Master Thesis Supply Chain Management University of Groningen

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Master Thesis Supply Chain Management

University of Groningen

CONCEPTUALIZATION OF HORIZONTAL LOGISTICS

COLLABORATION BETWEEN SHIPPERS- The influence

of competition on opportunities and barriers

Irene Aguadero Castrillo S3243486 i.aguadero.castrillo@student.rug.nl

Supervised University of Groningen: Dr.ir. P. Buijs Co-assessor University of Groningen: C. Xiao, Bsc

Second assessor University of Groningen: Prof. dr. D. P. van Donk

June 22nd_{, 2018}

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2 ABSTRACT:

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3

1. INTRODUCTION

The market is under constant change, product life-cycles are getting shorter and customers have higher expectations (Cruijssen, Cools, & Dullaert, 2007; Cruijssen, Dullaert, & Fleuren, 2007). Therefore, due to these high customer requirements and the market competition, shippers have lower profit margins than ever before, obliging them to reduce non-added-value activity costs and improving their supply chains (Saenz, Gupta, & Makowski, 2017; Sun, Rangarajan, Karwan, & Pinto, 2015). Considering that logistics activities are transportation and warehousing activities, which shippers can characterize as non-core activities, they could also be perceived as contributing to their competitive advantage. By collaborating between organizations regarding logistics activities, costs may be reduced, which improves efficiency. This creates the opportunity for shippers to collaborate horizontally.

Horizontal collaboration is defined as the collaboration of more than two organizations in the same level of the supply chain to obtain benefits together (Cruijssen, Dullaert, et al., 2007; Pomponi, Fratocchi, & Tafuri, 2015). This concept is elaborated through the perspective of the relational view, under which an organization’s resources may be influenced by collaboration (Dyer & Singh, 1998). Barratt (2004) made a distinction within horizontal collaboration that was based on partnering with competitors and non-competitors. Horizontal collaboration between competitors has already been researched in product development, as well as in technology management while lacking in logistics (Gnyawali & Park, 2011; Wu, Luo, Slotegraaf, & Aspara, 2015).

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5 LSPs increasing role, while being ignored in collaboration literature (Hingley, Lindgreen, Grant, & Kane, 2011; Saenz et al., 2017; Zacharia, Sanders, & Nix, 2011). This rises the following research question, making this research interesting from the academia perspective: How can horizontal logistics collaboration between shippers be conceptualized?

The influence of competition has been barely researched, even though highlighted as needed by some authors (Ozcan & Santos, 2015; Sanchez Rodrigues et al., 2015; Shah & Swaminathan, 2008; Sytch & Tatarynowicz, 2014). Literature provides conflicting opinions regarding the influence of competition on collaboration. On the one hand, some authors highlight that firms from different industries face more difficulties on reaching agreements than firms from the same industry (Ozcan & Santos, 2015; Shah & Swaminathan, 2008). On the other hand, others characterize collaboration between competitors to be unstable, due to the opportunistic behaviour and tension between partners (Sytch & Tatarynowicz, 2014; Wilhelm, 2011). Due to the conflicting opinions of the influence of competition on collaborating relationships, it is unknown in literature what is the actual influence of competition. This research is interesting leading to the following research question: How does competition influence the initiation of horizontal logistics collaboration between shippers?

This study follows a qualitative approach, collecting data based on interviews with organizations that face different competition levels with their partners. This methodology helps to answer the research questions due to the information that will be collected based on the expertise of the interviewees. This paper contributes to the current literature on four aspects. Firstly, it provides a different perspective on the current literature of collaboration, due to the fact that it is mainly focused on the LSP’s perspective and ignoring the shipper’s point of view. Secondly, it provides a new conceptualization of horizontal logistics collaboration between shippers, which has been avoided in literature. Thirdly, it provides insights on the competition topic, viewing if it strengthens or weakens the collaboration (Ozcan & Santos, 2015; Pomponi et al., 2015; Shah & Swaminathan, 2008; Sytch & Tatarynowicz, 2014). Fourthly, this research contributes to insights on how horizontal logistics collaboration is initiated, by combining literature from other collaboration areas of research (Cruijssen, Cools, et al., 2007).

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6 be elaborated on Section 3. Section 4, explains the results of the research followed by the analysis. In Section 5, the research results are discussed against the literature reviewed. Lastly, in Section 6 the research is concluded, including research limitations, managerial and scientific implications and further research opportunities.

2. THEORETICAL BACKGROUND

2.1 Horizontal collaboration

Collaboration is a type of interfirm cooperative relationship, which varies depending on the type of exchanges taking place (Kaufman, Wood, & Theyel, 2000). Past research has differentiated between two possible exchanges types, transactional exchanges and relational exchanges. Transactional exchanges are characterized by the use of contracts and little contact between partners. The latter is known for an intense cooperation between parties and the inclusion of joint planning and transparency (Hingley et al., 2011). Hence, Simatupang (2002) defines collaboration in the supply chain “as two or more independent companies work jointly to plan and execute supply chain operations with greater success than when acting in isolation” (Simatupang & Sridharan, 2002: 19).

