In Europe, it's estimated that nearly one-fourth of the trucks running along the continent's congested roads are empty. These empty trailers— which are typically on their way back from deliveries or en route to pick up goods—are exacerbating the area's traffic and air-quality problems while also wasting money. If companies would work together on moving goods, then those empty miles could be reduced, thereby easing congestion and curtailing air pollution, including greenhouse gas emissions.
That's why the European Union (EU) has begun encouraging what it calls "horizontal collaboration." Horizontal collaboration involves multiple, independent shippers working together in communities to consolidate compatible freight flows. These bundled freight flows are then outsourced to and physically executed by a logistics service provider.
One early mover in this initiative is Baxter International Inc. Since 2011, the health-care products company has been collaborating with other businesses to share transportation movements across Europe. After three years of participating in horizontal collaboration, the company has seen some significant advantages and demonstrated the viability of the concept, says Ludovic Menedeme, Baxter's director for transport and distribution services.
Early mover in collaboration
Headquartered in Deerfield, Illinois, USA, Baxter is a global business with expertise in medical devices, pharmaceuticals, and biotechnology. In 2012 the company reported about US $14 billion in worldwide revenue, with approximately 29 percent of its sales in Europe. Baxter manufactures in 27 countries and sells its products in more than 100 countries.
The company took part in its first European transportation collaboration in 2011. It teamed up with the Belgium-based pharmaceutical manufacturing company UCB to share shipping to six Eastern European countries: Bulgaria, the Czech Republic, Hungary, Slovakia, Slovenia, and Romania.
Baxter and UCB were brought together in 2010 by Tri-Vizor NV, a neutral third party that orchestrates shipper collaborations. The Belgian service provider's database showed that the two companies had significant overlap between their freight flows out of Belgium and could benefit from shared transportation. "Eastern Europe was chosen because the destination points of UCB and Baxter were close to each other in the vicinity of the capital cities, and because the distance [to the final locations] from the Baxter and UCB distribution centers in Belgium was quite large," explains Sven Verstrepen, business development director for Tri-Vizor. "The larger the distance, the bigger the savings opportunities of flow bundling."
Baxter and UCB now use a motor carrier to make full truckload shipments to all of the Eastern European destinations except for Romania, where co-loaded containers move via railroad. For the over-the-road shipments, the truck stops first at a UCB plant in Belgium and then proceeds to Baxter's facility in nearby Lessines. The truck goes to UCB first due to the first-in, last-out loading sequence for pallets: At each destination in Eastern Europe, the truck delivers to Baxter's customer first and then to UCB's consignee.
That synchronization also extends to how much product each company ships. Normally, Menedeme says, UCB places three pallets on the truck. If the Belgian pharmaceutical maker wants more than three pallets, Baxter will ship fewer of its own pallets on that truck.
In 2012, Tri-Vizor suggested Baxter collaborate with another shipper, Donaldson Company Inc., a maker of filtration systems. Now Baxter and Donaldson co-load shipments from Belgium to Ireland. A truck picks up raw materials from Baxter's and Donaldson's facilities in Belgium and then takes a short-sea ferry from the port of Zeebrugge, Belgium, to Dublin, Ireland. From there the truck travels to Castlebar, Ireland, where a Donaldson manufacturing center is located near a Baxter plant.
The importance of a neutral trustee
In both of the cases just described, Tri-Vizor, acting as a neutral trustee, helped to set up the agreement between the shipping partners. As an impartial third party, Tri-Vizor can make sure that all costs and savings from the collaboration are distributed equitably. It also can synchronize the two shippers' daily operations so that one is not favored over the other.
Tri-Vizor coordinates the shipments through its Web portal. Baxter and its shipping partners place shipment orders through the Tri-Vizor portal, which automatically synchronizes the shipments and assigns them to a carrier on a pre-approved list. The portal also handles all aspects of the collaborative arrangement, including invoicing, Menedeme says. As part of that process, Tri-Vizor tracks such key performance indicators as number of loads consolidated, pickup and delivery performance, and claims, as well as monetary and greenhouse gas savings.
There are limits on what any party can see through the portal, as Tri-Vizor makes sure to guard companies' confidential data. "Community members can review performance indicators for the community and for their own business, but not for another company," Verstrepen explains.
Since it began those collaboration projects three years ago, Menedeme says, Baxter has realized freightcost savings of around 10 percent on the collaborative trade lanes. In addition, the company has witnessed a 30-percent reduction in its transportation-related carbon dioxide (CO2) footprint as a result of the consolidated truck shipments and the use of short-sea shipping and rail. "The additional benefits are that we achieved a higher service level because of the more frequent combined departures as well as saving on CO2," Menedeme explains. "If you don't put halfempty trucks on the road, you ease congestion."
From CO2 to CO3
Baxter has now begun working with the European consortium Collaboration Concepts for Co-modality, informally known as CO3. Tri-Vizor is a key member of that consortium, which was launched with a grant of 2 million euros from the European Commission. The organization's goal is to promote shared supply chains as a way for Europe to reduce its dependence on foreign oil, ease traffic congestion, and cut greenhouse gases. Comprising 17 members, CO3 is developing a legal framework that allows companies to work together without violating antitrust law. It's also conducting pilots to demonstrate the value of shared supply chains from both a monetary and a sustainability standpoint.
At the moment, Baxter is engaged with two other test projects under the auspices of CO3. One of those involves the consumer goods company Kimberly-Clark, which got under way in March 2013. Kimberly-Clark and Baxter now send full truckloads back and forth between France and Belgium. The project is being managed by Tri-Vizor and another CO3 consortium member, Giventis, a Dutch information services company. Giventis developed a platform that automatically detects co-loading and round-trip opportunities beween multiple logistics networks. In another project, Baxter is working with three other companies— Belgian retailer Colruty, the building-products company Eternit, and Ontex, a manufacturer of hygienic personal care products—to run full truckloads between Belgium and Spain. That project is making use whenever possible of short-sea shipping between those two countries.
The key to successful horizontal collaboration, Menedeme says, is having compatible organizations that can work together in an operational alignment. "To make this work," he says, "you need a good fit between the parties and buy-in by senior management, because horizontal collaboration becomes rapidly a key element in your supply chain strategy."
Based on its previous successes, Baxter has even more plans for collaboration in the future. Menedeme says his company is now working with the consumer goods giant Procter & Gamble to explore the possibility of creating enough shipment volume to run dedicated cargo trains within Europe.
Baxter isn't limiting itself when it comes to identifying additional opportunities for horizontal collaboration. "We're looking to expand this geographically and work with many more companies," Menedeme says. "We want to use transport modes such as ocean and air. This will be not only for Europe but on a global scale."