Retail InboundHorizontal Collaboration

Sven Verstrepen, TRI-VIZORLisa Van den Bossche, GS1 Belgilux

Published by: Jan Somers – GS1 Belgium & LuxembourgGraphic design: www.ramdesign.be

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Table of contents

Preface .......................................................................................................................................................... 04

Acknowledgements ................................................................................................................................ 05

Executive Summary .................................................................................................................................. 05

List of Abbreviations ................................................................................................................................ 06

Introduction ................................................................................................................................................ 06

Stakeholders................................................................................................................................................ 07

Project Methodology .............................................................................................................................. 09

Logistics and Product Compatibility .................................................................................................. 14

Legal Aspects .............................................................................................................................................. 15

Gain Sharing................................................................................................................................................ 16

Key Performance Indicators .................................................................................................................. 17

Conclusions ................................................................................................................................................ 17

Top 10 Learnings and Recommendations ...................................................................................... 18

Contact .......................................................................................................................................................... 19

References.................................................................................................................................................... 19

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Preface

The purpose of this document is to share best practices onbundling of loads in the FMCG industry in Belgium,Luxembourg and The Netherlands. It is based on a real-lifebusiness case of Spar Retail, several of their suppliers and theirLogistic Service Providers. Sharing best practices will allow themembers of the FMCG industry to learn from each other whatthe challenges and benefits are from horizontal freight con-solidation.

This project was executed together with Spar Retail and wassupported by the GS1 Belgilux ECR Committee. The pilot wasconducted with financial support from ECR Belgilux and waspart of the European CO³ consortium. TRI-VIZOR, a Belgianspin-off company of the University of Antwerp, acted as neu-tral trustee and project manager.

This project shows that freight consolidation requires theactive collaboration of all involved parties: Logistics ServiceProviders, retailers and suppliers. The retailer needs to take aleading role to achieve actual results. To maintain the savingsit is important to regularly monitor and update the resultssince transport networks are subject to constant change. Inthis case Spar Retail has adopted the pilot learnings as regularpractice, and thus maintains the results achieved.

We hope this best practice guide can inspire you and that youcan learn from the experience of Spar Retail.

Good luck!Jan Somers CEO, GS1 Belgium & Luxembourg

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The authors of this document wish to thank the management and employees ofSpar Retail and the Colruyt Group for their highly constructive participation andwillingness to make available their time and share their viewpoints. They are equallygrateful to the European CO³ Consortium Members and Scientific Board for theirvaluable support, insight and feedback.

1. Acknowledgements

2. Executive SummaryThis report describes the detection, cre-ation and management of logistics hori-zontal collaboration and inbound trans-port synergy opportunities in the supplynetwork of Belgian retail company SparRetail (part of the Colruyt Group). It isintended for a wide audience: logistics,purchasing and sales managers at retail-ers, wholesalers, manufacturers and logis-tics service providers, as well as profes-sionals who are responsible for transportor fleet management within a retail envi-ronment. SME-size retail suppliers are aspecial target group for this test case.

The purpose of this project is to showthat suppliers in a retail network canshare transport capacity that would oth-erwise run empty, by engaging in cross-company collaboration. This will improvethe total performance of the retail net-work and its stakeholders in 3 ways:

• Efficiency: lower transport price perpallet or per drop, lower receptioncosts, lower inventories

• Effectiveness: higher service level ordelivery frequency, faster stockreplenishment

• Sustainability: lower carbon emis-sions per pallet or per drop, lesswasted vehicle capacity and traffic

Another goal of the project is to demon-strate that transport collaboration can be“triggered” from the outside by a neutraltrustee and that it can work both forlarge and small companies, resulting inretail distribution networks with ‘fewerand friendlier kilometres’. At the sametime it is demonstrated that retailers cantake a proactive approach to encouragecollaboration in their supplier network. Itis also shown that such collaboration cantake place in accordance with competi-tion law, with support from a neutralexternal facilitator (called a “trustee”).

This case study was conducted byGS1/ECR Belgilux in collaboration withTRI-VIZOR, a Belgian spin-off company ofthe University of Antwerp. TRI-VIZORacted as neutral trustee and project man-ager on behalf of Spar Retail andGS1/ECR. It started the preparation of thistest case in the summer of 2012, workingwith both Spar Retail, its suppliers andLogistics Service Providers to realize theproject, and made a status evaluation ofthe test case in January 2014.

Conforming to the standard CO³methodology for creating horizontal col-laboration, TRI-VIZOR applied a 3-phasedapproach to set up this test case:

• Phase 1: identification of compatiblesuppliers and overlapping transportflows • Phase 2: preparation of a collabora-tive concept and business case

• Phase 3: operational implementation,management and support

Acting as ‘offline trustee’, TRI-VIZOR firstmapped and analyzed the Spar Retailinbound network, identified a numberof compatible suppliers and productflows, grouped these into geographicalclusters and evaluated their potential torealize transport synergies. TRI-VIZORand GS1/ECR Belgiux assisted Spar Retailto define a number of test communities,evaluate their potential and measuretheir actual results. Both success factorsand practical showstoppers were docu-mented. The project learnings and bestpractices are described in this docu-ment, as well as top-10 recommenda-tions for other companies who wish tostart similar projects in the future.

