Despite its growing infatuation with technology, logistics continues to be a relationship-based industry at its core. As with all professional relationships are changeable and sometimes strained. Relationships between logistics providers and customers are especially susceptible to disruption during times of great market volatility. Having an iron-clad service-level agreement (SLA) in place from the beginning can ensure a smoother ride for both parties when market conditions change.
A successful SLA takes the goals of both the logistics provider and the customer into account, setting both up for success. These agreements should include measurable expectations while leaving enough room for flexibility and agility on both sides in the event of extreme market disruptions like those seen over the course of the coronavirus pandemic.
“The key is to create the SLA very early on in the relationship, before going live with a customer. Collaboration with the client during the process is important. It is always a balancing act between ensuring that the customer’s needs are met and making it work for the vendor as well,” BlueGrace Logistics Vice President of Logistics Operations Todd Trompeter said, “A strong SLA should include operational expectations from the customer, as well as financial expectations. You want to take any perceptions out of it, so make sure you can identify measurable targets.”
Trompeter emphasized the importance of collecting and tracking data via business intelligence tools. It is critical to track agreed-upon variables throughout the life of the agreement in order to increase internal visibility and facilitate meaningful conversations with customers.
“If you don’t have that data, you may not have that opportunity,” he said. “Data allows us to get more strategic with our customers and identify pain points and areas for improvement. It also allows us to be proactive and drive profitability, helping the relationship between both sides.”
Service-level agreements align well with wider industry pushes for both transparency and trackability. These ideals are often applied to technology and digital tools, focusing on topics like real-time shipment tracking and the elimination of data silos. The same concepts can be applied across relationships by prioritizing honesty and efficiency from the start, everyone stands a better chance of success.
The biggest lift and main purpose of these agreements is preparation. Companies can revisit and revise an SLA that they find no longer serves them well. If issues arise when there is no SLA in place, there is no official guidebook or agreement to help resolve conflict which can become difficult. This leads to wasted time, lost money and can be stressful on relationships.
“Overall, buckling down and ensuring these agreements are in place helps drive a lot of efficiency,” Trompeter said. “It saves time, removes any emotion or misperceptions from the equation and allows for much more proactive responses. We have seen a lot of improvement in client relationships and efficiencies through SLAs.”