Collaborative Transportation Management

8. Key Enablers and Roadblocks to Collaboration

Table of Contents

In order for collaborative initiatives to succeed, key enablers must be in place. These enablers support best practices in critical activity areas and help overcome the roadblocks to success that inevitably surround collaboration.

One critical enabler of CTM success is establishment and mastery of transportation best practices. Such practices are separate from CTM but create the needed foundation for success. The following list summarizes transportation best practices that facilitate CTM success:

• Increase operational control and centralize transportation management
• Establish a core carrier program; rationalization and reduction of carrier base
• Institute proper contract terms and conditions
• Optimize daily transportation plan: Consolidation (economic loads) and selecting lowest cost carrier
• Implement electronic tendering
• Implement shipment status reporting and visibility for orders, shipments, and inventory
• In-source freight payment; implement self-billing
• Eliminate freight bills for contract carriers; pay on agreed milestone/timeframe
• Establish concise KPIs and metrics; ensure compliance
• Implement trading partner report cards and quality reviews
• Establish Continuous Improvement programs
• Implement accurate freight cost allocation and cost/unit reporting
• Implement transportation financial analysis

While developing best practice transportation is central to CTM success, other key enablers are equally important. Successful collaboration is a function of how well people work together both internally and with collaboration partners. The following enablers (Supply Chain Management Review, September/October, 2000) are related to the human side of CTM and are essential to CTM success:

• 1. Common Interest - All parties need to have a stake in the collaboration's outcome to ensure their ongoing commitment.
• 2. Openness - For a relationship to work, the partners must openly discuss their practices and processes. Sometimes this means sharing information traditionally considered proprietary (though adherence to anti-trust guidelines remains prerequisite).
• 3. Recognizing who and what are important - Not all prospective collaborators and supply chain activities are created equal. Choose those that will deliver the greatest benefits.
• 4. Clear expectations - All parties need to understand what is expected of them and others in the relationship.
• 5. Leadership - Without a champion to move collaboration forward, nothing significant will ever be accomplished.
• 6. Working together and adjusting to one another - There's no CEO of the supply chain, so the partners have to work collaboratively to figure out how to get the job done.
• 7. Cooperation, not punishment - When things go wrong in a relationship, punitive actions seldom make them better. The right approach is to solve the problem jointly.
• 8. Trust - This basic human quality must be evident throughout the organization -- at every management level and functional area.
• 9. Benefit Sharing - In a true relationship, the partners need to share both the pain and the gain -- use of a shared modular supply chain scorecard can help.
• 10. Advanced information technology (IT) - IT is essential to enabling collaborative relations across the supply chain. Communication and process automation achieved through IT enables CTM by facilitating real-time data transfer and reducing transaction costs and risks.

In addition to enablers of CTM success, firms seeking to implement the CTM Model should be able to recognize and avoid debilitating roadblocks to CTM success. Many of these roadblocks stem from behaviors, attitudes, and practices associated with traditional business operations. The following list summarizes primary reasons for failure of collaborative initiatives.

• 1. Doing things the old way - The natural resistance to change that confronts any broad initiative like supply chain collaboration.
• 2. Conventional accounting practices - These practices become impediments to collaboration when they focus on the traditional accounting role of determining the value of a single firm, rather than measuring cross-company values.
• 3. Tax laws - Tax laws dictate the need for a clear "price paid" and "price sold" to determine profitability. Yet these practices can obscure the synergistic, and often indirect, cost savings that are primary drivers of supply chain collaboration.
• 4. Limited view of supply chain - The legacy of the traditional silo organizational structure in which people think only about their own functional area.
• 5. Annual negotiation process - Annual negotiations consume time and energy, plus they are usually adversarial. There are better alternatives.
• 6. Time investment - Collaboration takes time and a lot of hard work. To get people to make the necessary effort, they have to be clearly shown the expected benefits.
• 7. Inadequate communication - When communication between supply chain partners is nonexistent or inadequate, the potential for problems increases exponentially.

Collaboration is not meant for every situation. That is, collaborative effort must result in gains for everyone involved. If outcomes involve only one party gaining, and the winner's gains are not shared to offset the losses of others, the collaboration should not be pursued. Therefore, no single party can only consider what it stands to gain from the effort. The initiative must represent a collective win.

The willingness to engage involves the recognition of the time and effort required to find the opportunities. Also, the willingness to share critical information with collaborative partners - information that up until now had never been shared - is a key driver of success. Having faith in the collaborative partner(s) is essential, trusting that the rewards of sharing the information outweigh the potential risk.

The final requirement is ability. Having good opportunities and good intentions will only get you so far. The partners must individually and collectively have the skills and information capabilities to seize the opportunities. Management and analytical skills are necessary for finding the value and selling the prospects with internal and external parties. As noted previously, information technology represents a critical enabler of CTM. With the exception of transportation marketplaces, however, CTM is not a "technology solution."

While outside parties such as third-party logistics providers are not required of CTM, they can serve as facilitators of communication or execution. This is particularly true when potential for gains are found among trading partners but capabilities are lacking. The presence of an unbiased, capable intermediary can sometimes make collaboration possible when it might not exist otherwise.

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