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Article Excerpt
Abstract
This article presents a broad review of horizontal cooperation in transport and logistics. This topic is fast gaining momentum in the logistics sector and is thus highly relevant from a practical point of view. Moreover, horizontal cooperation is also interesting from a theoretical perspective because it can be approached by various disciplines, offering a forum for economists, operations researchers, and psychologists, among others. The purpose of this article is to provide a starting point for intensified future research on the topic of horizontal cooperation. In addition to a discussion of various types of horizontal cooperation and closely related literature, the drivers, impediments, and facilitators are reviewed and supported by an extensive bibliography.
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In 1993, eight competing medium-sized Dutch producers of sweets and candy came to an agreement of intensive cooperation designed to increase the efficiency of their delivery processes. Together, the companies supplied 250 drop-off points (e.g., retail distribution centers), the majority of which received goods from more than one of the eight producers on a daily basis. A logistics service provider (LSP) was hired to consolidate and deliver the shipments from these eight companies to their customers. The primary goal of the cooperation was to cut transportation costs, but at the same time customer service was increased because the consolidated shipments reduced the number of deliveries, which in turn reduced unloading and handling costs. Moreover, customers were able to access a broader product assortment more easily. This cooperation, called Zoetwaren Distributie Nederland (ZDN: Dutch Sweets Distribution), has proved quite successful and still exists today.
Initiatives such as ZDN are occurring more frequently. The shortening of product life cycles, fierce competition in global markets, and heightened customer expectations have caused companies' profit margins to shrink (see, e.g., Ruijgrok 2003). As a result, there exists a strong incentive to decrease the costs of non-value adding activities, such as basic distribution and warehousing. Burgers et al. (1993) argue that organizational inertia makes it difficult for firms to internally develop or purchase the capabilities required to deal with rapidly changing demand conditions. The accumulating number of mergers and acquisitions within the logistics industry provides an impetus for companies to re-optimize their logistics processes. Consequently, the logistics market is undergoing a fundamental reorganization and since the potential of internal logistics optimization is almost completely exploited, attention has shifted to better managing external relations in the supply chain (Skjoett-Larsen 2000).
When redesigning logistics processes, one of the most fundamental choices that companies face is whether to (1) outsource, (2) keep logistics in-house, or (3) seek cooperation with like companies to exploit synergies (Razzaque and Sheng 1998). Since today's demanding customers expect their goods to be delivered to the right place, at the right time, in the right amount, in perfect condition, and all at the lowest price, companies often experience difficulty in satisfying these demands individually or by means of dyadic outsourcing relationships with service providers. This has resulted in the third option of closely cooperating with other companies becoming more and more viable.
Cooperation can occur in many ways. Commonly, a cooperative supply chain is characterized by its structure: vertical, horizontal, and lateral (Simatupang and Sridharan 2002). Firstly, supply chain management is the term describing vertical cooperation, a topic that boasts an abundant amount of formal literature. Simchi-Levi et al. (2000) define supply chain management as "the set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses, and stores, so that merchandise is produced and distributed in the right quantities, to the right locations, and at the right time, in order to minimize system wide costs while satisfying service level requirements." This definition indicates that supply chain management is aimed at installing beneficial partnerships and seamless linkages among multiple parties operating at different levels of the supply chain to avoid unnecessary logistics costs, or "waste." The key drivers of such costs savings are inventory and transportation reductions, logistics facilities or equipment rationalization, and better information usage. Examples of vertical cooperation are vendor managed inventory (VMI), efficient customer response (ECR), and collaborative, planning, forecasting, and replenishment (CPFR). Secondly, the European Union (2001) defines horizontal cooperation as "concerted practices between companies operating at the same level(s) in the market." These can be either competing or unrelated companies that share private information, facilities, or resources to reduce costs or improve service. Some examples of horizontal cooperation in logistics are manufacturers consolidation centers (MCCs), joint route planning, and purchasing groups. Finally, Simatupang and Sridharan (2002) define a lateral cooperation as a combination of vertical and horizontal cooperation. Lateral cooperation most frequently aims at gaining more flexibility by combining and sharing capabilities in both vertical and horizontal manners. The goal of lateral cooperations is to synchronize shippers and LSPs of multiple companies in an effective logistics network. We refer to Tavasszy et al. (2003) for an analysis of the challenges of lateral cooperation in logistics networks.
