Frequently Asked Questions

1-What’s the difference between horizontal collaboration and traditional logistics (groupage/LTL/FTL services)?

2-What’s the added value of a neutral trustee in horizontal collaboration?

3-What will be the impact of horizontal collaboration on the market of traditional logistics service providers?

4-How much effort and cost does it take to launch a collaborative community?

5-How long does it take to launch a collaborative community?

6-What kind of new software and ICT tools are needed to make horizontal collaboration possible?

7-I am a shipper. How can I participate in a CO3 pilot project?

8-I am a logistics service provider. How can I participate in a CO3 pilot project?

9-How does a neutral trustee make money?

10-How real is horizontal collaboration? Is it not just a hype?

11-What is the role of the HLIB?

12-Will CO3 treat my logistics data in a confidential manner?

13-How long does a horizontal partnership last? Is it forever?

14-How can logistics service providers benefit from horizontal collaboration?

 

 

  1. What’s the difference between horizontal collaboration and traditional logistics (groupage/LTL/FTL services)? Traditional logistics is based on 1-to-1 contracts, 1-to-1 pricing, 1-to-1 service level agreements and direct interaction between individual shippers and their LSPs. Where possible, LSPs will create internal network synergies based on scale effects and geographical and temporal overlap between their clients’ individual logistics volumes. However, from a contractual standpoint, LSPs are not allowed to modify flow volumes or synchronize the timing of their clients’ transport orders, even if this would enable far greater bundling synergies. In addition,  because of the high degree of fragmentation in the logistics market, freight flows of different shippers that are potentially compatible are now dispersed “randomly” over many competing LSP networks. As a result, the logistics network in Europe and the rest of the world shows a significant degree of inefficiency and capacity underutilization. Horizontal collaboration tries to address this problem by introducing a number of innovative elements, such as : (a) collaborative business models that allow shippers and LSPs to collaborate openly in order to create higher network synergies; (b) anti-trust compliant multilateral contracts that allow shippers to collaborate, even if they are competitors; (c) technological solutions to bundle and synchronize freight flows of multiple shippers so they can be operated more efficiently by LSPs; (d) neutral trustees to organize and manage collaborative communities; (e) gain sharing mechanisms to measure and distribute the collaboration gains fairly and transparently between all collaborating actors; (f) transport databases to enable the identification and matchmaking of compatible shippers and freight flows, etc. As such, the business model of horizontal collaboration is fundamentally different from traditional logistics.
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  3. What’s the added value of a neutral trustee in horizontal collaboration? Neutral trustees can offer various value added services to a collaborative community, which the participating shippers and LSPs in the community are not always able to provide themselves. For example: (a) identification and matchmaking of compatible shippers and freight flows; (b) anti-trust compliant data gathering and synergy creation; (c) measurement and reallocation of actual synergy gains; (c) synchronization of freight flows between different shippers and supply chains; (d) community management of collaborating shippers and LSPs. In summary, the role of a neutral trustee is to optimize and maximize the total synergy gains of a logistics community or network, without being involved in its actual operations and without being partial to any of the community members. In many cases, introducing a neutral trustee is a legal obligation to enable information exchange and avoid anti-trust risks in horizontal collaboration.
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  5. What will be the impact of horizontal collaboration on the market of traditional logistics service providers? The current expectation is that collaborative logistics in the next 5 years will become a small but commercially viable segment of the logistics market. More and more shippers may will look towards this new niche market to find solutions for freight flows that today cannot be operated in an efficient, effective or sustainable  manner. The position of CO3 is that horizontal collaboration should not be considered as a threat, but rather as a constructive addition to traditional logistics. As such, there may exist a first mover advantage for LSPs that are the quickest to understand and adopt the principles of horizontal collaboration.
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  7. How much effort and cost does it take to launch a collaborative community? The launch of a profitable collaborative logistics community may require several months of preparation work and upfront investment in terms of matchmaking, synergy calculation, legal advice, community management and ICT configuration. Depending on the context, the effort can be anywhere between 10 and 100 person days. Although the setup costs can typically be shared among multiple collaborating partners, it may still be a barrier to the implementation of collaborative communities. The aim of CO3 is to remove this barrier and fund the setup cost for a number of test projects (case studies), so that horizontal collaboration can be further tested and evaluated in practice.
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  9. How long does it take to launch a collaborative community? The current setup time for a new collaborative logistics community can be anywhere between 3-12 months. This setup time is expected to decrease as the market for horizontal collaboration becomes more mature and CO3 builds more experience in setting up new case studies.
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  11. What kind of new software and ICT tools are needed to make horizontal collaboration possible? Some examples are: (a) freight flow databases and matchmaking software to identify compatible shippers and transport flows; (b) ICT tools to visualize and quantify synergy benefits in a community; (c) operational tools to manage collaborative planning and synchronize freight flows; (d) software tools for dynamic calculation and sharing of gains.
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  13. I am a shipper. How can I participate in a CO3 pilot project? Shippers interested in horizontal collaboration first sign a Non Disclosure Agreement with the CO3 project team. This team will then analyze the logistics network and transport data of each shipper to identify bundling opportunities with other shippers. In case of a positive match, the CO3 team will work with the collaborating shippers to develop a business case and implement a pilot project, using a proven step-by-step methodology.
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  15. I am a logistics service provider. How can I participate in a CO3 pilot project? Although CO3 is primarily aimed at shippers, LSPs are welcome to join as well. Please contact the CO3 project office to discuss possible options.
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  17. How does a neutral trustee make money? The current thinking is that a trustee can either be paid on time and material (advisory) or on “no cure no pay” (gain sharing) basis. CO3 will test the various options in practice.
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  19. How real is horizontal collaboration? Is it not just a hype? Although from a practical perspective, horizontal logistics collaboration is still in its infancy, it is based on advanced scientific research and a very solid business logic. Furthermore, there is growing interest from shippers and LSPs, and European and regional policy makers strongly support it. The first practical test cases have delivered  convincing positive results. As such, horizontal collaboration is definitely here to stay.
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  21. What is the role of the HLIB? The role of the HLIB is to make sure that the work of CO3 will be relevant for the entire European market and will benefit all actors in the logistics industry.
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  23. Will CO3 treat my logistics data in a confidential manner? Yes, all data shared with the CO3 team are covered by strict Non Disclosure Agreements. A CO3 lawyer will oversee anti-trust concerns.
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  25. How long does a horizontal partnership last? Is it forever? CO3 test projects will be supported for 6-12 months and will then be evaluated. If test communities are profitable, they are free to continue outside of CO3.
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  27. How can logistics service providers benefit from horizontal collaboration? Horizontal collaboration can offer to LSPs new methods to differentiate themselves in the highly competitive logistics market and build long-term contractual relationships with communities of shippers. Furthermore, test projects have proven that horizontal collaboration can significantly increase the asset utilization and profitability of LSP networks.
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