Application of Collaborative Transportation Management to Global Logistics: An Interview Case Study

Article excerpt

Global logistics in business operation is playing a critical role in responding to the changing market demand in a world of globalization and mass customization. The efficiency of global distribution holds the key to success in international trade. Not only is collaborative transportation management (CTM) a new collaboration strategy between the shipper and carrier, it is also a new business model. This paper presents a descriptive case study on the application of CTM to business global logistics. In-depth interviews were conducted with respondents from multinational electronic manufacturing service (EMS) corporations and transportation logistics service providers. Our analysis reveals that third-party logistics (3PL) service providers play an important role in global sourcing of multinational corporations. Integrating CTM with enterprise resource planning (ERP) via information technology (IT) can facilitate transportation capacity planning and achieve prompt delivery within the shortest time possible. The positive impact of CTM on business logistics enables enterprises to gain competitive advantage in the global business arena.

1. Introduction

The rise of regional economies around the world as well as the development of globalization has caused the supply chain to face problems such as global sourcing, cross-country production, diverse needs of customers, short product life cycle, demand for rapid delivery, frequent order placement, reduced procurement quantity, high logistics cost and diminished revenues. Hence, efficiency in global distribution is the key to survival and success under the intensely competitive business environment, which demands adequate product supply, rapid delivery and low inventory. Growing trend of mass customization and e-commerce are forcing manufacturers and retailers to shorten their planning cycles and delivery time. With smaller planning windows and the universal objective to minimize inventory in the value chain, transportation has become a critical opportunity in the process (Browning and White, 2000; Sutherland, 2003).

Transportation consumes 5.5% of the U.S. gross domestic product (GDP), and approximately the same proportion of a company's sales revenue (Wilson and Delaney, 2003). Transportation service represents a major component of order lead time. Much of the variability in order lead time is attributed to variation in transit times (CTM White Paper, 2004). Huge capital in terms of sunk cost is a unique feature of transportation industry, making it difficulty, if not impossible, to increase supply capacity or find substitutes within a short time. The success in supply chain management lies in whether the replenishment can be in the right place when it needs to be there. The supply chain is a complex system made up of many parties. Insufficient or unavailable carrier capacity provided in time for the shipper will cause disruption in the supply chain when the delivery will be in process but its status is unknown or delayed. Such uncertainty will cause both the buyers and sellers to maintain a larger inventory just in case. Hence, suppliers either have to face the pressure of excess inventory or run the risk of inadequate stock. This jeopardizes the whole supply chain, posing problems of increased cost, time delay and negative impact on business.

A single member of the supply chain alone cannot do much to resolve supply chain problems. This is why collaboration among partners in a supply chain has become a topic of great interest for many and an essential element of company strategy for others (CTM White Paper, 2004). Previous studies on supply chain collaboration has focused mainly on the collaboration among supply chain parties including, the suppliers, manufacturers, wholesalers/distributors and retailers (Armistead and Overton, 1994; Bowersox et al., 1999; Holmberg, 2000; Hoyt and Hug, 2000; Stank et al., 1999; Tage et al., 2003; Thomas and Griffin, 1996; Holweg et al. …