Termination of Collaboration Projects

Respondents were asked whether they had been involved in a horizontal collaboration project that had ended, 47% of the respondents indicated that they have been involved in a horizontal collaboration that has ended. Figure 4.11 illustrates the reasons these collaborations ended.

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Figure 4.11: Reasons for horizontal collaborations ending

It can be seen from Figure 4.11 that under half of horizontal collaboration projects come to a planned end, with the two main reasons for collaborations failing being one of the partners wanting to collaborate with other companies and diversification of companies leading to the horizontal collaboration being of no interest to the company/ies. This indicated that whilst horizontal collaboration is a mature practice in the logistics industry, it is one that companies are not often able to implement fully successfully and that more research is needed into what

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

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makes horizontal collaboration projects a success. Other responses to this question included ‘lack of trust between partners’, ‘better partner located’, ‘partner went bankrupt or into liquidation’ and ‘lack of communication and shared goals’.

The first underlying factor considered for the reasons collaborations ended was the type of collaboration the companies were involved in. This is shown in Table 4.26.

Consolidation of complementary freight Consolidation of non- complementary freight Shared services Joint procurement Joint ventures Collaboration failed 23.4% 19.0% 28.3% 11.1% 10.0% No mutual benefits 4.3% 9.5% 8.7% 11.1% 30.0% No benefit to this company 14.9% 9.5% 13.0% 33.3% 20.0% No benefit to other company 6.4% 14.3% 8.7% 11.1% 10.0% One/both companies have diversified so project is of no interest 14.9% 9.5% 19.6% 22.2% 40.0%

One partner wanted to collaborate with

someone else

14.9% 19.0% 23.9% 11.1% 20.0%

Project came to

planned end 38.3% 38.1% 37.0% 33.3% 10.0%

Table 4.26: Reasons for horizontal collaborations ending by type of collaboration

Joint ventures are the least likely project to come to a planned end by a significant percentage. This could be explained by the fact this type of collaboration tends to be done on a more formal basis and have a definite set finish date, making it easier to measure whether the project came to a planned end or not. For other types of collaboration the ‘planned end’

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could be a much more fluid concept. In the literature review, it was established that the failure rates for joint ventures were generally very high, but not as high as has been seen in this research, suggesting joint ventures between logistics companies are less successful than in other industries.

Given this low level of joint ventures coming to a planned end, it is interesting to note that respondents involved in joint ventures also had the lowest percentage of instances where they indicated that the collaboration had failed, with the majority of collaborations ending due to partner diversification. This suggests that while joint ventures in the logistics industry do not last until the planned end, they do end with agreement between the parties having each reaped benefits from the collaboration. This would fit with examples where the joint venture company is sold off or bought out by one company. A simple search of news items provides examples of this that include the joint venture between TNK and BP which ended in 2012, when BP chose to exit the Russian market to concentrate on other markets and sold its share to another Russian company (Goodley, 2012). This year has also seen the sale of E.ON and RWE’s joint venture in the UK, Horizon Nuclear Construction, to exit what they see as a risky market (Deutsch Welt, 2012).

Shared services is shown to be the type of collaboration most likely to fail. This is contradictory to some of the literature which suggested that collaboration in terms of non- core processes were likely to be the most successful types of collaboration.

It can be theorised from Table 4.26 that consolidation of complementary freight is the most effective type of collaboration being undertaken in the logistics industry as it is is the least likely type of collaboration to provide no mutual benefits to the companies involved and has the highest percentage of collaborations coming to a planned end. It also had low percentages for ‘no benefit to other company’, ‘diversification of companies’ and ‘one

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partner wanted to collaborate with someone else’. It does, however, show the second highest percentage of failed collaborations

The consolidation of non-complementary freight also appears to be a very effective type of collaboration, with low percentages for ‘failed collaborations’, ‘no mutual benefits’, ‘no benefits to this company’ and ‘companies diversified’, whilst showing a high percentage of collaborations ‘coming to a planned end’.