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A retail distribution network is a complex and dynamic logistics environmentwith many interdependent stakeholders, product flows, processes and systems.Retail product flows are often fragmented as well as time critical, and most com-mercial actors in retail network have a natural tendency to manage and opti-mize their supply chain parameters from their own perspective and on an indi-vidual basis. Together with an overall lack of network visibility and transparency,this will inevitably cause a lot of inefficiencies in the network. As a result, manyretail suppliers typically have to deal with a lot of logistics challenges and con-tradictions:

• Lots of expensive transport kilometers • Underutilization of delivery vehicle capacity• Empty return trips• Suboptimal drop sizes• Suboptimal or conflicting delivery windows• Congestion risk• Unpredictable drop dates and delivery schedules• Demand variability with peaks and lows• Suboptimal inventory rotation• Suboptimal on-shelf availability

Since the population density in Belgium is high and the number of large retailchains is limited, most suppliers have to deliver to a small number of retail distri-bution centers which are located in the center of the country. On the one hand,it can therefore be assumed that there exists a lot of overlap and synergy poten-tial between individual suppliers’ product flows. On the other hand, there isoften a lack of visibility of this overlap and suppliers are not used to communi-cate or collaborate with each other to jointly look for flow optimization oppor-tunities. In addition, the most powerful party in the network, i.e. the retailer atthe center of the network is not used to modify its inbound delivery schedulesor to provide incentives to its suppliers, in order to help them create logisticssynergies.

In this test case, Spar Retail, a mid-size Belgian retailer, addressed the above chal-lenges by applying innovative concepts of horizontal collaboration in itsinbound supplier network.

List of Abbreviations

3PL: 3rd Party Logistics Service Provider

CMR: Convention Relative au Contrat deTransport International de Marchandisespar Route; a binding set of internationalrules for road transport. The CMR docu-ment (delivery note) which needs toaccompany every transport, is also usedas proof-of-delivery when the goods arehanded over by the Logistics ServiceProvider to the customer.

CO2: carbon dioxide, a greenhouse gasand logistics sustainability (carbon foot-print) measure

CO3: Collaborative Concepts for Co-modality (www.co3-project.eu)

DC: Distribution Center

EU: European Union

FTL: Full Truck Load

HACCP: Hazard Analysis and CriticalControl Points, a standard methodologyfor food safety

JIT: Just-in-Time

KPI: Key Performance Indicator

LSP: Logistics Service Provider

LTL: Less-than-Full Truck Load

POD: Proof of Delivery

Speed dock suppliers: suppliers of SparRetail who mostly deliver in LTL quanti-ties, for whom a dedicated and separateunloading dock (“snelkaai”) has beenforeseen

3. Introduction

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4. Stakeholders

Spar Retail BelgiumThe story of SPAR in the early years is thestory of Adriaan Van Well, a visionaryDutch wholesaler. He was inspired by asimple yet powerful philosophy thatindependent wholesalers and retailerscan achieve more by working togetherthan by working alone. In the 1930'sthere was evidence that multiple chainswere expanding in Europe. As a response,SPAR was launched in 1932 as DESPAR, anacronym of a slogan: "Door EendrachtigSamenwerken Profiteren AllenRegelmatig". This translates in English as:"All Benefit from Joint Co-operation".SPAR continued to develop in theNetherlands during the 1930s and tookits first international step in 1947 whenSPAR was introduced into Belgium. Inthe late 1940s the name was abbreviat-ed from DESPAR to SPAR. The brand isnow operated in Belgium by Spar Retail,which is today part of the ColruytGroup, Belgium’s largest retailer. SparRetail is responsible for 249 stores, all ofwhich are run by independent retailers.All stores are delivered from Spar Retail’scentral distribution hub, which is locatedin the Flemish town of Heist-op-den-Berg, ca. 20 km east of Mechelen. Thedistribution center comprises separatebuildings and sections for dry packagedfood, fresh and chilled products andwines and beverages. For historical rea-sons, the accessibility and mobility ofthe site are not ideal and its expansionpossibilities are limited. Therefore, theColruyt Group intends to move the DCto a new and larger site in Mechelen,close to the E19 highway, in 2014.

As a proactive answer to the increasingcongestion challenges and to reducesomewhat the burden of heavy suppliertraffic on the surrounding urban area,Spar Retail and the Colruyt Group decid-ed that the DC in Heist-op-den-Bergwould make an interesting testingground for supplier horizontal collabora-tion and logistics capacity sharing. Theretailer intends to keep the learnings andbest practices from this test case andapply them at once to their inboundsupply flows at the new DC in Mechelen.