Supply chain collaboration can be classified differently, as vertical, horizontal and lateral collaboration. Firstly, vertical collaboration is known organizations in the same supply chain, sharing resources and investments (Simatupang & Sridharan, 2002). Secondly, horizontal collaboration 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” (Cruijssen, Dullaert, et al., 2007: 23). Lastly, lateral collaboration is based on a combination of vertical and horizontal collaboration (Simatupang & Sridharan, 2002). This research focuses on horizontal logistics collaboration.

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7 concluding in better results than by performing individually (Dyer & Singh, 1998; Lado, Boyd, & Hanlon, 1997).

Horizontal collaboration can be identified within different levels of the supply chain. It can occur amongst LSPs, which is the most researched collaboration, as well as between shippers and between receivers of goods (Gnyawali & Park, 2011; Wu et al., 2015). Within horizontal logistics collaboration between shippers, different types can be identified, collaboration can occur between competitors or non-competitors. Four types of relationships can be identified within these collaborations: coexistence, cooperation, competition and co-opetition (Bengtsson & Kock, 2000). Coexistence is known as a collaboration without economic exchanges and individual goals. Cooperation is characterized as a close relationship with joined goals. To continue, competition is known as the collaboration with organizations that have equal or similar suppliers or customers. Lastly, co-opetiton is a relationship between competing organizations based on their non-core activities, with shared objectives regarding these (Bengtsson & Kock, 2000; Cruijssen, Dullaert, et al., 2007).

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8 The showed controversy leads to the following research question:

RQ1: How can horizontal logistics collaboration between shippers be conceptualized?

Transaction cost economics (TCE)

The controversy that has been viewed in the conceptualization of horizontal logistics collaboration can also be viewed from the TCE perspective. The amount of activities outsourced in the collaboration to the third party logistics involved can be viewed through this theory (Williamson, 1975; Zacharia et al., 2011).

Williamson (1975, 1985) proposed that the choice of outsourcing can be based on minimizing the costs of conducting an exchange between firms. These costs were named transaction costs, which comply information, negotiation and monitoring costs. The theory that supports this statement is TCE. To continue, TCE supports that firms follow collaborations to benefit from scarce resources or to become more efficient. Also supporting that collaborations provide access to knowledge and other aspects that might be complicated to obtain by other relationships (Williamson, 1991). TCE elaborates that outsourcing should be chosen when the transaction costs of conducting the activities in-house exceed the ones of conducting them by an outsourced firm.

If logistics is viewed from the TCE perspective, it can be observed that conducting logistics activities require high investments, due to the new assets needed. As it has been observed in previous literature, when logistics is outsourced, transaction costs are usually minimized, in comparison to managing the logistics activities. By providing more tasks to the 3PL, previous research has showed that the transaction costs are reduced (Zacharia et al., 2011). This could justify the need of the orchestrator role, meaning that shippers with the goal of minimizing transaction costs, they might decide to outsource certain activities of the collaboration to a third party. However, TCE also suggests that parties involved in a collaboration might try to act opportunistically, if another party is involved, this might increase the chances of opportunistic behaviour.

Opportunities of horizontal collaboration

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9 Firstly, achieving economies of scale can be considered as a horizontal collaboration opportunity. These are achieved by spreading the fixed costs over multiple parties, creating savings and increasing productivity (Capron, 1999; Cruijssen, Cools, et al., 2007; Lambert, Emmelhainz, & Gardner, 1996; Yang et al., 2016). Previous research has proven the necessity of collaborating to maintain competitiveness in the market (Cruijssen, Dullaert, & Joro, 2010). For instance, truck capacity can be used more efficiently by transporting full containers rather than less than full containers to increase the fill rate (Sanchez Rodrigues et al., 2015). Other examples can be viewed on the reduction of total distance traveled, of empty miles or by collaborating in the backhaul transportation (Esper & Williams, 2003; Juan et al., 2014; Pérez-Bernabeu et al., 2015). Moreover, by the appliance of economies of scale less assets can be used, decreasing overall logistics cost (Esper & Williams, 2003; Padilla Tinoco, Creemers, & Boute, 2017; Pérez-Bernabeu et al., 2015).

Secondly, market coverage can be considered as an opportunity which can be derived from collaboration (Capron, 1999; Santos & Eisenhardt, 2009). In product development literature, the increase of market coverage has been viewed from the perspective of expanding their customer reach and obtaining a bigger market share (Capron, 1999). Therefore, this can be drawn to the shipper’s perspective by expanding the product reach to other customers that might be applicable due to the new availability created by the partnership. For instance, achieving new delivery locations due to the collaboration (Ozcan & Santos, 2015).

Lastly, bargaining power towards the LSP is identified as a horizontal collaboration expected opportunity (Cruijssen, Cools, et al., 2007). This is achieved by the creation of bundles and combining activities. For instance, literature has highlighted the shipper’s increase of bargaining power towards the LSPs due to the combined amount of loads. Therefore, the shipper will have more power by collaborating rather than by not collaborating (Ergun et al., 2007; Özener & Ergun, 2008).

Barriers of horizontal collaboration

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10 Partner selection is considered as a key decision in collaboration literature due to its complexity and the characteristics that its culture can have (Cruijssen et al., 2010; Li, Eden, Hitt, & Ireland, 2008; Sambasivan & Yen, 2010; Sanchez Rodrigues et al., 2015; Saxton, 1997). This complexity arises from the fact that partners in the collaboration are usually only concerned about the impact on their gains and savings, rather than the collaboration impact, they are driven by selfishness (Hingley, 2005a; Vanovermeire, Sörensen, Van Breedam, Vannieuwenhuyse, & Verstrepen, 2014).

