Supply chain leaders can be reluctant to collaborate due to a variety of factors. For shippers, there’s a balance between openness that improves operations and safeguarding their flexibility to pivot across logistics service providers (LSPs) as market conditions change. Meanwhile, LSPs and freight forwarders want to validate patterns and trends without revealing their strategic approach. Stephen Dyke , Principal Solutions Consultant Manager at FourKites, Inc., lists for us some of the key challenges and opportunities. More from our Feb edition with focus on warehousing here!
Overall, here are four reasons why those in logistics are reluctant to collaborate:
- Competitiveness. Logistics providers are still independent companies competing for business, even when working with the same manufacturers or retailers. There is a reluctance to share data or insights that may compromise their competitive advantage.
- Lack of trust. Collaborative relationships take time to build trust and alignment. Without that foundation, partners may be hesitant to share information or rely on others in the supply chain.
- Tech limitations. Disparate IT systems, data incompatibility, cybersecurity fears, and lack of tech-savvy can hamper collaboration, even when the desire exists. Overcoming these barriers takes investment and expertise.
- Siloed incentives. When supply chain partners have conflicting KPIs or narrow priorities only optimised for their organisation, it creates less incentive to collaborate for the greater good.
Suppose a shipper wants to drive an initiative like emission reductions or carrier consolidation. In that case, they must first outline the specific key performance indicators — this ensures all parties share an understanding of the intended value,’ tells us Stephen.
With goals defined, McKinsey & Company offers an insightful framework for evaluating potential partners:
- Assess if there is sufficient potential value to justify the collaboration investment
- Confirm strategic alignment in the targeted area of collaboration
- Validate capabilities and infrastructure exist to enable the priorities
Rather than assume that the largest players always provide the greatest value, optimal collaborations require an alignment of incentives between parties of comparable readiness and capability — regardless of sheer size or scale.
Once the right partners are secured, pragmatism is key during execution:
- Start small with isolated use cases to demonstrate concept viability
- Rigorously quantify improvements to build confidence
- Align on data standards upfront to prevent delays
- Secure executive commitment
- Ensure mutual value distribution across partners
All about the costs & revenue
To start, shippers should work with providers to clearly define success metrics — lead time, inventory turnover, demand forecast accuracy, and supplier delivery performance are all good examples. By benchmarking these metrics before and after implementing new collaboration strategies or technologies, companies can quantify the operational improvements.
The next step is to translate those operational gains into financial impact. For example, if lead times are reduced by three days, calculate the working capital improvement from faster cash conversion cycles. Or if inventory turnover increases by 10%, estimate the savings from reduced inventory holding costs.
It’s critical to continue monitoring these metrics over time to prove sustained impact. Periodically revisiting the benchmarks, recalculating cost savings, and highlighting new performance milestones maintain executive support for collaboration initiatives. And the data can reveal additional opportunities for improvement.
Leaders
With the right expertise and analysis, shippers can identify targeted segments of their network where deeper coordination is most acutely needed, whether due to constant disruptions, margin pressures or other quality issues. These priority areas might involve a problematic distribution path plagued by unreliable carriers, unstable final mile delivery routes, or long-lead-time SKUs from international vendors.
Once the goals are clearly articulated, it’s time for partners with deep domain expertise — typically logistics service providers and/or solution providers — to take charge, providing frameworks for success that align with budget and desired outcomes. Importantly, as collaboration efforts unfold, building a cross-functional team will help avoid internal and external silos.
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