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How do you incorporate sustainability and social responsibility into transportation contract negotiation?

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Transportation contract negotiation is a crucial skill for logistics managers who want to optimize their supply chain performance and reduce costs. However, it is not enough to focus on the price and service level of the carriers. You also need to consider how your transportation choices affect the environment and society and how you can align them with your sustainability and social responsibility goals. In this article, there are strategies and tips to help you incorporate these factors into your transportation contract negotiation process.

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1 Assess your current situation

Before you start negotiating with potential carriers, you need to have a clear understanding of your current transportation needs, costs and impacts. You can use tools such as transportation management systems (TMS), carbon footprint calculators and social audits to collect and analyze data on your transportation activities. This will help you identify your strengths and weaknesses, as well as opportunities for improvement and innovation. You can also benchmark your performance against industry standards and best practices and set realistic and measurable targets for your future transportation contracts.

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Robert Kessler

Product Manager @ MIS Marine | Leading Marine Terminal Optimization
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In my experience, the data required to fully understand the total emission impact of the goods you are shipping are disparate. Each transportation provider must report your cargo's share of any emissions produced in the journey from manufacturer to consumer. Contracting provides a mechanism to ensure a consistent way to measure and report emissions production across your providers.

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Elvis Theodhori

Vice President Sales & Service at Superior Solutions
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Data is important to asses your current situation however feedback from internal and external stakeholders is very important. Data is important however feedback from internal and external stakeholders is a key opportunity to tell you the story.

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2 Define your sustainability and social responsibility criteria

Once you have assessed your current situation, you need to define what sustainability and social responsibility mean for your organization and your transportation contracts. You can use frameworks such as the triple bottom line (TBL), which considers the economic, environmental and social aspects of your business, or the United Nations Sustainable Development Goals (SDGs), which provide a global agenda for addressing the most pressing challenges of our time. You can also consult with your stakeholders, such as customers, suppliers, employees and communities, to understand their expectations and preferences. Based on these inputs, you can establish your sustainability and social responsibility criteria, which may include reducing greenhouse gas emissions, minimizing waste and pollution, ensuring fair labor practices, and supporting local development.

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Jesus Ayo

Sea Transportation Executive
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Should you want to make sustainable to the participants in the contract the wording and it’s terms, must be agreed to, prior to its final acceptance by all concerned.

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3 Research and evaluate potential carriers

The next step is to research and evaluate potential carriers based on your sustainability and social responsibility criteria, as well as your other requirements, such as price, quality, reliability and flexibility. You can use sources such as carrier websites, industry reports, certifications and ratings to gather information on their policies, practices and performance. You can also conduct interviews, site visits and audits to verify their claims and assess their capabilities. It's important to look for carriers that share your values and vision and that can demonstrate their commitment and competence in delivering sustainable and socially responsible transportation solutions.

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Elvis Theodhori

Vice President Sales & Service at Superior Solutions
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It’s important to also look for carriers that effectively fill a void or a gap that you may have. Filling a gap should be one of the priorities and it should be part of the evaluation process.

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George Chatzivasileiou

Procurement | Operations | Supply Chain
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A great example of industry practices you can review for the trucking and rail industry in North America is the United States Environmental Protection Agency's verified sustainable technologies. You can access your supplier base, or include SmartWay verified technologies as part of supplier selection. One step further would be becoming a SmartWay partner or affiliate.

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4 Negotiate and finalize your transportation contracts

The final step is to negotiate and finalize your transportation contracts with the selected carriers. You should communicate your sustainability and social responsibility criteria clearly and transparently and explain how they align with your business objectives and strategy. You should also seek to create value for both parties and to establish a long-term and collaborative relationship. To do this, you can use techniques such as win-win negotiation, joint problem-solving and incentive-based contracts. You should also monitor and review your transportation contracts regularly and provide feedback and recognition to your carriers for their performance and improvement.

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Elvis Theodhori

Vice President Sales & Service at Superior Solutions
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A penalty/fine program should also be implemented to upkeep contractually agreed SLA’s with a defined process. Likewise, a reward program should also be implemented and agreed upon if SLA’s exceed set thresholds.

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How do you incorporate sustainability and social responsibility into transportation contract negotiation?

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4

1 Assess your current situation

2 Define your sustainability and social responsibility criteria

3 Research and evaluate potential carriers

4 Negotiate and finalize your transportation contracts

Logistics Management

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How do you incorporate sustainability and social responsibility into transportation contract negotiation?

1

2

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1 Assess your current situation

2 Define your sustainability and social responsibility criteria

3 Research and evaluate potential carriers

4 Negotiate and finalize your transportation contracts

Logistics Management

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