Past literature researched that lack of trust can create a barrier to initiate horizontal logistics collaboration. Sanchez Rodriguez et al., (2015) identified multiple aspects that facilitate the evolvement of horizontal collaboration in the supply chain, where trust was mentioned. Mutual trust in the collaboration has been concluded to evolve as the collaboration increases (Cruijssen, Dullaert, et al., 2007). Multiple papers have highlighted the need for a certain level of trust in order to be able to commence a horizontal collaboration (Pomponi et al., 2015; Vanovermeire et al., 2014). It is considered as a necessity, due to the fact that for a collaboration to happen, reliability should be a must (Barratt, 2004).

Partner’s reputation has also been researched in collaboration literature. It has been concluded that by having a positive reputation, the collaboration concludes on a positive relationship with the partner, as well as being considered as a key characteristic of partner selection due to its impact on the relationship (Saxton, 1997). As well as prior partner knowledge, which can facilitate the process and increase the trust on the party due to the fact that the company has already experienced the process (Li et al., 2008). Lastly, the commitment of top management also influences the partner’s selection, due to the influence on the success of the collaboration. The willingness of the management to follow the relationship plays an important role on its success, for instance, due to its necessity to overcome conflicts (Barratt, 2004; Kuyzu, 2017; Li et al., 2008; Sanchez Rodrigues et al., 2015).

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11 allocation method can influence the level of gains received by an organization, even reaching to a loss circumstance (Padilla Tinoco et al., 2017; Sun et al., 2015).

Different aspects have been researched in literature that have to be considered when designing or choosing a cost allocation mechanism. Flexibility has been mentioned to be encouraged by the chosen mechanism with the final purpose of decreasing the total transportation costs, as well as, having a certain amount of partners in the collaboration (Kuyzu, 2017; Vanovermeire et al., 2014). Lastly, a research conducted by Sun et al., (2015) designed a new model that fulfilled the requirement of fairness, for a successful horizontal collaboration, after having investigated multiple mechanisms that failed to achieve it. This can be considered as another characteristic that might be necessary on the cost allocation mechanism, showing the complexity that this topic faces.

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12 the highly communication and the share of information needed (Dussauge, Garrette, Mitchell, & Wiley, 2000).

2.2 Competition

Competition has been recognized by previous literature for being an interesting research topic, not only from the collaboration perspective but also from a market perspective since it can contribute to increase competitive advantage (Lado et al., 1997). This research will follow the Chamberlinian concept, under which competition occurs between firms within the same industry, who have similar or overlapping resources or characteristics (Barney, 1986). This has been chosen due to the scope of the research, and due to the reasoning towards the expected outcomes as introduced in the introduction.

Competition affects relationships between organizations, also affecting organizational perceptions and experiences (Bengtsson & Kock, 1999; Morgan & Hunt, 1994). It is also characterized by mutuality and harmony, such as any other relationship (Bengtsson & Kock, 1999). Furthermore, literature defined that competition and collaboration can take place in an inter-organizational relationship, defined as co-opetition (Cruijssen, Dullaert, et al., 2007). Cooperation has been defined as the most beneficial relationship between competitors (Bengtsson & Kock, 2000).

There is controversy regarding the influence of competition on collaboration, due to the opportunities that it can bring, to the possible barriers encounter and to its instability. Other studies have started to elaborate on certain opportunities and barriers that are faced by co-opetition in other fields (Ozcan & Santos, 2015; Shah & Swaminathan, 2008; Sytch & Tatarynowicz, 2014). For instance, knowledge sharing between competitors has been observed to gain financial performance. The paper that elaborates on this topic concluded that once the relationship has reached to a point where opportunistic behaviour is not an option, financial gains will be high (Wu et al., 2015). By sharing knowledge both organizations would benefit due to the high complementarity of their businesses (Chen, 1996; Hoffmann, 2007; Lado et al., 1997).

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13 becoming an opportunity when initiating horizontal logistics collaboration (Dussauge et al., 2000).

Co-opetition has also been proven to enhance economies of scale of the provided service as well as to geographically extend their markets. Economies of scale can be enhanced due to the fact that the requirements of the activities should be similar since the resources are similar, complementary (Lado et al., 1997; Saenz et al., 2017; Whipple & Frankel, 2000).

The complexity of partner selection has been researched in past literature, emphasizing on the fact that the relationship maintained between the parties is even more critical in co-opetition than in other forms of horizontal collaboration (Chin, Chan, & Lam, 2008; Pomponi et al., 2015).

Trust between partners together with management leadership, are the most critical factors for a successful co-opetition (Chin et al., 2008). Trust is considered to be so indispensable due to the higher chances of partner’s opportunistic behaviour, meaning that its lack can lead to not initiating a collaboration. The need of trust has been addressed to increase when instability occurs (Krishnan, Martin, Noorderhaven, & Krishnan, 2006; Schmoltzi & Wallenburg, 2011). However, in this research, the collaboration is regarding non-value-added activities. Hence, a different risk of opportunism could apply.

