Collaborative logistics is said to be achieved when two or more organizations enter into a partnership for the purpose of optimization of operations related to logistics by sharing of equipment, vehicles, information or carriers to reduce the costs and overcome situations when the carrier that transports their shipment is almost empty or at less-than-usual capacity. It is also beneficial for controlling inventories and thereby eliminating stock-outs that are likely to impact customer service.
Modern day collaborative logistics are powered by state-of-the-art advanced electronic media and software systems which help organizations with the expansion of these networks on a big scale. This is believed to be the best of both worlds as there is a flow of information, resources, service providers and saving of money.
Nowadays, organizations are forming traditional and web-based partnerships with an aim to lower the transportation costs along with reducing inventories and thereby raising the existing levels of customer service. Collaborative logistics is meant for fostering new, innovative and different solutions for business problems and acquiring new businesses. It can be of optimal use when it is effectively executed to derive high efficiencies in supply chain, while also lowering costs and placing the trading partners in a better position by providing them with flexibility for addressing variances in the demands of their customers.
The current highly competitive business environment encourages organizations test collaborative logistics, which benefits them by raising collective visibility between the transportation service providers, vendors and organization for the purpose of realizing the goals of supply chain in an optimal way.
Collaborative partners must together decide on the selection of the proper infrastructure and systems. This may include an existing system or the services of a third-party service provider to successfully plan and implement these systems. The evaluation of cost is vital in order to insure that all trading partners perceive equity and to make sure that the costs do not in any way exceed the projected benefits of the shared logistics.
This approach is slowly and steadily becoming the perfect choice to doing business for many organizations formerly wedded to the traditional logistics approach. It usually involves utilization of planning software tools which can re-engineer their existing domestic and international supply chains with regard to transportation.
This method facilitates breaking down of the barriers that supposedly exist between the supply chain partners. Only an effective and efficient flow of real-time information between the trading partners can effectively remove these barriers. Technology can considerably improve collaboration and provide effective management of supply chain by providing efficient flow of promotional plans and real-time load data, thereby allowing the use of collaborative logistics to achieve cost reduction and efficiency in the supply chain.