The suppliers ofSpar RetailThe Spar Retail DC in Heist-op-den-Bergis continuously replenished by hundredsof large and small suppliers, located inBelgium as well as abroad. This causes aheavy daily sequence of truck move-ments and receptions at the warehouse.To limit the scope and effort and tomaximize the bundling opportunities, asmaller subset of suppliers was filtered

out for this test case, i.e. small and medi-um size Belgian suppliers who deliver in“Less than Full Truckload” (LTL) quantitiesand with relatively broad time intervals.To make the reception operations moreefficient, these suppliers are required bySpar Retail to deliver to a dedicated,fixed unloading gate called the “speeddock”. Based on the fragmented deliverydates and LTL drop sizes, it was expect-ed that quick-wins could be found bysynchronizing and optimizing theinbound flows of compatible suppliersat this “speed dock”.

The Logistics ServiceProviders of the Sup-pliers of Spar RetailThe Spar Retail suppliers use a mix ofown drivers and vehicles, as well asexternally sourced transport capacity.Especially larger suppliers are used toworking with 3rd Party Logistics ServiceProviders (3PLs). These 3PLs provideSpar’s suppliers with transport capacityas well as with warehousing and value-added logistics services. As such, theywill be important stakeholders or atleast involved parties in the reengineer-ing of Spar Retail’s inbound supplychain. In this case study, although theprimary optimization contacts tookplace directly between Spar and its sup-pliers, the transport and logisticsproviders were also considered as equiv-alent and necessary partners in the totalnetwork optimization. This means that a“win-win-win” situation was pursued forSpar Retail, its suppliers and the involvedlogistics provider.

Creating horizontal collaboration in a retail inbound network is a complex undertaking with many different involved parties. The stakeholders in this test case are the following:

TRI-VIZORTRI-VIZOR is a spin-off company of theUniversity of Antwerp, specialized inlogistics horizontal collaboration. Itplayed the role of neutral trustee, facili-tator and project manager for this testcase on behalf of Spar Retail andGS1/ECR Belgiux. As such, TRI-VIZORbrought suppliers around the table,analyzed their delivery data and evalu-ated potential logistics synergy. TRI-VIZOR also facilitated the collaborationprocess and helped the companies andtheir staff to overcome various opera-tional and mental barriers towards col-laboration.

Over the past few years, neutraltrustees have emerged as essential newplayers to create and manage horizon-tal collaboration communities in thelogistics market. In line with the recom-mendations of the EU-supported“Collaborative Concepts for Co-modali-ty” (CO³ www.co3-project.eu) program,

trustees can have two main functionalresponsibilities, which are described as“offline” and “online” functions.

The first possible function of the trusteeis the “offline function” which providesneutral external support to the collabo-rating companies. This role encompass-es, but is not limited to, activities suchas matchmaking, the search for compat-ible volumes and critical mass, provid-ing stability and transparency, transportsourcing support, fair gain sharing, com-petition law compliance, communityentry/exit policies, conflict resolutionand ensuring data confidentiality forthe community. The second possiblefunction of the trustee is the “onlinefunction” which encompasses real-timeoperational planning and optimizationof the collaboration process.

In this particular test case, TRI-VIZORplayed only an offline role, while opera-tional aspects were handled betweenSpar Retail, the suppliers and theirrespective Logistics Service Providers.

GS1/ECR BelgiluxGS1 Belgium & Luxembourg is a mem-ber of the worldwide GS1 organization.GS1 develops uniform standards for theidentification, capturing and sharing ofindustrial data in more than 100 coun-tries. Globally, 2 million companies in 30different industry sectors are member ofGS1. In Belgium and Luxembourg alone,GS1 has 5.200 members, among whomSpar Retail and many of its suppliers.GS1 is a neutral, not-for-profit organiza-tion with a strong focus on value chaincollaboration. As such, GS1 Belgilux sup-ports collaborative logistics projects thatresult in more efficient, effective andsustainble supply chains and networks.

In 2007, GS1 Belgilux merged with ECRBelgilux, the Belgium-Luxembourg

branch of ECR Europe. ECR stands forEfficient Consumer Response and is aneutral collaboration platform for retail-ers and suppliers. The goal of ECR is tosustainably serve the consumer better,faster and at less cost. Collaborationalong the value chain provides addedvalue to retailers and suppliers. Butfreight consolidation between competi-tors and clients can be a complicatedmatter. That is why ECR facilitates thisprocess.

GS1/ECR Belgilux believes that competi-tion should take place on the shelf, notin truck trailers. As such, together withTRI-VIZOR, it played a pivotal role in facil-itating this project and bringing the dif-ferent stakeholders together.

