CO3 – Collaboration Concepts for Comodality

Context of Transport Climate Action

Statistics show that the overall capacity utilization of freight vehicles in Europe is only 43%. This means that almost 1 out of 4 vehicles in Europe run empty. Moreover, transportation is the second strongest sector for the production of CO2 in the EU and road transport, representing 72% overall of transport greenhouse gas emissions (including aviation and maritime shipping).

Improving vehicle utilization by reducing empty trucks running and optimizing the use of each vehicle’s carrying capacity, leads to the same goods being carried with fewer vehicle movements and lowers emissions. This helps to reduce total impact of freight vehicle traffic, thereby leading to reduced congestion, emissions, accidents and other environmental impacts from the intensity of freight transport.

Capacity in the European transport system is being structurally underutilized. “Carpooling for cargo”, also known as horizontal collaboration or smart bundling of goods flows from different companies, offers a powerful and innovative solution to tackle this problem. Companies who collaborate and bundle their logistic shipments can achieve dramatic benefits in economic, social and environmental terms. Up to now, shippers who want to collaborate in this way are usually hindered by the practical obstacles in their way. The mental shift to eliminate these obstacles is the idea behind the project CO3.

Description

CO3 is a business strategy enabling companies throughout the supply chain to set up and maintain initiatives to manage and optimize their logistics and transport operations by increasing load factors, reducing empty movements and stimulate co-modality, through Horizontal Collaboration between industry partners, thereby reducing transport externalities such as greenhouse gas emissions and costs.

The CO3 consortium, which is made up of logistics specialists, manufacturing industry and transport service providers, has been working on the topic of collaboration and co-modality for three years and already produced a first draft of a model framework with legal and operational guidelines for collaborative projects in the supply chain.

The consortium, consisting of 18 partners from seven EU countries, had coordinated studies and expert group exchanges and builded on existing methodologies to develop European legal and operational frameworks for freight flow bundling. The partners have come up with joint business models for inter- and intra-supply chain collaboration to deliver more efficient transport processes, increase load factors and the use of co-modal transport. The results of the studies and expert group exchanges have been applied and validated in the market via case studies. The aim was to set up at least four different real-life applications of collaboration across the supply chain by using road transport, multimodal transport, regional retail distribution and collaboration for warehousing activities. CO3 also promoted and facilitated matchmaking and knowledge-sharing through CO³ conferences and practical workshops to transfer knowledge and increase the market acceptance of the CO³ results. This was done through discussions with a High Level Board of European Industry supply chain Leaders.

Implementation

The CO3 project ran for 3 years and has received funding under the European Union’s Seventh Programme for research. The project consisted of three main phases that have been summarized in the graph below.

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Results in the project were tested in six real-life business cases across Europe

  • STEF, TRI-VIZOR, Nestlé and PepsiCo (CO3 Award for Horizontal Collaboration)

This Belgian case has received the CO3 Award in the final conference. It describes the management of a horizontal collaboration community in fresh & chilled retail distribution between two Fast Moving Consumer Goods (FMCG) shippers (Nestlé & PepsiCo), a logistics service provider (STEF) and a neutral trustee (TRI-VIZOR).

  • P&G and Tupperware:

Development of an intermodal solution for the involved partners on the route between Belgium and Greece.

  • Application to AIAA (Association of Food companies in Aragon, Spain):

Development of a Roadmap of how to set inter-organizational collaborative actions among companies in the Aragon food Industry sector and pilot study on the emulation of implementation of the practices proposed in the study in a small group of companies. Aragon food companies found increased efficiency: 9-49% savings in logistics costs (these savings are dependent on the transport routes involved); increased effectiveness from higher frequency of deliveries and increased service levels; and a 20-30% reduction in CO2 emissions.

  • Nestle’, Colgate, Mondelez (JIT Project): a collaboration project in which the three shippers, supported by logistics service provider Seacon, bundled cargo on the route Rotterdam (Netherlands) to Poznan (Poland).

Mars, United Biscuits, Saupiquet and Wrigley, with factories in France. Products are transported from these factories to a shared warehouse in Orléans, in central France. This warehouse is operated by a logistic service provider (LSP). From this joint warehouse collaborative deliveries are made to the various retail warehouses in France and  the individual retailers supply their supermarkets from there.

