More and more companies try their best to reduce operating costs and simplify supply chain, which makes some companies consider outsourcing non-core business, among which logistics outsourcing is the best choice. At the same time, the expanding scope of logistics outsourcing has deepened the content and complexity of logistics service agreements. The relationship between the parties to the original logistics contract is relatively simple, involving only simple transactions, such as direct freight arrangements; Today's logistics service agreements usually cover global logistics services that require advanced technology.
For logistics managers, the above challenges are becoming more and more common. How do they draft an effective logistics service agreement? "Negotiation" is the core to solve all challenges. Effective negotiation can affect the cost and service level of delivering products to customers, reduce costs and improve operational efficiency, and ensure the quality of logistics services. If you want to successfully reach a logistics service agreement, the following four steps are crucial:
1. Understand the objectives clearly at the beginning of the process.
2. Let the appropriate logistics enterprises participate in the negotiation.
3. Draft and negotiate the comprehensive logistics service agreement.
4. Establish an effective management process.
Step 1: Define the goal
To reach a successful logistics service agreement, the first step is to ensure that your negotiating team can clearly understand the objectives before the negotiation begins. The logistics service items you need should be listed at a glance to truly reflect the actual needs of your company. Throughout the negotiation process, we should clearly record and discuss the financial results brought by different options, and constantly evaluate these options.
Step 2: Choose the right object.
The second step is to choose the right company to participate in the negotiation. The whole selection should be based on reasonable quotation, and the ability and quotation of the other company should be considered in the process. The selection of logistics service providers should be based on the company's clear written requirements, not on the other party's marketing performance (that is, oral display of excellent company image and service level). If the logistics service provider can't meet the service you need, then even the best price will draw water with a sieve. On the contrary, if you only have a budget for beer money, but the other party can provide champagne service, then this is value for money, and this is the embodiment of value.
Logistics managers should consider the following factors when choosing potential logistics service providers:
1. The other party's ability to integrate into your company's corporate culture.
2. Understanding of your company's business (or industry).
3. Be able to share your goals and strategic direction consciously.
4. Management ability and adaptability to information system tools.
5. Logistics service providers can provide customers with additional value and services.
6. Logistics companies follow your goals and instructions.
Step 3: Practical operation
The third step is the actual drafting and negotiation of the logistics service agreement. In the whole process of drafting the agreement, it is very important to write clearly how the two sides should handle each other's relations and their specific responsibilities. Clear responsibilities should be established at the beginning of the relationship between the two parties to reduce the potential negative impact on service, cost and relationship continuity in the future. The logistics service agreement shall clearly stipulate the relationship between the company and the logistics service provider. The content clause should cover the whole relationship between the two parties, including their respective legal and operational responsibilities.
1. Determine legal liability
The legal departments of both parties bear the main responsibilities when negotiating relevant legal provisions, such as the definition of responsibilities, intellectual property protection, confidentiality provisions, applicable laws, etc. In addition, it is equally important to clearly define the operational relationship between the two parties. In fact, determining the operational relationship is the main responsibility of the logistics manager. These terms should include: service specific scope, ordering process, management process, price, payment terms, performance level guarantee, etc.
2. Define the scope of service
One of the most important clauses in the logistics service agreement is the comprehensive description of the service scope. If the description of service scope is vague, it may mislead logistics service providers and think that the service provided according to the contract is not what your company needs. At the same time, some commonly used terms (such as reverse logistics) are handled in different ways and processes. Maintenance return and asset return are obviously two different reverse logistics methods, although their common names are exactly the same. This simple example further shows that the definition of service scope should not be taken lightly, and your needs and expectations should be clearly explained to the logistics service provider.
3. Rewards and incentives
The main goal of any business restructuring is to improve operational efficiency and cut costs. Therefore, you need to ensure that the relevant rewards and incentives in the logistics service agreement can help you achieve the above goals. These terms may include: cost reduction target, performance bonus, revenue sharing plan, etc. The goal of cost reduction refers to how much the logistics service provider must ensure to cut at least in a specific time (such as the first year). Failure to achieve this goal may mean that the execution of the contract is suspended.
Logistics managers also need to cover key performance evaluation measures in logistics service agreements to determine whether logistics service providers provide corresponding services at an acceptable level. The responsibility of logistics service providers is to meet or exceed the minimum acceptable service level. If it does not meet the requirements, corrective measures and economic penalties should be stipulated in the terms.
4. Make a transition plan
After successfully introducing a logistics service provider, let him make the following points: What kind of service quality should the logistics service provider achieve within a specific time frame (that is, the transition period)?
Step 4: Effective management
The last step is to effectively manage the logistics service providers according to the standards established in the logistics service agreement. This management process includes effectively managing the services provided by the relationship between the two parties. Effective "governance" should be implemented for the provision of logistics services. The word "governance" refers to a method and process, involving the exchange and coordination of business strategies between the two sides; Monitor each other's performance from the perspective of service, quality and cost; Continuous review of comprehensive business relations, etc. In particular, it is pointed out that governance should include daily interaction and daily operational communication to ensure that the resulting strategic direction should be consistent with the goals of both parties.
"Governance" can be carried out in the following ways:
1. The senior management conducts business evaluation once every quarter.
2. Conduct monthly business evaluation.
3. Description of the service.
4. Report relevant performance standards.
5. Contract management.
6. Change management.
7. Dispute resolution process.
8. Minimum expected service level.
To reach a successful logistics service agreement, we need excellent methods, full attention to the contents of the contract, and an experienced and knowledgeable team. These are the key factors for the successful negotiation and implementation of logistics service agreements.