Power can also be viewed within co-opetiton, since tension and instability, can be experienced more often due to the industry shared (Gnyawali & Park, 2011; Hingley, 2005a). Moreover, management commitment has also been identified in co-opetition literature as a key decision for horizontal collaboration. Due to the fact that the management attitude towards the competitor influenced critically the collaboration due to the needed support and commitment that is needed to successfully hold the collaboration (Chin et al., 2008; Gnyawali & Park, 2011).

The following research question was drawn due to the mentioned influences previously researched and the controversy:

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3. METHODOLOGY

3.1 Research design and interview selection

A qualitative approach was followed to answer the research questions proposed in this paper. The data collection was based on interviews, which allows to obtain deep information about the detailed understanding of what shippers understand for horizontal logistics collaboration. As well as the impact of competition on the opportunities and barriers encountered on the initiation of horizontal collaboration (Isabella, 1990). Examples and specific information is needed from interviewees that have or are experiencing horizontal logistics collaboration. Additionally, to fulfil the research questions, experiences are required to understand the perceptions on horizontal logistics collaboration.

It was decided not to limit the research to a specific field, to obtain a higher generalizability and ensuring that within the already small pool of interviewees available, the highest amount of participants were obtained (Isabella, 1990). The amount of interviews conducted was eight, due to the limited available organizations that have experience in such collaborations. These collaborations are not that common in the market, meaning that the quantity of available interviewees is not as vast.

The interviews were selected based on the following criteria:

• Knowledge and experience on horizontal logistics collaboration between shippers • Shippers needed to have had initialized a horizontal logistics collaboration or

being on the process of commencing one.

• The expert also needed to have experience and be involved in the development of the researched topic and had previous experience on the shipper’s perspective of the collaboration

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15 The following table provides some general overview of the interviewee characteristics, as well as the organization and collaboration overview.

TABLE 1 Interviews overview Interview Length

(min)

Interviewee

position Location Collaboration on

Stage of the collaboration Dairy Food

manufacturer 70 Senior buyer role Netherlands Ocean freight Implemented Agricultural

manufacturer 40 Sales director Netherlands Barge transportation Implemented Food

manufacturer 1 35

Export and

Marketing manager Spain Road transportation Finalised

Beverage

manufacturer 30

Supply chain

Manager Spain Road transportation Finalised

Food

manufacturer 2 25

(CEO) Export and

Sales manager Spain Road transportation Finalised

Waste

manufacturer 70

Development

Logistics manager Netherlands Rail transportation

Under development

Cardboard

manufacturer 70

Global transport

manager Netherlands Transportation

Under development Horizontal collaboration control tower 90 Strategy advisor and Global freight forwarder manager

Netherlands Transportation/Expert

interview Implemented

3.2 Data collection

The data collection was performed from the end of March to the middle of May. A previous research was performed regarding the contacted companies. This was done with the final purpose of discovering the small pool of companies, who were applying the horizontal logistics collaboration.

The interviews were recorded and transcribed to ensure data reliability and avoid misunderstandings. Moreover, the interviews were transcribed within 24 hours of conducting the interview, in order to ensure the full understanding of the conversation and avoid confusion (Eisenhardt, 1989). These interviews were of a length between 90 to 25 minutes. They were conducted as a combination of face-to-face and phone interviews, due to the fact that some of the interviewees were located in Spain. Hence, interviews were held both in English and in Spanish to facilitate the communication with the interviewee and ensure that they felt completely comfortable while sharing the information. However, the transcriptions were translated carefully into English, to facilitate data comparison.

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16 method was applied, since I wanted the interviewee to fully provide information regarding the researched variables, while being able to expand on topics that might have not been analysed on the literature review and could be considered as unexpected findings. As well as, ensuring the reliability of the findings and the possibility of its comparison (Yin, 2009). Moreover, the interview is divided in five sections, including a general overview of the collaboration and the understanding of the concept, followed by questions about each of the investigated variables. In order to help with data triangulation, secondary data was also collected (Voss, Tsikriktsis, & Frohlich, 2002). This was on the form of documents and news articles provided by the interviewed organizations, as well as business field news articles which are related to the horizontal collaboration topic.

3.3 Data analysis

The interviews were analysed with the use of Microsoft Excel, to facilitate the analyzing process and ensure data visibility. The data analysis process was based on the Gioia, Corley and Hamilton (2012) approach. It is an iterative three step method, which has been conducted during the data analysis phase. To start with, the data was divided into quotes of the information that was considered relevant for the research. This was performed individually per interview. Each quote was further examined and looked into, to view the information that the quote provided. This was performed to create the first code, which was formed trying to use certain words used by the interviewee. Once the first codes were assigned, the 2nd_{codes followed, which are more directed to the theoretical literature.}

This process consisted on looking more closely to the literature based on the 1st_{codes that}

were drawn on the quotes. The last step of the process was to combine the 2nd_{codes into}

aggregated dimensions. This consisted on drawing emerging themes that were present on those 2nd order codes. This allowed to draw upon new literature that was not considered initially as part of the research.

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17 A code tree was created to view the dimensions assigned to the obtained data (See Appendix 3 for coding tree excerpt). This facilitates the visibility of the obtained data into a more structured overview (Gioia et al., 2012).

