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What is Collaborative Distribution?

Posted on by wildfireDev1

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Image courtesy of jscreationzs / FreeDigitalPhotos.net

Image courtesy of jscreationzs / FreeDigitalPhotos.net

Collaborative distribution is exactly what it sounds like- it is a way of collaboratively bundling product shipment loads in order to save companies money with their distribution and shipping costs. In other words, collaborative distribution happens when vendors partner and agree to consolidate shipments and share the costs instead of utilizing separate distribution centers and making individual shipments.

Collaborative distribution can be a creative and cost-effective solution, especially for small to mid-sized suppliers.

Collaborative distribution, sometimes referred to as multi-vendor consolidation, is a distribution model that can save most companies up to 35% in distribution costs. The many upsides of collaborative distribution include: warehouse space-sharing; cost savings; decreased carbon footprint; and the creation of mutually-beneficial, successful, partnerships between competitors.

But what are the risks associated with collaborative distribution?

Manufacturers and distributors may have the following concerns about collaborative distribution:

  • Finding the right partners to collaborate with
  • Ensuring timely shipment and delivery
  • Questions about equitable cost-sharing
  • Problems associated with trust, planning concerns, and effective communication between partners

Successful collaborative distribution requires partners to agree upon terms, commit to a payment methodology, and carefully communicate all planning and logistics.

What is the role of third-party logistics suppliers in collaborative distribution?

Third-party logistics suppliers, by their very nature, can provide valuable advice and act as matchmakers or go-betweens to increase the possibility of success with collaborative distribution. They enable integration of services and utilize successful and economically beneficial partnerships, as well providing a shared warehouse space.

The bottom line:

In order for collaborative distribution to be truly successful for all parties concerned- retailers, manufacturers, and third-party logistics suppliers must work together to carefully create cost-effective plans, communicate their needs and goals, and build sustainable and mutually-beneficial partnerships.

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