Whereas much has been written about both vertical cooperation in supply chains and lateral cooperation in supply networks, the literature on horizontal cooperation in transport and logistics is still in its infancy, especially where operational consequences are concerned. However, this type of cooperation is becoming more and more relevant in practice. Empirical research (Cruijssen et al. 2006a) has indicated that generally LSPs consider horizontal cooperation to be an interesting approach to decrease cost, improve service, or protect market positions among others. As a result, more and more horizontal cooperation initiatives are developing. In Belgium and the Netherlands, the European logistics center of gravity, the authors are aware of over fifty formally articulated horizontal logistics partnerships. This growing practical relevance has provided the impetus for this current review of available literature on horizontal cooperation and closely related fields. Horizontal cooperation is also very interesting from a theoretical perspective because it can be approached by various disciplines, offering a forum for, among others, economists, operations researchers, and psychologists. The purpose of this literature review is to provide the starting point for intensified future research on the topic of horizontal cooperation.
This article is hereafter organized as follows: In the following section, the concept of horizontal cooperation is discussed in detail by reviewing the literature and identifying various categorizations that exist. The next three sections are devoted to factors that influence the establishment of horizontal cooperations. These are, respectively, drivers, impediments, and facilitators. Finally, we draw conclusions.
HORIZONTAL COOPERATION
Horizontal cooperation is about identifying and exploiting win-win situations among companies that are active at the same level of the supply chain in order to increase performance. These companies can be suppliers, manufacturers, retailers, receivers (customers), or LSPs. Horizontal cooperation requires inter-firm coordination, a concept that is well studied in organizational literature. Inter-firm networks denote complex arrangements of cooperative, rather than competitive, relationships between companies that are legally independent (Pfohl and Buse 2000; Sydow et al.1995). For a detailed discussion of inter-firm networks from an organizational theory perspective, we refer to Grandori and Soda (1995) and Nooteboom (2004).
Horizontal Relationships
Horizontal cooperation can take place between competing companies (i.e., active in the same supply chain) or unrelated companies (i.e., different supply chains). Bengtsson and Kock (1999) identify four types of horizontal relationships. Firstly, coexistence refers to a relationship that does not include any economic exchanges and where the companies' goals are stipulated independently. Secondly, in cooperation, tight bonds exist between companies that define and pursue common goals. The third type of horizontal relationships is basic competition. This relationship is characterized by an action-reaction pattern as companies rely on the same or comparable suppliers and target the same group of clients. Finally, co-opetition is a common relationship for logistics companies that cooperate horizontally. In this type of relationship, goals are jointly stipulated if the competitors cooperate, but not if they compete. Co-opetition is especially beneficial if cooperation takes place for non-core activities, while competition remains unchanged for core activities. The non-core activities involving cooperation are preferably not visible to the customer (Cruijssen et al. 2006a). Bengtsson and Kock (2000) consider visibility for the customer as the most important characteristic in determining whether competition or cooperation should take place for a certain activity. For example, if there is cooperation between retailers for logistics activities, competition and differentiation can remain unchanged for other domains such as product prices and assortments. Co-opetition must not be seen as dangerous (Bengtsson and Kock 1999). Instead, top management should understand and communicate to organizational members that cooperation and competition can be applied simultaneously, and that both can contribute to achieving organizational goals. More information on co-opetition can be found in Brandenburger and Nalebuff (1996) and Zineldin (2004).
Types of Cooperation
Various types and designations of cooperative horizontal supply chain relationships have been discussed in both professional and academic literature. Cooperation, collaboration, alliances, and partnershipping are all used to refer to concerted practices on horizontal supply chain links. However, a high level of ambiguity exists between the definitions and characteristics of these relationships. Some authors explicitly discriminate between these appellations. For example, Mentzer et al. (2000) report that a focus group of twenty interviewed supply chain executives felt strongly that collaboration entails much more than cooperation, especially in terms of sharing information, risks, knowledge, and profits. Golicic et al. (2003) also interviewed a focus group to construct a descriptor of relationships in terms of "magnitude" or "closeness." Again, one focus group member indicated that collaboration requires a higher level of closeness than cooperation, the difference being that with collaboration there must be a willingness to take an active role in making decisions and sharing more information. Most often, however, the...
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