Assessing the benefits of horizontal cooperation for the various stages of the supply chain

Horizontal cooperation is a promising avenue to improve the efficiency of logistical operations, as shown in the literature with real-life cases and experimental studies. In this paper, we analyse the benefits of a joint supply network for the various stages of the supply chain, parse the contribution of the various cost components and assess the impact of the markets and partners characteristics. For this, we present a collaborative location-inventory model which minimizes facility opening and transportation costs, as well as inventory costs at distribution centers and at retailers. It allows us to investigate the impact of inventory decisions and of the vehicle loading rate on the collaboration benefits. Our extensive set of experiments shows that horizontal cooperation leads to significant savings for all the supply chain stages, with an average total cost reduction of 22.4%. The benefits for the retailers, which are rarely discussed in the current literature, are significant with a reduction of the cycle inventory of 43%, deliveries almost twice more frequent and safety stock reduced by 7% on average. Collaboration shows to be particularly profitable for companies with high facility opening costs and low order costs, carrying small products (compared to the vehicle capacity) with a low unit holding cost, in a market with a low demand variability.