The KPIs of a Logistics Service Level Agreement

What is a Service Level Agreement (SLA) in Logistics?

A service-level agreement (SLA) is a contract between a logistics service provider and a customer that specifies, usually in measurable terms, what services the logistics service provider will furnish.

Many logistics service providers will provide their customers with an SLA. More recently, logistics departments in major companies have adopted the idea of writing a service level agreement so that services for their customers (users in other departments within the company) can be measured, justified, and perhaps compared with those of outsourcing network providers.

Some basic metrics or Key Performance Indicators (KPIs) that SLAs may specify include:

• IT agreements: Customization/Integration
• Inventory Records Accuracy
• Quality Assurance upon receipt
• Returned Material Authorization (RMA)
• Continuous Improvement
• Mutual Inventory Management
• Cost Reduction agreements
• Voice of the Customer (VOC) feedback

There are many more KPIs that can be added to this basic SLA agreement. The more KPIs, the more difficult the negotiation process. It can take months to negotiate a complex SLA/KPI document, as you go back and forth with your logistics provider so the document becomes a “win-win” for both parties.