  • ECR Italy: Intermodability for FMCG products and a modal switch from road to rail in Italian FMCG Supply Chain. Challenges include to assure a proper legal framework (Trustee role, benefits split, …); facilitate interaction with carriers/intermodal offer. A key role will be played by a 4PL acting on behalf of the “demand side”, a player selected to carry out operational tasks

Results in the project were tested in six real-life business cases across Europe

  • STEF, TRI-VIZOR, Nestlé and PepsiCo (CO3 Award for Horizontal Collaboration)

This Belgian case has received the CO3 Award in the final conference. It describes the management of a horizontal collaboration community in fresh & chilled retail distribution between two Fast Moving Consumer Goods (FMCG) shippers (Nestlé & PepsiCo), a logistics service provider (STEF) and a neutral trustee (TRI-VIZOR).

  • P&G and Tupperware:

Development of an intermodal solution for the involved partners on the route between Belgium and Greece.

  • Application to AIAA (Association of Food companies in Aragon, Spain):

Development of a Roadmap of how to set inter-organizational collaborative actions among companies in the Aragon food Industry sector and pilot study on the emulation of implementation of the practices proposed in the study in a small group of companies. Aragon food companies found increased efficiency: 9-49% savings in logistics costs (these savings are dependent on the transport routes involved); increased effectiveness from higher frequency of deliveries and increased service levels; and a 20-30% reduction in CO2 emissions.

  • Nestle’, Colgate, Mondelez (JIT Project): a collaboration project in which the three shippers, supported by logistics service provider Seacon, bundled cargo on the route Rotterdam (Netherlands) to Poznan (Poland).

Mars, United Biscuits, Saupiquet and Wrigley, with factories in France. Products are transported from these factories to a shared warehouse in Orléans, in central France. This warehouse is operated by a logistic service provider (LSP). From this joint warehouse collaborative deliveries are made to the various retail warehouses in France and  the individual retailers supply their supermarkets from there.

  • ECR Italy: Intermodability for FMCG products and a modal switch from road to rail in Italian FMCG Supply Chain. Challenges include to assure a proper legal framework (Trustee role, benefits split, …); facilitate interaction with carriers/intermodal offer. A key role will be played by a 4PL acting on behalf of the “demand side”, a player selected to carry out operational tasks

Benefits

In order to make horizontal collaboration “real” by embedding it into the logistics organization and daily operations of companies, CO3 developed a highly effective 3-step methodology that enables shippers to build scalable and profitable collaborative networks from the ground up. This methodology was tested in different business models developed fully based on the use of co-modality, focusing on the increase of loading factors and for the entire supply-chain.

Among others, main results related to Transport Climate Action were:

  • In STEF, TRI-VIZOR, Nestlé and PepsiCo case study (horizontal collaboration in fresh and chilled retail distribution), by proactively consolidating, balancing and synchronizing the part loads of Nestlé and PepsiCo into Full Truck Loads, significant cost savings (10-15%) and similar CO2 reductions.
  • In P&G and Tupperware case study (two shippers with two separate supply chains but similar lanes), where:
  • 150,000 truck-km were saved by taking trucks off the road
  • More than 200 metric Tonnes of CO2 emissions avoided (over the 2 year period).
  • Co-modality was stimulated.
  • There was a collaborative saving of ~17% on total lane costs

Potential for scaling up

Next step in research should be extending the scope and objectives of horizontal collaboration by improving the utilization of existing assets and services, joint planning of new facilities, systems and services, catalyzing and leveraging future logistics innovations and joint programs for adaptation to regulations, climate change etc.

The main challenges to the future of collaboration are orchestrating more complex, broadly-based collaborative networks and complying with evolving competition law.

Selected references

Project’s website http://www.co3-project.eu/

Enabling Horizontal Collaboration Through Continuous Relational Learning (Book) http://www.springer.com/us/book/9783319080925

PROJECT INFORMATION

Location:

Europe

Start:

2011

Finish:

2014

Tags:

Europe, mitigation, freight, aviation, shipping, shared transport, policy, awareness, partnership

Organizer/s:

Holland International Distribution Council (coordinator), Zaragoza Logistics Center (partner)

Contact/s:

María Jesús Saenz, mjsaenz@zlc.edu.es and Carolina Ciprés, ccipres@zlc.edu.es

“Pilot projects carried out with the Agro food sector showed that companies could save up to 49% in transportation costs due to Horizontal Collaboration practices, and reduce GHG emissions by 25- 40%”
- Prof María Jesús Sáenz, Director, Zaragoza Logistics Center