive” strategy to enter new markets or actively attract additional clients in present markets. Furthermore, the study findings indicated that there should be a minimum degree of efficiency and scale required for the partners so as to allow more effectively coordinated activities to reap benefits and overcome impediments.
Determining and dividing costs and gains is one significant barrier that threatens horizontal collaboration, but the current literature directly addressing this issue is scarce, as mentioned by Cruijssen et al. (2007a). To fill this gap, Krajewska et al.(2008) developed a model to study how to distribute costs and profits among freight carriers in a horizontal partnership. In their model, game theory was used as an approach to costs and profits sharing. Likewise, Audy et al. (2011) studied a cost savings sharing approach that can provide satisfactory and meaningful allocation between partners. On the basis of the Equal Profits Method and Alternative Cost Avoided Method, they have proposed a new method with some modifications that support a stable and profitable coalition. A case study using this method was conducted in the furniture industry and the potential cost-savings were analysed.
Another model was developed by Cruijssen et al. (2007c) who used a vehicle routing model to investigate the potential cost savings that can be attained through one basic form of horizontal collaboration — joint route planning. Sensitivity analyses were conducted based on seven operations characteristics (the number of partners,orders per partner, the average order size, the standard deviation of order size, the time window width, the size of distribution areas, market shares) to evaluate the effect on cost reduction. The results indicated that the joint route planning is most beneficial in situations where there are a large number of partners of a uniform and not too large size. Furthermore, the cost reduction will increase if order sizes are small compared to a standard truck’s capacity, time windows are narrow, and inter-customer distances are large.
Governance is a fundamental management aspect that influences how companies engage and interact within the collaborative relationships. Due to the complexity arising from these bilateral or multilateral collaborative relationships, conflicts and issues of commitment are highly likely to affect the effectiveness of collaboration.Implementing the appropriate governance mechanism is therefore critical to the success of LHC. With a focus on collaboration among LSPs, Wallenburg and Raue(2011) investigated how the different nature of conflicts might affect the outcomes of LHC and concluded that social governance (relationship management/personal interactions) is perceived as a better choice than formal governance (contractual/written agreement) in dealing with conflict resolution issues in LHC.
Continuing this work, Schmoltzi and Wallenburg (2012) further investigated the specific effects that formal and social governance mechanisms have on collaboration commitment and effectiveness and how collaboration complexity will shape such effects. It was found that both formal and social governance mechanisms have a substantial positive effect on performance. Formal control becomes particularly important when organizational complexity grows, while issues and frictions caused by strategic complexity increase the relevance of both formal and social control for collaboration success.
Establishing horizontal collaborative partnerships is not an easy matter and involves a number of considerations before implementation. Hence, recent studies have considered the frameworks for analysing and implementing LHC.
It takes time and resources to establish, maintain and develop horizontal collaboration between firms. Therefore, checking the compatibility of the two companies in advance is very important. Naesens et al. (2009) developed a strategic decision support framework that allows companies to mutually evaluate their strategic fit for resource pooling in inventories. They have identified 58 performance attributes which can be used as the measuring base and developed an analytic hierarchy process (AHP) to rate these indicators which provide a more comprehensive decision support about whether collaboration is possible.
Verstrepen et al. (2009) proposed a stage-wise approach to develop LSP collaboration. They discussed a conceptual development framework consisting of four subsequent phases for developing an LHC project. Each phase involves different tasks, ranging from strategic positioning to moderation, that describe an entire life cycle for the development and implementation of a collaboration project.
Palmer et al. (2012) explained a development framework for horizontal collaboration consisting of three stages characterized by “exploration”, “assimilation”and “exploitation”. This represents a continuous relational learning process in which partners explore together the potential improvements in their operations,with each then assimilating internally the changes they have to make to enable the collaboration, exploiting these efficiently together again and sharing fairly the outcomes of the collaboration.
Moutaoukil et al. (2012) proposed a collaboration framework based on three levels of collaboration: strategic, tactical and operational. The first level is corresponding to the engagement process involving strategic activities like the selection of partners and definition of management rules. The second level is related to the management of interdependencies which deals with planning and coordination issues between partners. The third level is concerned with the effective implementation of operations that ensures the execution of relevant plans and specifications.
