Conditions for viable horizontal collaborative transport: insights from a stylised model

Recent developments such as increased volatility and sustainability requirements, lead to added pressure on supply chain performance. This is frequently considered a reason for firms to engage in collaboration. However, in practice the level of collaboration lags behind the expectations. To contribute to closing this gap between theory and practice, in this paper, the conditions for establishing a viable horizontal transport collaboration are studied. To this end, a stylised quantitative model of two supply chains, each comprising a single buyer and a single supplier located in different geographical regions is modelled. A horizontal logistics collaboration (HLC) scenario is investigated. It is demonstrated that due to hidden coordination costs in terms of inventory and warehousing costs, forming a viable HLC is not straightforward. This adds to the literature in the sense that in evaluating the viability of HLCs hardly ever trade-offs between different organisational functions are addressed.