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5. Project Methodology

Identification As a starting point for identifying logisticsand transport synergy opportunities, anoverview was needed of all inboundtransport flows to the SPAR warehouse inHeist-op-den-Berg. As many hundredsnational and international suppliers areinvolved, this can become quite a heavyand complex exercise (the processedinbound volume amounts to ca. 20.000pallets/month). Spar Retail extracted thisinformation from various inbound recep-tion files and databases. In order toaccount for seasonality effects, the data for1 calendar year had to be collected. Asexplained above, the project scope wasfocused on Belgian “speed dock” supplierswho typically deliver in LTL quantities.However, in the identification phase alsoFTL and international suppliers were inves-tigated in order not to miss any bundlingquick wins. Both Belgian and internationalsuppliers were selected who had deliv-ered at least once during the past 12months. For each of these suppliers, anindication was given of their averagenumber of deliveries and their averagenumber of delivered pallets per month.

On the basis of this information, alonglist of active suppliers was selected

who made at least 50 deliveries per yearin Heist-op-den-Berg (=1 or more deliv-eries per week) with a certain minimaldrop volume. This longlist contained intotal 316 suppliers:

• 78 Belgian speed dock (LTL) suppliers• 76 Belgian FTL suppliers• 162 international suppliers

For these suppliers, the following infor-mation was collected by the internal ICTdepartment of SPAR:

• Supplier name and address• List of year-to-date deliveries and volumes (pallets per day)• Temperature conditioning

This information was then used to plota geographical location map of themost important Belgian suppliers ofSpar Retail ("pie sizes" are in function ofnumber of deliveries per year). This rep-resentation makes it easy to identifyclusters of suppliers who are locatedgeographically close to each other andwho should have, as such, potentialtransport synergies for delivering toHeist-op-den-Berg:

1 IDENTIFICATION 2 PREPARATION 3 OPERATION

As neutral trustee, TRI-VIZOR was asked to initiate and facilitate the collaboration process in the inbound supply network of SparRetail. To make this possible, it used a standard 3-step methodology which is applicable to most instances of logistics horizontalcollaboration. This methodology guides the stakeholders in a structured manner “from start to finish”, from the very first contactsto the operational phase of the horizontal collaboration:

It should be mentioned that although for each horizontal collaboration project the 3 basic phases are identical, every projectrequires a tailor-made approach depending on its complexity, its stakeholders, its group dynamics and its operational level of ambi-tion. The identification phase and preparation phase may overlap because it is not uncommon for additional partners to join thecommunity at any moment during the 2nd project phase. On the other hand, it can also happen that community members dropout of the project for a variety of reasons, forcing the search for compatible shippers (identification phase) to start over again.

A similar exercise was carried out for the international suppliers of Spar Retail:

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It was observed that in most cases, SparRetail only knew the administrative(=Accounts Payable) address of its suppli-ers. The physical origin of the supplierflows was not known. It was also notimmediately known whether the suppli-ers operated their own transport, orwhether they made use of an LSP. Aftersome double checking with other retail-ers, it appeared that this lack of physicalflow information is quite common in theretail world. As such, this detailed opera-tional information must typically be col-lected on an individual basis from thesuppliers themselves – a very labourintensive process.

Based on the density and proximity ofsuppliers per geographical region, the fol-lowing regional clusters were identified aspotentially interesting for flow bundling:

• South-West Flanders (4 suppliers)• Hainaut (3 suppliers)• Liège (6 suppliers)• Waasland/E17 highway (3 suppliers)• Scheldeland (3 suppliers)• Antwerp (8 suppliers)• Gent (3 suppliers)• Willebroek (10 suppliers)• Netherlands (6 suppliers)• France (wine suppliers in Bordeaux region)• Germany (5 suppliers)

PreparationBased on the above data analysis, a highlevel overview was now available ofpotential transport bundling opportuni-ties between regional clusters of suppli-ers. However, as the data analysis waspurely an internal exploration exercisebetween Spar Retail, GS1/ECR and TRI-VIZOR, none of the suppliers had beenmade aware yet that they were thepotential subject of a horizontal collabo-ration initiative.

Therefore, the following step was tomake the suppliers aware of this exer-cise and at the same time motivatethem to participate. Instead ofapproaching the suppliers on an individ-ual basis, it was decided to organize aseries of regional “information road-shows” where local suppliers were invit-ed by GS1/ECR on behalf of Spar Retail.Roadshows were held in the followingregions:

• Antwerp• Hasselt• Gent• Brussels

In these 2-hour workshops, the supplierswere given an introduction about logis-tics horizontal collaboration and CO3,and were invited to participate in pilotprojects. They also had a chance to askpractical questions or to express con-cerns, e.g. about transport liability orgain sharing. It was always clearly statedthat the intention of Spar Retail was tofocus on improvement of empty run-ning and efficiency in its inbound net-work, but that any cost savings wouldbe left to the suppliers and logisticsservice providers who made them possi-

ble. Participation was on a voluntarybasis, i.e. no pressure whatsoever wasexercised on suppliers or transportproviders to participate in the pilot pro-gram.

