Seven Ways to Multimodal

Adopt best practices to improve asset utilization, lower cost-to-serve and reduce carbon footprint


Shippers—Shippers have much to gain. Their most tangible benefit will be lower cost of transportation as a result of both collaboration and modal optimization. Collaboration will lower lane rates and help reduce transportation overhead costs of individual organizations, as the level of collaboration increases and the transportation function is increasingly centrally-managed across all participating shipper organizations. Another less tangible but important advantage is the ability of corporations to focus on their primary businesses. Having off-loaded the transportation function to the internal group created by the collaborating parties, or to the external 3PL hired by the parties, companies can focus on their core competencies such as manufacturing, new product design or marketing. In addition, shipper organizations can better meet their sustainability mandates by playing an active role in reducing deadhead miles and increasing asset utilization—which will reduce the total miles traveled. Sustainability benefits will not be limited to a lower carbon footprint but also will extend to other realms, such as less congestion, noise pollution and needed infrastructure. Shipper organizations can achieve all of this and maintain their competitive differentiation as value sharing in collaborative alliances is based on the individual contributions of each organization—contributions based on metrics such as scale and network footprint.

Carriers, private fleets and 3PLs—Carriers and private fleets will accrue the majority of benefits, which will then be shared with shippers. To start with, collaboration will help carriers and private fleets minimize their deadhead miles and capture incremental revenue with almost the same total miles traveled. The incremental fixed costs associated with capturing this incremental revenue opportunity will be insignificant. Hence, the impact on the bottom line will be substantial, providing these organizations an opportunity to reduce their cost-to-serve and their lane rates. Similarly, modal optimization will reduce carriers’ and private fleets’ cost-to-serve, as well as improve their asset utilization and lower their capex needs. Similar to shipper organizations, carriers and private fleets will also be able to meet their sustainability goals.

3PL providers will be positioned for a unique opportunity. As mentioned earlier, shipper organizations are likely to appoint 3PLs for multi-party collaboration---at least during initial stages of collaboration as they test the waters and build trust. Thus, 3PLs will have the opportunity to maintain their roles and become indispensable. Key success factors for 3PLs will be seamlessly integrating disparate systems of shipper organizations and working with the different cultures of various organizations. If 3PLs are able to display enough value capture for the collaborating parties, minus 3PL fees, shipper organizations will be hooked.


Arun Kochar,Manager, A.T. Kearney can be reached at arun.kochar@atkearney.com.

 

Sean Monahan,Partner, A.T. Kearney can be reached at sean.monahan@atkearney.com.

 

Joy Peters, Principal, A.T. Kearney, can be reached at joy.peters@atkearney.com.

 

Jeff Ward, Partner, A.T. Kearney can be reached at jeff.ward@atkearney.com.

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