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Essential tips for contract management in logistics

03 October 2017

In contract management in logistics, it is vital to include the key objectives. The benefits are that the contract is workable, favourable, avoids risk for all parties and meets the criteria for why the contract is in place. It also helps to avoid key challenges in advance.

Here are some essential tips:

1: Organisational diligence, and a commitment to get out in front of any potential problems before they become real issues is vital to preventing breaches.

2: Failing to get feedback from both parties in the contract is often the downfall of contracts.

3: Communicate projects regularly to avoid springing surprises on your teams; especially in supply chain activities. This allows parties to plan ahead to implement projects successfully, thereby meeting deliverables. Timeframes must be established for deliverables, and timeliness should be monitored.

4: Monitor performance on a quarterly basis to get out in front of any potential problems before they become real issues. Being proactive when it comes to contract management is vital to preventing breaches, and monitoring performance is pertinent to ensure the contract and service is a success.

5: Identify and mitigate risks. Identify the significant risks, consider the likelihood of all the risks that could materialise and assess the consequences if the risk materialises. Many companies find the contracting aspect frustrating, but many companies fail to devote sufficient resources to this part of the business. Agile contracts are tailored to meet specific objectives, but maintain a fair amount of flexibility to allow for unavoidable changes in circumstances.

6: Screen suppliers and do reference checks on all your service level agreements every quarter, this promotes honesty and monitors the performance of your current service provider; transparency is key and vital.

7: Relationship management. Many contracts involve limited resources between the client and supplier. Broaden the relationship management and meet the CEO and key executives from both parties. Knowledge sharing and affiliation is key.

8: Key performance indicators should be simple and should be measured continuously.

Transportation

·        On-time final delivery. If the report is below 98% then operations should review and look for process improvement and efficiencies.

·        Cost per kilogram. Measure gross net with total weight moved each month/quarter to show the buying and usage patterns to customers.

Warehousing:

·        Inventory accuracy. You want high accuracy to ensure the correct products are going to the correct customers. Low inventory accuracy can make customers angry and lead to additional costs to fix orders.

·        Dock to stock. It is important to track the efficiencies of inbound activities and to ensure your product is available as quickly as possible.

·        On-time shipping. Show the percentage of shipments that left the warehouse on-time. All items have tight deliveries with small windows

·        Order accuracy. Not only do you want to know how many orders a service provider can fill an hour, but how many accurate orders they can fill. When orders are filled incorrectly, more headaches and costs will be incurred later.

 

In my experience, corporations that do not have the above in place struggle to maintain successful relationships and contracts.

Contributed by: Leanne Donaldson, the strategic sales manager at Aramex South Africa, with expertise in logistics, supply chain, strategic sales and contract negotiations

Article originally appeared in:  BESPOKE.png

http://www.bespoke.co.za/index.php/articles/227336-essential-tips-for-contract-management-in-logistics-by-leanne-donaldson