Audy et al. (2012) described a general framework for developing and managing efficient logistics collaborations between firms, which can be used in the context of horizontal collaborative logistics. This framework firstly explains the main stages for building an inter-firm relationship, namely the objectives to reach, the organization of the collaboration to implement, and the partners to select. Then it describes how to manage collaborations in terms of responsibilities, leadership, and benefits sharing.In addition, some coordination mechanisms are proposed to support information sharing, the planning and execution of logistics activities, and benefit sharing, which could help managers to design their collaboration schemes.
Pomponi et al. (2013) suggested that firms need to accumulate a relevant experience in horizontal collaboration in order to increase their mutual trust. They hence proposed a conceptual framework that identifies three incremental steps in the collaboration development. Each stage is characterised by a specific combination of aims and shared assets. At the operational level, companies collaborate mainly for operations-related performance such as cost reduction and quicker response,which involves the shared use of data and fleet. When entering into the tactical level,companies might collaborate on more complex logistics problems like multimodal transport and start to share their own facilities and warehouse. When the partnership becomes strategic, collaboration will be centred on innovation and joint investment,through sharing market power and expertise.
Pomponi et al. (2015) proposed a trust-based evolutionary framework for LHC. The framework assumes the trust and extent of collaboration as the main dimensions along which subsequent steps of horizontal collaborations are developed.Collaboration development is incremental and has three stages (i.e. operational, tactical and strategic). The different collaboration intensity is mainly influenced by the level of trust developed between partners over time. Initially, due to the limited trust,the collaboration needs some form of contractual boundary (i.e. agreement-driven trust). As partners get to know one another, the shared knowledge will enhance mutual understanding and expectations (i.e. knowledge-driven trust). Eventually, when partners know each other’s wants and requirements and acts in ways that exceed each other’s expectations, the collaboration fosters itself (i.e. collaboration-driven trust).
Generally speaking, past studies mainly used three approaches to analyse and propose the LHC development frameworks. The first approach suggested that the development of a LHC project is an incremental process that would therefore need a stage-wise approach to ensure proper activities (e.g. partner selection, performance control) are conducted at each critical phase. The second approach considered the collaboration development based on the planning and decision levels. The collaboration activity should be designed according to whether it meets the strategic,tactical, or operational goals. The third approach considered the level of trust as the key measurement to develop collaboration. Trust levels hence affect the extent of collaboration.
Whilst the literature on LHC is in its infancy, lots of the previous studies have focused on explaining the benefits, barriers and development process of LHC. In contrast, fewer studies attempted to investigate and classify the different types of LHC models in the practice. Two of the authors attempted to provide the typology analysis of horizontal collaboration models that might be applied in the various areas of logistics and transport operations.
Cruijssen (2006) described thirteen LSP collaboration models such as freight sharing, group purchasing, co-branding and knowledge centre, based on which they developed a tentative typology that incorporates four dimensions in order to characterize the proposed models: (1) operational scope (operational, tactical,strategic); (2) competitive relationship (presence/absence); (3) combined assets (e.g.facilities/expertise/market power); (4) objectives (e.g. cutting cost/growth/innovation).
Leitner et al. (2011) proposed a conceptual framework to classify the possible types of LHC according to two collaboration dimensions: the level of collaboration intensity that goes from no collaboration to intense collaboration relationship, and correspondingly the potential of business consolidation in terms of the different logistic activities, which varies from absence of collaboration (individual transport planning and optimization) to high collaborative approach (coordination between logistics and production).
These typologies are simplistic and non-systematic however, due to a number of limitations. First, most LHC models are described very briefly. For instance, it is not clear about the logistics players involved, the specific resources and information shared, and the design of the collaborative process. Such information is critical and needs more concrete and insightful discussion. In addition, the relevant typologies of LHC models are merely the conceptual discussion with no support of a formal research process and data analysis. More rigorous and systematic investigations are required. Furthermore, some proposed LHC models are not strongly related to the key logistics and transport operations (e.g. knowledge centre, co-branding). Efforts are further needed to investigate into the logistics and transport sectors for proper LHC practice.