Unfortunately, not all suppliers respond-ed to the roadshow invitation. As a lessonlearned, it might have been better for theresponse rate to send out the workshopinvitations by Spar Retail directly, insteadof by an external party. This would at thesame time also emphasize the strategicimportance of the workshops in terms ofSpar Retail’s supplier relations.

Based on the roadshows and individualfollow-up, a shortlist of potential supplierclusters in Belgium was identified. Thenext step was to collect additional infor-mation from these suppliers in order toexplain the concept more in detail andto establish their “transport baseline”towards Spar Retail:

• Geographical location of outboundwarehouse• Name and location of LogisticsService Provider, if any• Product characteristics and transportrequirements• Transport cost and service level• Openness to work on increased sus-tainability• Relationship with other suppliers inthe same region• Nature of relationship with Spar Retail• Nature of relationship with LogisticsService Provider• Logistics maturity and ability to investmanagement time and effort in apilot project• Contact details of logistics responsible• …

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From the shortlist of interested suppli-ers and potential collaboration clusters,a number of “quick wins” were identi-fied and elaborated. As soon as suffi-cient potential synergy was detectedbetween the delivery flows of 2 ormore suppliers, an important questionwas how to realize this synergy in prac-tice. The most obvious way was theselection of a shared Logistics ServiceProvider and a common transportprice.

It turned out that this was not an easymatter. Many small and medium-sizedsuppliers operate their own vehiclesand emply their own driver(s). Thismakes it legally and practically difficultto bundle products of multiple suppli-ers in the same truck. In addition, inmany cases the suppliers had no accu-rate view on their logistics and trans-port cost.

Small and mid-size suppliers who haveoutsourced their transport often enjoylong standing relations with their“house” transport provider, who is oftenalso located nearby. Switching LSPs isin many cases perceived as a risk andan administrative or emotional burden.It was in this context also observedthat many small and mid-size suppliersdo not have a well-defined transportand logistics department or manager.As a consequence, the degree of mana-gerial freedom to implement innova-tive logistics concepts such as horizon-tal collaboration is limited. Furthermore,the interest in transport sustainability islow when it is not coupled with attrac-tive cost savings.

Another observation is that many sup-pliers who operate their own vehicles,work according to to a very rigid sys-tem of daily millkruns, often deliveringcertain regions of the country on fixedweekdays. This system has often beeninternally developed and carefully bal-anced over the years, to make it possi-ble for the supplier to deliver LTL dropsizes to a dispersed customer basewithout losing too much efficiency. Bytaking out certain loads and deliveryaddresses in order to bundle them withother suppliers through a sharedLogistics Service Provider, the internaltransport network can get “out of bal-ance”, causing more disadvantages thenbenefits. This can be a very importantblocking factor for horizontal collabora-tion between suppliers who do not yetwork with outsourced transport.

To complicate matters, due to the factthat smaller suppliers are often family-owned and locally embedded, it turnedout that it was not easy to get themaround the table. Quite surprisingly,willingness or refusal to talk withpotential partners was often influencedby personal animosity or amitybetween company owners and man-agement teams in a certain region.Obvious competition concerns addedto this complexity.

One of the possible conclusions was thatin order to generate logistics synergiesbetween smaller suppliers in a specificregion, a very simple, attractive andtransparent “plug-and-play” offering mustbe made by a logistics service provider,ideally with support and encouragementfrom the retail company.

The biggest opportunity for sponta-neous horizontal collaboration quickwins was found with mid-size or largersuppliers who have a certain degree of“logistics maturity” and professionalism.Especially in case the potential partnershad already outsourced their transport,a financial business case could quiterapidly be developed.

Whether or not a successful collabora-tion can be set up, will then depend ona number of criteria:

• Selection of a shared LogisticsService Provider

• Negotiation of a shared transportrate and operational procedures

• Synchronization of LTL transportmovements towards he retailer (dri-ven by Spar Retail)

• Overall willingness to experimentwith the new concept

Typically, the suppliers will enter into a1-to-1 discussion with each other andwith potential transport providers toreach a collaborative agreement. Theneutral trustee together with the retail-er can support this discussion in thebackground, e.g. to clarify the conceptor to calculate cost and CO2 savings.

As a general guideline, it was learnedthat pilot projects for shared logisticsbetween retail suppliers should be keptas simple and transparent as possible.

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Pilot 1Bakker Logistiek Tilburg transports products of 4 different suppliers. These suppli-ers used to have 3 different delivery days at Spar Retail. As from January 2014 thedelivery days were changed and Bakker Logistiek was asked to bundle theorders. As such, we could reduce the number of trucks per week from 3 to 1. Thismeans we reduced the transport kilometers with 66% without changing theorder quantities.

