Collaborative freight management (CFM) is drawing increasing attention around the world. In the United States, the United Kingdom and continental Europe, we are seeing a growing number of examples of collaborative freight management at work.

CFM can take many forms. But in a typical case, several shippers—sometimes even competitors—combine traffic volumes to create greater leverage for negotiating terms with transportation and logistics service providers or to create a broader base of shipments for building consolidated loads, economical lanes and continuous movements. Clearly, the availability of new Internet-based tools designed to provide inventory and shipment visibility and assist in shipment planning has helped to enable the development of CFM programs.

Collaborative freight management is gaining popularity in several industries. In the food industry, for example, three shippers that serve the same retail customer have coordinated their activities so they can build truckload shipments of mixed products that can be routed directly to retail stores. This approach has taken an entire step out of the distribution process, eliminating the delivery to the retailer's distribution center and the associated handling, receiving, transaction and inventory costs. This has resulted in huge savings for all involved. Similarly, some shippers in the automotive and pharmaceutical industries are collaborating to consolidate shipments that are destined for their mutual customers.

In some cases, logistics service providers have taken the lead in creating collaborative freight management arrangements. In other cases, online exchanges have encouraged CFM. For example, a number of industry consortia that are involved in developing business-to-business (B-to-B) exchanges for their industry sectors have actively explored the development of collaborative freight management capabilities, and several already have experimental pilot programs under way. The value propositions for such programs are extraordinarily attractive. It will be a challenge for them, however, to scale these pilots up to broader working models.

In many circumstances, collaborative freight management offers a clear and compelling value proposition, but it may not be appropriate for all companies. Some may be reluctant to share information about their shipments and freight volumes with other companies in their industries, even if there is limited overlap in their product lines. Furthermore, we find that many companies are simply not capable of operating in a collaborative environment. They lack the information technology skills and infrastructure, the integrated processes, and the propensity to partner with others. It requires a certain cultural orientation to operate in a collaborative way. Thus, even though the prize is very large, many companies do not have what they need to attain it.

Collaborative freight management can be a significant opportunity for many companies; it may even be a gold mine for a few. If you have not explored its potential benefits for your company, it's time to take a serious look at this fast-growing strategy.