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12/10/2010 8:00:00 AM Write a Letter to the Editor Write a letter to the Editor

Opinion: Collaborative Distribution

Manufacturers must agree to allow their goods to be warehoused and distributed with the products of other manufacturers — even competitors. They must accept that products competing on the store shelf don’t compete on a warehouse rack or in the back of a truck. While co-locating inventory is an element of collaborative distribution, it bears fruit mainly when retailers combine orders for different companies’ products.

Retailers who order stock with consolidated deliveries in mind hold the key to making collaborative distribution work. But to do so they need to close the communication gap that exists between the people who order stock, and the people who arrange its delivery.

Replenishing the fruit juice aisle at the same time as the paper goods aisle creates a cost-efficient, fully stuffed trailer shipment that’s within cube and weight limitations. But, right now, retail buyers don’t get rewarded for maximizing truck utilization and lowering freight costs. Their job is to look for fruit juice and paper towels at the lowest price. Coordinating deliveries and unloading freight is the job of the guy at the DC, and he has no idea about ordering cycles.

It’s a question of getting these guys — the front door and the back door operations of a retailer — to come together.

Collaborative distribution also suggests a new role for third-party logistics providers who, because of their relationships with multiple shippers, are in a perfect position to act as neutral matchmakers for manufacturers whose distribution operations could be combined. 3PL pricing models would need to change in this new model. Savings from collaborative distribution will come from shared storage space, pooled shipments, increased backhauls and other efficiencies, and 3PLs need to determine an equitable way to allocate costs and share these savings.

As I’ve traveled the country discussing collaborative distribution at industry conferences, I’ve found overwhelming support for the concept. Philosophically, everyone’s invested in sustainability. Everyone agrees it’s a good thing. Practically, the building blocks for collaborative distribution are in place, as far as the technology to consolidate orders, consolidate freight, allocate costs fairly, and maintain visibility to inventory throughout.

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