Operation: Some Case StudiesAs from the start, given the limited scaleof this test project, the targeted benefitswere modest. This is mainly due to thefact that the SME-size suppliers couldnot easily be convinced to invest a lot oftime in the project. Elaborate 1-on-1 dis-cussions to come to a collaborativeagreement on transport (i.e. which 3PLto use and how to divide the costs andbenefits) were seldom an option. SparRetail therefore took a more pragmaticapproach and selected 6 groups of sup-pliers that were believed to currentlywork with the same 3PL located in thesame region. This information was gath-ered by the Spar Retail transportplanned based on data from the CMR.After checking with the planning andbuying department, 6 supplier clustersremained in scope.

These groups of suppliers were contact-ed one by one by GS1 ECR to see if theywould agree to have the 3PL bundletheir loads. A common delivery day wasset, and this information was communi-cated to the 3PL. For 3 supplier clusters,a common delivery schedule could beagreed, which has been implemented asfrom Q2 of 2014. The 3 other suppliergroups chose not to participate, mainlyfor a number of practical reasons: suppli-ers did not always work with the same3PL, they only had very few deliveries viathe targeted 3PL, the physical location ofthe goods was different from theaddress in Spar Retail's database, etc.Before the pilots could start however, 2more groups fell out of scope. This wasdue to changes in 3PL collaboration andthe ordering patern of Spar Retail. Onepilot was effectively launched, see below.

It was noted that many suppliers foundthis an odd question, they expected thateither the 3PL or the retailer would bun-dle their flows automatically (which wasnot the case). We believe it is an impor-tant learning that suppliers should bemade aware that synergy projects suchas this one, can only be done in collabo-ration with retailers and 3PLs. Nobodywill have all the necessary data andinformation, let alone the decisionpower, to execute or enforce such aproject individually. The use of a neutraltrustee can help to align all the differentplayers in this respect, and to divide thesynergy gains on a fair basis.

Shortly after the first pilot had beenlaunched, Spar Retail repeated the exer-cise. A new group of suppliers was iden-tified and a second pilot was launched.

Pilot 2Eratrans transports the products of 2 suppliers, one existing supplier and a newsupplier. When Spar Retail noticed that this new supplier worked with Eratrans,they arranged for both suppliers to have the same delivery day. As such, additionaltransport kilometers could be avoided. This means a reduction of 50% in transportkilometers.

6 Logistics and Product CompatibilityAn important consideration to make inany collaborative logistics community iswhether the partners can make use ofthe same transport capacity or deliveryvehicles in the network. Without a mini-mal degree of compatibility betweenproducts and transport equipment,logistics collaboration will be very diffi-cult.

Some aspects to take into account inthis respect are the following:

• truck types: city vans, trailers, double deck trailers, tautliners, boxes, side or rear loading• temperature regime: ambient, chilled, frozen• max. weight and volume of the products• pallet sizes and packaging/returns management• availability of a tail lift• pallet strength and stackability• vehicle cleanliness• food safety regulations (e.g. HACCP)• licenses and insurances• necessary documents (e.g. POD, temp. tales)• security• procedures in case of transport damage• transport booking and invoicing• …

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7. Legal Aspects

A fundamental question to be asked atthe start of any horizontal collaborationproject is whether it is legally permitted.Both European and national legislationsprohibit the formation of cartels.However, the object of the legislator isnot to hold back efficiency or sustainabili-ty improvements. As such, EU anti-trustlegislation is quite tolerant of logisticshorizontal collaboration when efficiencyor sustainability gains can be demonstrat-ed. This is especially the case when a fairshare of these gains eventually benefitssociety and consumers.

The evaluation whether a horizontal com-munity operates within the boundaries ofthe law, depends on many criteria:

• The aim and size of the collaboration• The number of market participantsinvolved• Whether the collaboration involves(potential) competitors• Whether a written multi-party con-tract exists• The characteristics of customers andsuppliers of the community• Whether prohibited activities takeplace (e.g. price fixing)• …

As the EU no longer provides individualrulings, these criteria should be evaluatedby a professional attorney or competitionlaw specialist on a case-by-case basis. Forlarger collaborations, the use of a solidand standardized legal framework isstrongly recommended in order to pro-

vide legal certainty and clarity. The use ofsuch a framework will also facilitate thesmooth working of a collaborative com-munity, as it provides a written record ofarrangements. However, it should benoted that not only the written contractbut also the implementation in practicemay be investigated in order to assess thelegal compliance of a collaboration.