Joint procurement shows a high level of collaborations which turn out to bring no benefit to the respondent company, suggesting that bulk discounts are not common from suppliers to this industry or that logistics companies spend so much time and money setting these collaborations up and maintaining them that they cost more or the same as the potential savings.

Table 4.27, considers the responses to this question by size of companies. Due to the low number of responses to this question by the respondents in the top two size categories, these two categories have been amalgamated.

158 Under 5 million 5 million – 10 million 11 million – 50 million 51 million – 250 million Over 250 million Collaboration failed 20.0% 44.4% 23.5% 16.7% 50.0% No mutual benefits 8.9% 0.0% 5.9% 16.7% 16.7% No benefit to this company 6.7% 0.0% 5.9% 16.7% 33.3% No benefit to other company 2.2% 44.4% 0.0% 0.0% 33.3% One/both companies have diversified so project is of no interest 11.1% 22.2% 11.8% 33.3% 16.7%

One partner wanted to collaborate with

someone else 13.3% 22.2% 17.6% 50.0% 33.3%

Project came to

planned end 51.1% 11.1% 5.9% 16.7% 66.7%

Table 4.27: Reasons for horizontal collaborations ending by size of company

Table 4.27 shows very mixed results, with no obvious relationship between any of the reasons and size of the company. There are, however, a few interesting results, the largest companies reported the largest percentage of project failures but also the highest level of projects coming to a planned end. This could mean that horizontal collaboration projects that are not proving as successful as anticipated get terminated quickly in larger companies whereas smaller companies may continue until the end. It also perhaps highlights a weakness in the questionnaire, where perhaps different respondents had different definitions of failure, some may believe failure is if the project does not meet all its objectives, others may have defined a failed project as one that was terminated.

The data does show that larger companies are more likely to find that horizontal collaboration projects do not bring them benefits. This is interesting as the literature considers that bigger

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companies will often be in a better position to negotiate the terms of a horizontal collaboration project to their advantage and suggest that it is smaller companies with less bargaining power that will see less benefits. In only 6.7% of cases did the smallest company respondents indicate that horizontal collaboration projects were terminated due to lack of benefit for their company. The results also show that in an even lower percentage of cases, 2.2% the collaborations they were involved in ended due to the horizontal collaboration not being beneficial to their partners.

4.12 Chapter Summary

This chapter has presented the results from the initial questionnaire; the main findings from this questionnaire are as follows.

 Horizontal collaboration is a widely undertaken practice in the logistics industry, with the majority of respondents indicating that their company is involved in multiple types of horizontal collaboration with multiple partners.

 Horizontal collaboration is principally used to reduce transport costs, access new markets and to enhance customer service.

 The main barriers to horizontal collaboration are lack of trust and fear of competitors accessing sensitive information about the company. The results also showed that respondents at larger companies believed there were more barriers to horizontal collaboration than respondents at smaller companies.

 Larger companies and 4PLs are more likely to be involved in horizontal collaboration than other sizes and types of companies.

 Shared services and freight consolidation are the most popular forms of collaboration. 53% of respondents indicated they were involved in multiple types of collaboration. Relationships were identified between types of collaboration that are undertaken in

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parallel, with 83% of respondents involved in joint procurement also being involved in shared services and 90% of respondents involved in the consolidation of non- complementary freight were also involved in the consolidation of complementary freight.

 The average company shares 2.81 types of resources, with the largest companies sharing on average a significantly higher number of resources. Truckloads are the most common resource shared.

 Most logistics companies which practice horizontal collaboration have been in a horizontal partnerships for more than 5 years.

 The majority of relationships are asymmetric in terms of companies of different sizes working with each other, with companies appearing to prefer to work with companies that are larger than their company to gain access to knowledge and resources.

 A large percentage of respondents were collaborating domestically with a significant percentage collaborating internationally. International collaboration was found to be particularly high among the largest companies.

 In most horizontal collaboration partnerships neither the costs nor the benefits of the collaboration are shared equally amongst the partners.

 Over 50% of horizontal collaboration projects are ending prematurely, suggesting that whilst horizontal collaboration is a well established practice in the logistics industry, more research is needed to establish exactly what makes a horizontal collaboration partnership successful.

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