FIGURE 1

Coding tree (See Appendix 3 for coding tree excerpt)

4. FINDINGS

The following table provides a general overview of some characteristics of the interviewee’s collaboration characteristics (see Appendix 4 for a general overview of the findings per case).

TABLE 2

Interviewee’s collaboration overview

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Dairy Food

manufacturer Ocean freight Return flow Yes No Client

Agricultural manufacturer

Barge

transportation

Creation of

resource Mixture Yes

Equal area location Food manufacturer 1 Road transportation Cargo

combination Mixture Yes

Introduced by the third party Beverage manufacturer Road transportation Cargo combination No No Introduced by the third party Food manufacturer 2 Road transportation Cargo combination No Yes Introduced by the third party Waste manufacturer Rail

transportation Return flow No Yes Client

Cardboard manufacturer

Road

transportation

Cargo

combination Possible Yes

Introduced by the third party Horizontal collaboration control tower Transportation Cargo combination and Return flow Possible Yes Introduced by the third party

4.1 Horizontal collaboration as a concept

Logistics activities.

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19 activities that are defined as horizontal logistics collaboration increase the complexity of the conceptualization.

Logistics value

The value of logistics activities has been differently defined amongst the interviewees. Some shippers identified the importance of logistics in their business. Considering them as adding value to their core activities. The Horizontal collaboration control tower emphasized it as: “Having a conversation on logistics because our feeling it is also that in a commercial meeting, the sales of the other party has less knowledge of logistics than the customer”. Other interviewees defined logistics as non-added value, for instance, the Dairy Food manufacturer implied that “We compete in the shelves, the logistics we only need to organize it in a sustainable way, also from a sustainable financial point of view”. However, the same interviewee turned perspectives on value added of logistics during the interview (the types of collaboration from the table above). The reason behind such belief could be due to the difference that it could bring towards their competitor.

Collaboration perspective

Different believes regarding logistics responsibilities have been observed. On the one hand, they believed that the LSP is responsible of bundling the cargo, by collaborating they push the LSP to have a more strategic perspective over the routes. This view has been shared by some of the interviewees, as well as experienced by the Horizontal collaboration control tower as indicated in “from their perspective, they have an LSP and they see it as the same, and I know them for 10 years and 15 years and they are doing an excellent job. I have no issues in logistics”. On the other hand, the shipper has the interest on following the collaboration for their own benefit rather than helping the LSP. This may be related to the collaboration types since some of the interviewees differed among the responsibilities of the LSP dependent on the activity.

Supporting role

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20 “Do we close the agreement as a shipper combination and after that as a total package to the LSP? Or just we agree that we will offer our lanes as a combination of shippers to one or two LSPs defined by all shippers who are involved and negotiate either for the share of the rates”. This concern is viewed on the perspective of having an LSP responsible for supporting the collaboration, as it occurs in the interview of Dairy Food manufacturer and the Waste manufacturer. In these interviews, the LSP is responsible of ensuring a fair cost division and be part of the collaboration (i.e. cargo connection). These collaborations are performed on a connecting the dot problem which highly involves the LSP since it might not include a constant connection, as indicated in the Dairy Food manufacturer’s case, who highlighted that “The carrier who has the best network so the most lines here, he is the best carrier. Their unique capability is that they can fill up every truck to FTL. In principle you are already working together, so you don’t have to make separate agreements with that”. Identifying that the carrier is responsible of arranging the loads rather than, being the shipper’s task to be fully responsible of logistics activities and its optimization. This creates a new conceptualization of horizontal logistics collaboration.

Responsibility levels in the collaboration

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21 4.2 The influence of competition on the initiation of horizontal logistics

collaboration

Collaboration objective

Two horizontal collaboration objectives have been identified in the analysed data, without an influence of competition. Some interviewees identified financial benefit as the purpose of the collaboration. By noticing the possible benefit that they could obtain and combining forces to reduce logistics costs, increasing efficiency (i.e. by combining cargo from each party onto one transport mode). On the contrary, a more strategic goal was given by other interviewees, under which they had objectives, such as ensuring capacity or reducing road transport. These parties were firstly concerned about a general objective rather than a financial one, as indicated the Cardboard manufacturer “We want to start to talk about benefit of capacity. When that is coming, then the financial benefit will follow”. The cases that had a more strategic goal were larger business with a higher understanding of logistics activities.

Market expansion

Market expansion was only identified as a driver in two of the interviews analysed with competition having no identified impact. In the case of the Waste manufacturer, collaborating on logistics activities determined expanding the market. In the Agricultural manufacturer’s case, the collaboration lead to the start of a barge service, leading to the possibility of new opportunities, “Now we have some import services who are interested to export our products again. So that they have a backload, which is very important for us because then you have cheap transport”. Both collaborations have in common that a new logistics service was set in place, while the other interviews were regarding collaborations on connections and mode of transports that were already being used by the shippers. Hence, not reaching new possible clients

Complexity of suitable partner selection

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22 have also been highlighted by some of the other interviewees. However, other interviewees mentioned other criteria (i.e. synergistic demand). The fact that different interviewees have different selection criteria, increases the complexity of finding a suitable partner to collaborate with.

