Practical Applicability of New Contract Management (SLA)-based on its own merits.

Nowadays most large business organization rely on services provided by other company, however, the importance of practical applicability of SLA's/Contracts in the high-stakes world of supply chain management is critical requires one to be savvy. Combining practical experience and theoretical foundation is key for the future of Supply Chain, which will echo how important practical applicability of these contracts turnout for strategic objectives of the company. Here I will give you the tools, however I will withhold the glue that binds the matrix.

Most people think of innovation, that it brings us the ultimate experiences in contract management. With innovation, growing and scaling your business is paramount into fulfilling the obligations of a contract. I wish I could say it's easy to manage contractors (Third/Fourth party 3&4PL), contracts i.e. (SLA), but it does require some work and a huge lump of patience. I am shaking my head right now as several incidents come to mind. You know, those times when suppliers show you their true colours. With global logistics shifting toward a whole different model by big corps such as Amazon, UPS, DHL,TEMU, Shein, and TikTok, logistics service providers must keep up with the platform's supply chain trends and must honour its SLA.

This article is fueled by a post on LinkedIn of Seabourne Logistics ZA (Garry Harris, Operations Director- under the title "Together we can/Preparing a winning Team". The post read " After recently being awarded a large automotive contract, the Seabourne team put massive effort into preparing for this account by conducting an in-depth training session with their team, sharing the new client's policies and procedures and culture that Seabourne staff would experience while working on the new account.

“Working on large accounts like this, teamwork is of uttermost importance,” says Garry Harris, Operations Director. “Training plays a vital role in preparing employees for their roles and responsibilities, equipping them with the necessary skills and knowledge to excel in their work.

Seabourne remains confident in its team's capabilities and believes that by promoting a collaborative work environment and investing in training initiatives such as these, the company aims to deliver seamless and outstanding service to the new client".

It is encouraging and a great attribute by Senior Management (Seabourne) to have an inhouse new contract planning session, forecasting, projection and training for each new contract. This helps with accountability, sustainability and has long term impact on the team, client and account managers. Experience has taught me to focus on preparing teams for each new directive and ensure we mitigate risk from the onset.

The state of readiness on new accounts or contracts must involve inter-department strategic planning or rollout plan, i.e. Finance, Procurement, Warehousing & Logistics and HR. It is imperative that we note and appreciate that contracts do not stand alone, they are interlinked to other processes within the SUPPLY CHAIN. We ought to explain these workflows and inter-connections, so as to have a beautiful sunset view of factors at play.

Many a contract are unsettling by lack of direction, preparedness and lack of understanding the new client. I am afraid that contracts constitute a fairly high degree of risk exposure, even though identified risks are commonly mitigated through contractual clauses. And herein lies the risk, such risk needs to be unpacked and explain on how it gets into a contract or SLA.

Definitions

Service Level Agreements (SLA): is the part of a contract?which defines exactly what services a service provider will provide and the required level or standard for those services. There are three basic types of SLAs:?customer, internal and multilevel?service-level agreements. Or a customer service-level agreement is between a service provider and its external customers.

SLAs are different to KPIs, SLAs are legally binding documents that outline the wider service agreements between a service provider and its customers, while KPIs are generally used to measure the performance of companies against their strategic goals.

The importance of SLAs in ensuring that expectations are being effectively managed cannot be overstated. Additionally, SLAs bring with them several clear advantages, including the following:

Improved customer experience

Improved employee experience

Established and trusted source of information

Increased productivity and performance

1. An organize resource allocation Service Level Agreement (SLAs): Today we talk about SLAs & the service is a means of delivering value to customer by facilitating outcomes customers want to achieve without the ownership of specific costs and risk.
2. Possible metrics to include in an SLA are as follows: Availability of service

Technical quality

Error rates

Security and Risk

Business results.

3. Service Level Management (SLM): Service Level Management has two cycles

The first cycle is Negotiate -> Agree -> Understand

The second cycle is Report -> Improve -> Monitor

Components of an SLA:

1- Service Description : this is the major component;

Standard or level; of services expected from the provider

The allocation of responsibility for activities, risks & costs

2- Reliability

3- Responsiveness

4- Procedure for Reporting Problems: When & how the agreement will be reviewed & revised

5- Monitoring and Reporting: How services & service levels will be monitored & reviewed, what measures of evaluated will be used & how problems if any will be addressed.

6- Consequences for not meeting service obligations: How complaints & disputed will be managed.

7- Escape Clauses or Constraints

An applied and matched SLA on a ticket or work order sets target dates that are based on the SLA commitments. When a target date is exceeded, the SLA commitment is breached.?A penalty or credit fee can be issued to compensate for the commitment breach.