The European Commission is currentlysupporting the development of legal bestpractices in horizontal collaboration(www.co3-project.eu). A number of guide-lines are being promoted to avoid anti-trust risk, for example:

• Avoid sharing competition sensitiveinformation directly between the parties

• Use a neutral trustee or intermediaryas information “black box”

• Use a pre-approved multi-party agree-ment or template according to juris-diction

• Make the collaboration transparentand open for new entrants

• Clearly define what is in and out ofscope (e.g. trade lanes)

• Calculate and demonstrate the effi-ciency gains

• …

An important observation so far is thatmany companies today still have cold feetto engage in written contracts to supporthorizontal collaboration. In some cases, ashort and simple “Letter of Intent” issigned to express commitment betweenthe parties without having to write elabo-rate and expensive legal agreements.

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Shared use of own transportationIt was observed in this project thatmany small and mid-size suppliers stillprefer to operate with their own vehi-cles and truck drivers for delivering theirproducts to Spar Retail and other cus-tomers. Special attention must be givenin this case to the legal and insuranceaspects of sharing this vehicle capacity:

• In principle, only registered transportcompanies are allowed to carrygoods of other companies

• Suppliers who structurally share theirown transport capacity with othersuppliers, should register as LogisticsService Providers and make sure theyhave proper insurance in place (e.g.CMR)

• This may have an impact on thesocial statute (CAO) of employeesdriving the supplier’s own vehicles

Therefore, in case sufficient flow overlapand logistics synergy is detectedbetween a number of suppliers in thesame region to start a collaborativecluster, it is recommended that theseparties work with a joint LogisticsService Provider in order to implementthe shared transportation and/or ware-housing.

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dures. The focus was mainly on opera-tional quick-wins. It was agreed before-hand that all parties could keep thegains realized in their part of the supplychain. In other words, the players areinvolved and committed in the opera-tions of the community. By changingtheir behavior, they can affect both theirown cost and efficiency levels and thoseof other players in the community.

In addition, for anti-trust reasons, theplayers in a coalition are discouraged toexchange competition sensitive infor-mation (such as transport costs) directlywith each other. As such, it is recom-mended that gain sharing be managedby a neutral party or external referee.This external party is often referred to asthe “neutral trustee”.

8. Gain Sharing

A fair allocation of costs, benefits and risksamong the different players in the com-munity will be crucial to the stability andsuccess of any horizontal collaborationproject. A number of gain sharing mecha-nisms can be applied, ranging from sim-ple (e.g. “fifty-fifty” or volume-based) toadvanced (e.g. “Shapley Value”, namedafter the winner of the 2012 Nobel Prizein Economic Sciences).

A prerequisite for a good gain sharingmechanism is that it should be fair for allparties involved. “Fairness” can be definedeither subjectively or objectively. A gainsharing mechanism that is not subjective-ly perceived as fair by the coalition part-ners, will not be sustainable even if it ismathematically correct.

In the Spar Retail case, the gains to bedivided are centered around logistics andtransportation cost savings, as well as car-bon footprint reduction. The players in thecollaborative community are invited bySpar Retail to modify their logisticsprocesses or behavior in order to achievesynergy gains for the community as awhole. In the context of fair gain sharing,each player will compare his “baseline”, i.e.his cost level before the collaboration, withhis cost level after the collaboration. If thedifference is too small or if the cost savingsis perceived as unproportionate to theinvested effort, the player will not be moti-vated to remain part of the community.

The test cases in this Spar Retail projectwere too small to justify elaborate syner-gy measurement or gain sharing proce-

This project made it clear that inboundlogistics networks of retailers have a largeuntapped potential for collaborativecapacity sharing. A clear and propermethodology in conjunction with a data-driven approach, is needed to create visi-bilty of the inbound flows and identifyand elaborate the most interesting syner-gy oportunities. For reasons of trust aswell as anti-trust, it is recommended thatthis process is driven forward by a neutraltrustee.

Many retail suppliers are small and medi-um sized companies with a limited

degree of logistics maturity or manage-rial freedom. Therefore, collaborationprojects should be kept as simple aspossible and should aim to produceclear cost benefits.

Business opportunities exist for LogisticsService Providers to develop and offerinnovative but simple ‘plug-and-play’solutions to SME-size suppliers, in orderto offer them logistics clustering andtransport synergies with other shipperswho are located geographically nearby.However, retailers should actively sup-port this offering in order to maximizethe potential.

The first analysis that was conducted forthis project did not directly lead to exe-cutable pilots. However, it was very usefulfor Spar Retail as it showed them thepotential of bundling of loads. They thentook a more pragmatic approach – start-ing from the CMR to identify possiblebundling opportunities. This approachhas now been integrated in their way ofworking. Every 6 months, Spar Retailscans the CMR data for potentialbundling opportunities. Both pilots thatwere launched are still running and willcontinue to run. So far, there has been nodiscussion with the supplier on the effectthat this project had on cost savings.