Competition increases the complexity of finding a suitable partner due to the possible rejection encountered by management. The Cardboard manufacturer indicated that “It’s just in their heads, we know we have customers which will be supplied every day again by our competitors, just a couple of kilometers away from here and from us”. Meaning that collaboration could only occur between competitors when the management is comfortable and supportive.

The interviewees that showed no resistance towards collaboration with the competition, emphasized that their competitor’s willingness is not the same. These interviewees showed full commitment to such collaborations and classified the logistics activities as non-added value activities. However, the Waste manufacturer showed also willingness to collaborate, while considering logistics a core service. This difference can be explained by the low profit margins of their business, “Sometimes in our waste transport, our business, logistics is such a key of success yes or no, that the project can only be done if only if the logistics connection is feasible and workable”. This may increase the complexity of finding a suitable partner due to the rejection from the competitors. Cost and gain division calculation

A noticeable point that has been viewed in the analysis of the interviews is regarding the cost calculation. The Dairy food manufacturer and the Horizontal logistics control tower have in place the same method, of not gaining income due to the collaboration. As indicated “We have an agreement with them that we cannot earn money from the logistics. So, they reimburse us for the amount we pay for the transport” (Dairy food manufacturer). This ensures the objective position of both parties in the collaboration, ensuring no opportunistic behaviour, combined with transparency. While the other interviews highlight that the calculation is provided by the third party involved. This is a different calculation due to the fact that the collaboration concerns on cargo combination requiring a mathematical formula.

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23 stronger, and it is very hard to determine, do we benefit more from it, or do they benefit more from it”. Meaning that the complexity of calculating and dividing costs may increase due to the need to ensure a fair benefit.

Information and communication

Information is shared and communication takes place in the collaboration without competition influencing it. A combination of ICT systems and personal contact has been identified as a method of sharing information. ICT (i.e. email) has provided the possibility to share the loads of cargo between parties involved in the collaboration. However, this is not sufficient considering that there is a need of holding meetings to solve encountered issues as indicated by the Agricultural manufacturer “We regularly have some meetings and then we discuss the things to do, the things changing and everything and then you talk to all people involved”. Meaning that the ICT systems used are not sophisticated enough to facilitate the initiation of horizontal logistics collaboration.

5. DISCUSSION

5.1 Conceptualization of Horizontal logistics collaboration between shippers

Horizontal logistics collaboration has been defined in literature “bundling transport of companies operating on the same level of the supply chain, who have similar or complementary transportation needs” (Vanovermeire et al., 2014: 339). Literature assumes that this definition applies to the collaboration between shippers. However, as analysed in the findings, there are different conceptualizations regarding the definition of horizontal logistics collaboration, than the one used in literature. The definition of horizontal logistics collaboration assumes that the responsibilities are kept within the shippers, being responsible of organize the logistics activities. However, the findings showed different perspectives from the interviewees, leading to the following new conceptualization. Horizontal logistics collaboration between shippers involves the bundling of logistics activities between shippers, with the influence of a supporting third party who is responsible of fulfilling certain activities.

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24 within the collaborations. Rather than defining two different levels of horizontal logistics collaboration, collaboration responsibilities have been differentiated. These being strategic and operational responsibilities, which are present in the collaboration and need to be assigned in a horizontal logistics collaboration. Moreover, some interviewees emphasized on the need to include standard operating procedures in the collaboration. Previous literature defines them as formal operational agreements, which can be used in to ensure the responsibilities, based on detailed agreements (Reuer & Ariño, 2002; Schmoltzi & Wallenburg, 2012)

Literature characterizes that shippers have different objectives on logistics activities than LSPs, meaning that their collaboration differs (Jothi Basu et al., 2015). This had been observed in literature as the fact that shippers view logistics activities as non-added value activities to their business (Zacharia et al., 2011). However, the encountered findings show that shippers have different perceptions of the value that logistics bring to their business. While most of them view logistics activities as adding value to the organization. Logistics was viewed as adding competitive advantage towards their competitors, which lead to avoid to giving benefit to the competitor in this aspect.

Higher complexity is derived from the collaboration with competitors on logistics activities. In the findings, it has been observed that the value of logistics activities differs amongst different levels of the organization. Transport managers can view the activities as non-adding value in comparison to the competition, while management considers them as competitive advantage.

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25 been observed to be responsible to find shippers to collaborate with and to identify the synergies amongst the parties (Hingley et al., 2015; Saenz et al., 2017; Zacharia et al., 2011). This has been identified as key since shippers do not view their task to identify synergies with other parties unless a prior business was taking place between them (Li et al., 2008). Concluding that there are different supporting roles for the third party involved, and each vary within the collaborations analysed.

The amount of activities of the collaboration delegated to a third party involved, lead to the concern of an outsourcing decision. Due to the fact that not only the different conceptualization of horizontal logistics collaboration is based on an outsourcing decision, which was avoided by the initial definition provided in literature. But also, the different responsibilities that are outsourced to the supporting party amongst the analysed collaborations. This outsourcing decision can be supported by the TCE theory, which aims for a minimization of the transaction costs (Williamson, 1985). As previous research emphasized that the more responsibilities that are assigned to a third party, the higher reduction of transaction costs is obtained (Zacharia et al., 2011). This could be the reasoning behind providing higher responsibilities to the involved party, while minimizing the involvement of shippers as the controlling party in the collaboration.