OLA refers to the operational level of agreement

Contract Manager & Contract Management: Since it generates, implements, and evaluates the contract to enhance the operation and financial performance, contract management is crucial. The company is therefore under additional pressure to reduce costs and increase productivity. Managers of procurement contracts seal the transaction between their employer’s business and other businesses. The managers frequently have experience in business, law, and project management. They frequently collaborate with customers, partners, and the executive team of their businesses or organisations. Contract managers need to understand the distinctions between purchasing and procurement. Procurement refers to the process of locating a vendor and negotiating the price, whereas purchasing means the actual act of purchasing products and services.

Procurement, Sourcing vs. Purchasing and the differences between them

A critical aspect of successful procurement projects is effective contract management. How the contract is managed from the outset will significantly impact the success of the project. Procurement concentrates on the strategic process of product or service sourcing, researching, negotiation and planning whilst the purchasing process is about right price and right delivery time. On other hand Procurement is a huge area which includes vendor management, contract management etc. So effects supply chain management as strong as planning.

The procurement process at first glance seems like a an easy thing to do: It looks like it’s just shopping with someone else’s money. While that’s essentially true, procurement is much more complex than that. So complex, in fact, that procurement must be streamlined with a process called the procurement process flow. Visualizing your procurement process helps all stakeholders be aware of the many moving parts involved in making purchases and helps identify potential issues.

The entire procurement management system can be tricky, but we’re here to unpack it. We’ll define what the procurement process is and help you develop your own procurement process flow so that it is transparent for everybody. With the help of visualization, a typically complicated system can become efficient and painless. This article made me think about the nature of Procurement as a service organization. The business expects the Procurement to work based on SLA and to provide the service on the highest level within the set timeline.

What exactly is procurement

Procurement is the process of identifying, shortlisting, selecting, and acquiring suitable goods or services or works from a third-party vendor through a direct purchase, competitive bidding, or tendering process while ensuring timely delivery of the right quality and quantity. Procurement outsourcing is handing procurement processes over to a third party which has several pointers.

Outsourcer: - is an independent company not affiliated with the client;

- is not a broker/representative of the supplier;

- does not supply goods and services on its own.

An end-to-end procurement process consists of the steps listed below:

? Surveying the market.

? Spotting potential suppliers.

? Creating an approved list of vendors.

? Spotting internal needs.

? Creating a purchase order online.

? Requesting proposals and evaluating quotations.

? Selecting the right supplier and negotiating effectively.

? Receiving goods and performing quality checks.

? Developing and managing contracts.

? Obtaining invoice approvals and fulfilling payment terms.

? Establishing a good supplier relationship.

Sourcing: is the strategic plan in the conducting of analysis, tendering, specifications, volumes, price, terms, manage contract aspects and agreements, create savings and the optimal commercial conditions for the "operational" purchasing.

Purchasing: is the tactical execution of those agreements including delivery performance OTIF, transport logistics, mix, exception management, quality, returns, customer service.

What is purchasing?

Purchasing is the set of functions associated with acquiring the goods and services that an organization requires. Purchasing is a small subset of the broader procurement function. This process includes activities like ordering, expediting, receiving, and fulfilling payment.

Listed below are the steps in the purchasing process:

? Obtaining a purchase requisition.

? Requesting proposals and evaluating quotations.

? Dispatching official purchase orders.

? Receiving products and services.

? Checking the quality of delivered items.

? Effecting payment to vendors.

Solutions of New Contract Management

Now that we have unpacked the whole process of starting point before the contracts, lets deal with SLA and why its important to treat each contract well within its merits for success. Recall the last few contract agreements you entered into with clients. Did it all go according to plan or otherwise?

The solution, in this case, is to recognize the fact the organization's growth and ability to deliver even more value to its customer requires it to introduce internal customer-focused teams/products properly and that such teams on top of their internal customer goals would still need to develop the "understanding" of how their work impacts external customer and potentially share end-customer success goals with frontline teams and be equally recognized and rewarded for it.

Well most companies do not have a workflow methodology of addressing new contracts, they simply follow the preset standards. However, my tactical aspect, business acumen, introspection experience kicks in when we acquire a new contract. This is a prerequisite of ensuring that the 3PL/4PL work optimally for realizing the strategic objectives of the company.

Knowing your business, knowing your needs, knowing your vendors/client and their branches is critical. It is paramount to bridge a hybrid training for every contract which requires different skillset and competency, based on the new clients policies, procedures, corporate culture, operation hours, cycle of invoicing, team duties, problem-solving abilities and office politics.

Strategy/process: apply APCD to continue the improvement:

Act : Implement corrective actions if SLA targets not fulfilled.

Plan: Gather expectations rom customers. Redefine SLA.

Check: Measure Service performance against SLA targets.

Do: Service activation. Service is delivered.