9. Key Performance Indicators

10. Conclusions

Ideally, the benefits and synergy gains of logistics horizontal collabo-ration should be easy to measure and quantify. Therefore, it is impor-tant to agree upfront with the community on a set of relevant KeyPerformance Indicators (KPIs).

The Key Performance Indicators or measurement points to be opti-mized in this Spar Retail case were:- Higher utilization rate of delivery vehicles (cube and weight fill)- Lower number of kilometres driven in the transport network(especially empty ones)

- Lower number of receptions at the gate of the Spar Retail ware-house (lower cost of labour)

- Lower inventory levels (higher inventory rotation)- Higher customer service level (faster deliveries + smaller drops)- Positive impact for society (reduced traffic)

Given that the test cases in this project were relativelysmall, a pragmatic approach was taken and no elabo-rate measurement schemes were set up to keep trackof the KPIs. However, the general feeling was that thetest cases sucessfully helped realize the general goal of“fewer and friendlier” kilometres in the Spar Retailinbound logistics network.

In addition, some of the test cases showed that it is pos-sible to reach an enhanced degree of simplicity in theinbound retail network in combination with a positiveimpact on the logistics efficiency (cost), effectiveness(service level) and sustainabilty (carbon footprint).

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11. Top 10 Learnings and Recommendations

1. Communication is key: most suppli-ers and LSPs are happy to discuss andtest inbound transport collaboration.All stakeholders must be clearlyinformed about the goals and back-ground of the project, as well as thepotential benefits for them.

2. Involve multiple departments:although projects of this nature willoften be driven by logistics and sup-ply chain managers, do not forget toinclude purchasing (on retailer side)and sales (on supplier side) depart-ments into the discussion. In largeretail organizations, also the legaldepartment may want to getinvolved.

3. Nominate project managers andgive them freedom to operate:clear project responsibles should benominated on the side of the retailer,the suppliers and the shared LSPs.

8. Keep it simple and start small: inorder to avoid an expensive andlengthy project, start small and workbottom-up. Try to identify potentialquick wins or low hanging fruit, andwork with a “coalition of the willing”.After a few small but successful pilottests, it will be far easier to scale up.

9. Work with Logistics ServiceProviders as equivalent partners:no logistics horizontal collaborationproject can be successful without theactive belief and support of a strongand capable logistics service provider.Ideally, logistics collaboration shouldalso result in business benefits for theLSP, such as fewer empty kilometersor loading meters, or higher stabilityof volumes and less capacity risk.

10.Celebrate success: use successfultest projects as stepping stonestowards enhanced horizontal collab-oration. Communicate results (of fail-ures) clearly, also to the outsideworld, in order to build a collabora-tive logistics culture with all partnerorganizations.

4. Work data-driven: use historicaldata and master data to analyse theretailer’s inbound transport flows, toidentify quick wins and to calculatethe business case.

5. Anti-trust compliance: in case ofdoubt or in order to avoid any risk,have the legal aspects checked by alegal specialist.

6. Use a solid methodology: inboundretail collaboration projects ofteninvolve many players and can rapidlybecome very complex. The “3-step”methodology (Identify, Prepare,Operate), promoted by the EU-proj-ect “Collaborative Concepts for Co-modality” has proven to be a verypowerful guideline in this respect.

7. Work with a neutral trustee:inbound collaboration will requirethe collection and sharing of largeamounts of data and information,some of which will be competition-sensitive (volumes, transport prices,commercial terms,…). Therefore it isstrongly recommended to work witha neutral intermediary.

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The research leading to these results(CO3 Deliverable D4.5) has receivedfunding from the European Union'sSeventh Framework Program([FP7/2007-2013- SST-2011-RTD-1-7.6)]under grant agreement n°284926.

Contact

For more information about thisproject, please contact:

For Spar Retail: Erik Pappaert, Logistiek Directeur,erik.pappaert@sparretail.be

For GS1/ECR: Jan Somers, CEO,jsomers@gs1belu.org

For TRI-VIZOR: Sven Verstrepen,sven.verstrepen@trivizor.com

For the CO3 Consortium: Dr. Silvia Rossi-Tafuri,info@co3-project.eu

References

Collaborative Concepts for Co-modality (2013): a EU-supported research project to encourage horizontal collabora-tion and innovation in theEuropean transport and logisticsmarket (www.co3-project.eu)

ECR UK and IGD, TransportCollaboration Guide (2009): Simple tools and techniques tohelp retailers and suppliers identifyand implement opportunities toincrease vehicle utilisation, reducemiles and cost.

GS1 BelgiluxKoningsstraat 76 b11000 Brussel (Belgium)www.gs1belu.org

TRI-VIZOR N.V.Waterfront Research ParkGalileilaan 18B-2845 Niel (Belgium)www.trivizor.com

Collaborative Concepts for Co-modality www.co3-project.eu

Spar Retailwww.sparretail.be