Evaluating Horizontal Cooperation in Supply Chains
(2018) EURO 2018 — Location: Valencia (8.July.2018)
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- Authors
Hacardiaux, Thomas 
- Abstract
- Horizontal cooperation consists in the collaboration of companies that work at the same level of the supply chain. The literature discusses several real-life cases and experimental studies of horizontal cooperation, showing that these partnerships generate cost reductions of various magnitudes. This work analyses the benefits for companies to use a joint supply chain network, and investigates the markets' and partners' characteristics that influence these benefits to understand when horizontal cooperation is particularly profitable. For this, we propose a location-inventory model formulated as a conic quadratic mixed integer program, and we compare the costs of stand-alone companies and horizontal partnerships. The model integrates the main logistical costs such as facility opening, transportation, cycle inventory, ordering and safety stock costs. We perform about 30,000 experiments varying the parameters values (i.e. vehicle capacity, facility opening cost, inventory holding cost, ordering cost and demand variability) and observe a cost reduction ranging from 15% to 30%. The benefits come from the increased delivery frequency, the improved loading rate, the reduced distances, the opening of joint facilities and the reduced lead times. We also discuss the impact of the number of partners, of the ability to open new facilities and of the retailers’ locations. Overall, our goal is to offer valuable managerial insights for companies wishing to collaborate.
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Citations
Hacardiaux, T., & Tancrez, J.-S. (2018). Evaluating Horizontal Cooperation in Supply Chains. EURO 2018, Valencia. https://hdl.handle.net/2078.5/172604