In an ever-evolving industry such as logistics, environmental factors are of growing importance. More pressure is being placed on global logistic companies to meet changing regulations, such as toxic waste disposal than ever before. Tony Hughes, CEO of Huthwaite International discusses how complex negotiation between regulators and governments will be key to the continued success of large logistic players as companies are set to be subject to yet more regulations in the future.
Long-term relationships with outsourcing partners
“Regardless of ongoing developments in climate change treaties, governments will remain legally committed to CO2 reduction for many years. Carbon taxes are likely to change, other environmental factors will grow in importance too. Water impact, plastic or toxic waste disposal, local labour laws, human rights and many other ethical issues are likely to be subject to new regulations. All of this will impact on those outsourcing all or part of their logistic operation. Since the efficacy of any regulation depends on it being followed and actively supported, this, increasingly, will need complex negotiation, not only between regulators and governments, but with larger logistics companies themselves – being as they are at the coalface of emissions and consumption.
“They are also well placed to offer re-balancing among their clients/suppliers by enabling a choice in manufacturing or resource location. This combination makes them ideally placed to support governmental and regulatory goals. As well as re-balancing their locations to meet changing regulations, global logistics providers can offer this as a means of responding to activist campaigns on social media. As the voice for environmental concerns increases in volume and reach client companies will demand flexibility to change suppliers, rapidly and with minimum pain, should they wish. Those that are sufficiently able and agile will capitalise.”
Great commercial skills can help logistics players
Outlining the key opportunities for those selling and negotiating, Tony said: “Adaptability and agility will increase in value – the best sales teams will know how to identify and persuasively articulate the value of this relative to the circumstances of each prospect, while those tasked with negotiating, either in sales or buying, will use it as an important lever.
“Also by improving their diversity of skill and knowledge logistic providers will be better able to understand and deal with the different parties of government, regulators and other companies from a variety of sectors. Similarly, as energy can be sourced from diverse supplier types, each with very different costs, locations and brand characteristics, trade-offs will often exist between use of materials, use of energy, employment, pollution and costs. The most skilled negotiators will understand all the options at play in whatever circumstance and leverage them to protect both margins and their company’s most important relationships.”
Marketing environmental differences
Tony continues: “By enhancing brand values marketers will focus their brand stories around such things as use of renewable energy, carbon footprints, waste, how they treat employees or support local communities, even their geopolitical value. They will also work seamlessly alongside their sales colleagues to ensure continuity of message thereby increasing impact and improving brand recall. In a competitive situation when all things are equal, the brand can often be the deciding factor.
“Government may apply pressures or incentives in many different forms. The best sellers and negotiators will use this to their advantage and become adept at dealing with highly multi-dimensional factors. These include handling multiple parties at the same time, such as a mixture of regulators, NGOs, activists and large industry players, each with things to lose or gain.
Improving commercial skills
“With the rise of environmental activists, social media will play an increasing role in activism aimed at forcing companies to change practices or suppliers. And of course, the number of things that activists fight about increases all the time. Sales and negotiation will sometimes overlap heavily with PR activities and reputation management. This will make for extremely complex discussions and will require the very highest levels of skills to get parties to reach acceptable solutions.
“Governments may also give subsidies for new environmental initiatives or start-ups, but the question is can these business ideas survive if the subsidy disappears. Buyers will need the foresight to consider longer term issues such as these when agreeing deals.”
Tony concludes: “A lot of change lies ahead for the logistics industry. Technology is challenging and disrupting almost every stage of the supply chain. The companies who thrive will have sales teams capable of persuasively articulating the value of this changing environment. As well as negotiators skilled in maximising margins, protecting high value client and supply partnerships. This is no landscape for average performers.”
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