Key solutions to apply or try out:

1?? Pitfalls of customer-centricity whether they are internal or external. The customer centricity is one of the critical approaches to winning the hearts of their audience and the competition. At the same time, the ability to provide services at a high level requires a sufficient level of capabilities, including automation. There should be an internal will to act as a service organization when people like what they do, they are praised and recognized and are satisfied with their place and role within the company. At the same time, Procurement often claims that the investments into its development are set based on the residual approach. And often, Procurement considers itself as something other than an internal customer, while others expect it to support the business agenda to be a customer-centric organization. The product teams may also feel unpraised when they work on the products for Procurement. It sounds like a vicious circle.

2?? Breaking this circle this problem. This is another classic growth phase when an entire organization claims "customer focus" for a specific profile (of the external customer), while internally, a big chunk of the same organization delivers products to empower other teams and thus needs to focus on the internal customer needs. This duality leads to situations where the teams delivering products to the external customers get "praised" and celebrated, while the teams delivering internal products remain the unsung heroes and often lack confidence and morale in what they do since their organization missed redefining the customer focus timely.

3?? Stay Agile with Changing Trends: Keep a finger on the pulse of client preferences. Failure to adapt to shifting trends can result in cross swords with the client and mistrust.

* Narrative about the new contract

* Communication chart from the internal to client

* Due diligence

* Planning & Organizing

* Culture and policies of the new client

* Well-defined processes aligned with business objectives

* Advanced technologies for automation & workflow streamlining

* Procedures

* Relationship Management

* Total Customer Focus

* Collate customer feedback on a monthly basis

* Clients cycle of payment for invoicing, outstanding payments

* Business Development Support

4?? Keep Finances in Check: Financial transparency is key! Maintain clear records, including robust cash flow models. It's vital for effective budgeting, performance tracking and cash flow management.

5?? Expertise Matters: Ensure you have the right trained team with expertise in for the contract duration. Their insights will guide informed decision-making and streamline operations.

6?? Careful Lease and Contract Management: Thoroughly evaluate lease terms, negotiate favorable agreements, and regularly review the performance and profitability. Avoid burdensome leases that drain resources.

7?? Continuous Evaluation and Adaptation: Regularly assess your strategies, market conditions, and operational performance. Proactively address challenges and make necessary adjustments to maintain long-term success.?

Consistent Client engagement with the solution within the first few days will experience virtually no churn over the duration of the contract, whereas those who didn't engage with change methodology WILL ALL CHURNED over the same period!

Remember that getting good results always requires customers to expend effort and change their behavior.

Team willingness is a finite resource that is most available right at the beginning.

① SET YOUR KICK-OFF SLA:

Determine the maximum number of days within which the customer kickoff or first engagement will happen. For example, in many cases, I recommend ensuring that the kickoff happens within two business days of signup.

② SCHEDULE THE MEETINGS WEEKLY FOR A START:

Meeting the kickoff SLA is difficult to impossible unless the meeting is scheduled during the process. Finding a time to meet often takes too long. Provide a method for the team to quickly set up the first call 'live'.

③ GET CLIENT STARTED PRONTO:

Even if implementation and onboarding will take time, it's extremely important to get the clients confidence. Build a "quick start" trust of efficiency

As you can see, there are many benefits to be had by closing the chasm between new contract and old. Not only will it lower your risks of failure, but it will also increase your productivity, bring in more revenues, and result in higher profits. So how do you achieve this harmony? By setting shared objectives, using data to inform decision-making structure & processes, investing in market intelligence, eliminating silos, fostering transparency, developing a closed-loop reporting system, establishing clear communication channels, regular meetings, setting realistic expectations, creating a SLA, and aligning incentives.

TPRM Considerations with ERM

??Plan for managing third-party risks, identify stakeholders, roles, responsibilities & budget

??Carefully select vendors based on reputation, expertise & compliance record

??Ensure contracts have clear expectations, responsibilities, protections & consequences for breaches/failures

??Continuously monitor third-party relationships, including performance reviews, compliance checks & incident reporting

??Have a plan in place for terminating relationships based on breaches of contract or data breaches

??Establish ownership & accountability

??Assess the current state of TPRM, identify gaps & areas for improvement

??Define the scope & objectives

??Develop & implement policies/procedures, including a framework

??Train & educate staff on principles/processes, conduct third-party risk assessments & implement due diligence processes for new & existing third-party relationships

??Ensure contract terms align with TPRM policies/objectives

??Monitor & report on third-party risks & performance to continuously improve TPRM processes & technologies

Key Benefits

??Improved risk mitigation & management of third-party risks

??Enhanced regulatory compliance & governance

??Better protection of sensitive data & assets

??Improved relationships with third-party vendors & partners

??Greater transparency & accountability across the organization

Conclusion: All contract projects have inherent negative risks (that varies depending on the specific nature, scope, and location of projects) which makes project objectives unrealistically achievable. TPRM is critical for organizations relying on third-party vendors, suppliers & partners to minimize risks. It includes risk assessment, due diligence, contract management & monitoring. People, process & technology are key pillars.