Finding Profit in Horizontal Collaboration

This is an excerpt of the original article. It was written for the January-February 2017 edition of Supply Chain Management Review. The full article is available to current subscribers.

January-February 2017

Transformation is a topic that comes up in almost every conversation I have with supply chain managers these days. Executives from companies as diverse as J&J Vision Care, the division of Johnson & Johnson that manufactures contact lenses, and Thrive Markets, a startup selling health and wellness products to its members, have talked about how they have had to remake their supply chains to meet new customer demands. Transformation is also the theme of this issue of SCMR.

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Horizontal collaboration—or the process of two or more companies cooperating at the same level on a certain market activity to realize benefits they could not achieve independently—is difficult to accomplish but hugely rewarding for those companies that do it successfully.

While horizontal collaboration (HC) can encompass a number of supply chain processes, freight transportation is one activity that offers vast potential for a profitable partnership. Take Carreras, a private, mid-sized logistics provider in Spain that is actively pursuing HC relationships to help it sustain or improve its 7% annual growth rate. “Horizontal collaboration has allowed us to expand our network and increase efficiencies without costing us significant extra effort or capital,” says Fernando Bermudez, Carreras’ director of operations.

While Carerras is one of many companies around the world that are unlocking the value of HC in transportation, they represent a fraction of the shippers and logistics companies* that could be capitalizing on the strategy. To help more enterprises capture the benefits, a research team at the Zaragoza Logistics Center (ZLC) in Zaragoza, Spain, has developed a framework for creating effective HC projects. Based on current success factors as well as new business models, tools and practices, the framework paves the way for the wider adoption of horizontal collaboration (see About our research).

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