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