5.2 The influence of competition on the initialization of horizontal logistics collaboration between shippers

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26 the competition to become stronger, without viewing the benefit that could be earned through the collaboration, ignoring the possible relational rents that could be obtained (Dyer & Singh, 1998).

Literature indicated that by collaborating with competitors, higher benefits could be obtained due to the shared service requirements on logistics activities (Chen, 1996; Hoffmann, 2007; Lado et al., 1997). However, the findings suggest that even though having the same logistics requirements facilitates the synergy, the aspect that they consider key is to ensure strategic alignment amongst the parties involved (e.g. shared vision, similar business strategy). This means that this characteristic can be found amongst competitors and non-competitors, rejecting the influence of competition in the observed collaborations.

Market expansion has been observed during the analysis of the findings in specific collaborations, without competition influencing it. These collaborations were characterized by beginning to use a different mode of transport for a specific connection. This leads to the exposure to a new area which lead to finding a new market. Other researchers emphasized such an expansion mainly for collaboration between LSPs, these collaborations share the characteristic of a new area exposure (Capron, 1999; Santos & Eisenhardt, 2009). Meaning that unless there is a new area reached, finding new clients are not considered as an opportunity for horizontal logistics collaboration between shippers.

The findings indicated that competition increased the complexity of finding a suitable partner for the collaboration. Literature identifies management commitment as a barrier towards co-opetition. Something that literature or a transport manager in the findings can define as gut feeling, it can be viewed by management as competitive advantage in comparison to the competition. This leads to the question, Is it merely based on an gut feeling or is it due to the competitive advantage?. However, this encountered confusion creates complexity to initiate co-opetition, due to the unwillingness to collaborate by the other parties, creating a barrier (Chin et al., 2008; Gnyawali & Park, 2011). The findings indicated that management should be comfortable to collaborate with the competition, increasing the complexity of finding a suitable partner.

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27 ones that had synergistic demand. While other parties considered key to ensure strategic alignment amongst partners. This can be related to the mentioned culture and strategic fit as a requirement to initiate horizontal collaborations that had been described in previous literature (Cruijssen et al., 2010; Li et al., 2008; Naesens, Gelders, & Pintelon, 2009; Sambasivan & Yen, 2010; Sanchez Rodrigues et al., 2015; Saxton, 1997). However, competition was not influencing these aspects, on the contrary of what literature had previously observed, of facilitating the suitability due to the complementarity (Chen, 1996; Hoffmann, 2007; Lado et al., 1997).

The lack of transparency was identified in the analysis of the results. While in literature it is emphasized that there is a higher chance of opportunistic behaviour with competition, due to trust issues. The lack of transparency was considered as a barrier in co-opetition and collaborations. This corroborates that the lack of transparency, hence trust can derive to not initiating a collaboration (Pomponi et al., 2015; Vanovermeire et al., 2014). Previous literature emphasizes highly on the difficulty of cost and gain division, and the extreme complexity that shippers need to go through to ensure the initiation of horizontal collaboration (Sun et al., 2015). By analysing the findings obtained, two different situations can be observed. This lead that the complexity that is expected by other authors on cost and gain division is not viewed by shippers as such a big constraint. This can be related to the fact that the main purpose of the collaboration has moved away from a financial perspective. However, when competition is influencing the collaboration, the encountered results highlight the need to ensure that the benefit share needs to be balanced or even higher than the competitor. The focus that literature has on the cost and gain division on the LSP’s collaboration can be viewed due to the fact that they perform the same business (Martin, Verdonck, Caris, & Depaire, 2018). It has also been viewed that the gains division in this situation is more complex. Due to the fact that balance needs to be reached, it needs to be ensured that both parties are obtaining equal benefits, otherwise, the collaboration will not be initiated.

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28 competitors. It was viewed that the knowledge that could be obtained from analysing the collaboration was not facilitated by the used ICT systems, nor noticed by all the involved parties (Dussauge et al., 2000). It was noticed by one of the interviewees, that ICT platforms could provide higher knowledge extraction on logistics activities. Concluding that the ICT systems used need to evolve as well as the parties need to realise the possible knowledge that can be shared on logistics by collaborating with other parties in order to facilitate the information sharing to initiate the collaboration.

6. CONCLUSIONS

This paper addresses the topic of horizontal logistics collaboration between shippers. By conducting interviews with shippers and one expert on the topic, information was collected to derive the obtained results.

Firstly, the following research question was answered: How can horizontal logistics collaboration between shippers be conceptualized?. The findings obtained, emphasises the existence of multiple conceptualizations of horizontal logistics collaboration between shippers and highlights the involvement of a third party. By showing that horizontal logistics collaboration is conceptualized differently in some interviews. This aspect continues increasing the complexity of the horizontal logistics collaboration between shippers. This expands the current conceptualization of horizontal logistics collaboration between shippers.

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29 requirements. This can occur also among non-competitors. Concluding that the influence of competition creates a higher complexity to initiate horizontal logistics collaboration.

6.1 Managerial implications

Aside from a contribution to the current literature, this paper also has certain managerial implications. One implication that is important in literature and as well for management, is to view that there are different definitions of horizontal logistics collaboration between shippers. This emphasises the complexity of collaborating with other parties since different concepts might be expected from each party.

