A couple of weeks ago, SAP held one of its periodic executive advisory councils for customers in the logistics industries. The dinner and hallway conversations focused a lot on economy, and how it is changing the buying patterns of shippers. Everyone agreed that in these economic times upper management is getting more involved in expenditures and scrutinizing every dollar spent. Point departments, like operations and warehousing, usually have to follow more strident purchasing guidelines. One can argue that as upper management gets more involved, the less the people approving third party logistics (3PL) contracts know about logistics.
Selling to executives is far different than selling to the traffic manager of old. Typically, corporate executives are non-logistics business people that are risk-adverse and interested in flexible, quick time-to-value projects that save money now, while still following and executing the company’s strategic roadmap.
After the executive council meeting, I had some time to think about these changing buying patterns and tried to draw some conclusions. In short, what’s a 3PL to do?
I think the first and most important thing is to understand a prospect’s business strategy. Too often 3PLs only look at a prospect’s transportation and warehousing needs and fail to grasp the bigger picture. To understand a prospect’s business, you need to understand their ‘business network’ of suppliers, customers, IT, finance, economic and supply chain needs. You can find most of this information in a prospect’s annual report and website. Of course, the best source is talking with the prospect directly. Remember, you are not just selling to operations people anymore; non-logistics professionals also need to understand the value of your offering. Use the language of the prospect’s business, not ‘logistics speak’. Be creative about the initial steps, ensuring low risk and rapid benefits. Also, give the prospect a roadmap that shows how you will transform their business network for today’s short term needs, and the upside for the future, all while following corporate strategy.
A prospect’s green strategy is another opportunity. Sustainability is probably one of the biggest game-changing trends of our time, and all your major customers are likely dealing with it. If you are a 3PL, have you had a conversation with the Chief Sustainability Officer of your prospects and clients? Optimizing truck routes, shifting more shipments to rail, or making a supply lane a little more ‘fat’ can significantly reduce carbon emissions and costs. Your position on sustainability matters less than the fact your customers are spending money in this area. Personally, I think a 3PL that can help customers ‘go green’ would get some serious CEO attention.
One final thought: the size of the project is not the issue; it is the risk involved. In fact, big game-changing projects may be advantageous—just chunk it up and keep the initial risk low for the prospect. Shippers have not stopped buying, they are just buying more cautiously and smarter. That seems to be true for most things these days, whether it’s software from SAP or services from a logistics provider.
JP Wiggins is the Senior Director Industry Solutions Marketing, Transportation & Logistics, at SAP. Prior to his current position, Mr. Wiggins was with Descartes Systems Group, and he was the co-founder of G-Log (now Oracle’s TM offering) and other transportation management startups. Before entering the software business, Mr. Wiggins worked as a traffic manager for a catalog retailer and he holds a degree in Transportation & Logistics from The Ohio State University.
In these tough times, if it doesn’t immediately cut costs or offer quick ROI, upper management will sound the horn. But they are not the cause of this inertia, but the messenger. I don’t agree with the statement that the problem is that these executives are “risk-adverse”. Does that make the logistics people risk-takers, by comparison?
While we, at WDX, are not a 3PL, we face similar issues in that we must sell not only to the transportation people (whose processes we change and whose jobs we may threaten), and to the IT people (whose territory we invade), and to the financial people (who worry about costs and ROI, as well as audit carrier invoices), but also to the higher level execs who worry about tying operations and processes together with strategic efficiency – people who may know little about logistics.
In the case of 3PL’s, upper management may not understand logistics very well, but they do have a better appreciation for the value of outsourcing, whatever the outsourced function may be: capital expenditure in long-term structural solutions vs. fast and flexible ability to react to change with hired expertise.
While there are challenges in selling upper management, there are advantages too. There is less concern over how it will affect their department, their budget, their people and a better appreciation of the big picture (and the solution is not the same for every picture).
If the sell seems more difficult today, I don’t think what has changed with these times is that these decisions are being now being scrutinized by upper managers who don’t understand logistics, it’s the resistance to major change at all levels that does not have a more compelling ROI than usual. In fact, upper management may be the best place to construct the case for value.
Gary Silver
WDXfreight.com