10 ways to develop a good LSP contract

10 ways to develop a good LSP contract

by Cliff Lynch
19. March 2013 15:29

10 ways to develop a good LSP contract

Lately, there have been several articles in the industry press about how to develop a good contract with a logistics service provider. Some I have agreed with, while others have seemed a little naïve about the structure of the relationship. There is more to it than just developing a contract.

Several years ago, I developed a list of ten basic rules for entering into an LSP relationship, which I believe have withstood the test of time. I list them here for your consideration.

  1. Develop a strategy for outsourcing. The decision to outsource should be made only after careful analysis of the options.
  2. Establish a rigorous selection process. Don't depend on an RFP. While they make proposals easy to evaluate, they often ignore the analysis of the most cost- and service-effective processes.
  3. Clearly define your expectations. Be thorough and realistic.
  4. Develop a good contract. Obviously, important. Clearly spell out obligations, expectations, and remedies.
  5. Establish sound policies and procedures for the arrangement.
  6. Identify and avoid potential friction points. Identify possible problems in advance and develop processes for dealing with them.
  7. Communicate effectively with your provider.
  8. Measure performance, communicate results.
  9. Motivate and reward providers.
  10. Be a good partner. Good partnerships are mutually beneficial. Bad ones are not.

While following these ten steps will help set the right course, for the relationship to truly succeed, it must be based on mutual trust and respect.

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