The insights provided in this paper can help management to realise that horizontal logistics collaboration does not only provide a financial benefit, but also a more future benefit. This insight can help to increase the awareness of logistics collaboration between shippers, viewing that they can obtain benefits from logistics and improve their supply chain.

Lastly, by shining light on the influence of competition, management is aware of the complexity that collaborating with the competition may bring. Hence, providing information necessary regarding the barriers and opportunities that the organizations might face. This research highlights the observed increased complexity to initiate horizontal logistics collaboration between shippers that are competitors.

6.2 Limitations and suggestions for future research

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APPENDICES

Appendix 1: Interview protocol

Introduction to interview:

(The cursive texts are the measurements derived from literature and expected to obtain information about them)

Thank you for accepting this interview. I highly appreciate that you are willing to participate in my research on horizontal collaboration.

Everything that we use from this interview will be anonymised and there is no option to trace data back to you or your company.

Is it OK if I record the interview?

Is it OK if I use the interview data for our research?

This interview contains four parts: (a) general information to identify you, your company and the collaboration b)defined successful collaboration c)benefits d) challenges e) competition

Part A: General information

A1: General information interviewee

What is your specific role within the organization? • Position: (job name and department name) How many years have you been in this current position?

• Work experience in current position

In what sector is the organization you work for belonging to? • Name company:

• Sector:

• Main business:

A2: General information about the collaboration

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38 • Length of contract / when was the first contract closed (years, months): On what logistic activity was collaborated on?

• i.e.Transportation, warehousing What is/was your role in the collaboration? Part B. Success of horizontal collaboration:

Has the collaboration realized the goals that were set out to achieve? What goals were set out to achieve?

• The collaboration has realized the goals we set out to achieve (Saxton, 1997: 460)

Has the collaboration contributed to the activities and competitive advantage of the organization? Can you elaborate on it please?

• The collaboration has contributed to our activities and competitive advantage (Saxton, 1997: 460)

Part C. Benefits Economies of scale:

What has been the impact of the relationship on the position of the consolidated business in terms of logistics activities?

• Obtain information regarding economies of scale (i.e. costs, productivity) (Capron, 1999: 1016)

Market expansion:

What has been the impact of the relationship on the position of the consolidated business in terms of geographical expansion?

• Obtain information regarding market expansion (i.e. new market due to the collaboration) (Capron, 1999: 1016)

Bargaining power:

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39 • Obtain information regarding the different relationship with the LSP due to

the increase power (i.e. better rates) Part D. Barriers:

Partner selection encompasses multiple aspects as defined by literature: Partner reputation:

How do you consider your partner’s reputation? (look for answers related to the following):

• Effective use of assets (Saxton, 1997: 460)

• Integrity of the top management team (Saxton, 1997: 460) • Good neighbor in the community (Saxton, 1997: 460) • Customer relationships (Saxton, 1997: 460)

Trust:

How do you trust your partner to make decisions?:

• The partner firm can be trusted to make sensible collaboration decisions. (Luo, 2008: 636)

Do you trust your partner on following your agreement and acting considering both benefits? Why/why not?:

• Both parties always rely on each other to abide by and carry out collaboration agreements (Luo, 2008: 636)

• Both parties have a high confidence level of each other’s commitment and contribution (Luo, 2008: 636)

• The partner firm never uses opportunities that arise to profit for itself at our expense (Luo, 2008: 636)

Flexible partners:

How flexible do you consider your partner regarding requests or unexpected situations that are not included in the agreement?

• Flexibility in response to requests for changes is a characteristic of this relationship (Heide & John, 1992: 37)

• The parties expect to be able to make adjustments in the ongoing relationship to cope with changing circumstances (Heide & John, 1992: 37)

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40 Do you consider the management’s partner will not use information for their own benefit for other activities? Why/why not?

• In the relationship you establish with your competitor/partner, internal information must not be used for any other purposes than for the partnership (Limoubpratum, Shee, & Ahsan, 2015: 438)

Is your partner willing to work together to reduce conflicts regarding communication and to efficiently improve the collaboration? Why/why not?

• In the relationship you establish with your competitor/partner, you are intending to monitor conflict intensity periodically (Limoubpratum et al., 2015: 438)

• You are intending to implement information technology to exchange information with your competitor (Limoubpratum et al., 2015: 438)

Determining and dividing gains:

How did you determine the savings beforehand with your partner? Could you elaborate on the complexity of the process?

• Determining the savings achieved beforehand has been an easy process with my partner

• Dividing the gains has been an easy process with my partner Power imbalance:

Do you feel that you have invested a lot of time interacting with your partner to ensure the collaboration?

• As a Partner I needed to spend a great deal of time interacting with each other to make this alliance work (Shah & Swaminathan, 2008: 494)

• As a Partner I needed to spend a great deal of time in the analyses, development, and delivery of their required tasks in this alliance (Shah & Swaminathan, 2008: 494)

• As a Partner I needed to spend a great deal of psychological or emotional energy in order to make this alliance work (Shah & Swaminathan, 2008: 494) How is currently the process of communicating and handling issues regarding the collaboration?

• This alliance requires extensive communications between partners (Shah & Swaminathan, 2008: 494)

Master Thesis Supply Chain Management University of Groningen