Logistics Service Contract

It is all about the contract between the Service taker and service provider. It binds both the parties to agree to the agreement sign by them. The Agreement includes scope of the work, payment, damage, insurance claim, manpower, KPI of service provider, etc.,
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Logistics Service Contract www.scm-re-engineering.com Logistics Service Contract Logistics service providers are the backbone of any Logistics System. Today’s logistics is very complex and critical. Top management expects lot from this department. It is genuine also, because Logistics service providers are required at all the part of supply chain. The value added services provided by the logistics service providers are as under – 1) Movement from Material at all levels. From Supplier till deliver to the customer and bring back the defective material back (reverse logistics). 2) Cross docking – It is one of the most important activity a logistics service provider do. Material from many venders reaches the main hub and from the main hub the material has to be sent many customers in mix and match. So the logistics service providers break-bulk the consignment, assort it, consolidate it and repack and dispatch to the customers according to the requirement. This reduces the delivery time. 3) In case of EXIM, logistics service provide plays an important role of completing all the desired documents for export and import of the material. The principal has to do nothing, just coordinate with the service provider. 4) Reverse logistics is becoming very important now a day due ecommerce activities. E-Hubs, like flipkart, amazon and other sellers provide satisfaction guarantee to their customers. If the goods are not liked, they can return back the same to the 2 www.scm-re-engineering.com Logistics Service Contract supplier. Due to this condition, reverse logistics has emerged as an important part of supply chains. 5) Warehousing – 3PL and 4PL firms have become a very crucial part of logistics services. They handle goods up to the delivery to the end consumer. 6) Special Packing. Now packers have also working as service providers due mix match of the products ordered and delivered from a single location/hub. All the articles of a single order are handed over to the specialist packers. Who take decision on the type of packing to be done? This reduces the packing cost of the order. 7) Audits – There are special firms who do Logistics audits. They are specialists in the job. They know the subject thoroughly. There are many other jobs, which are outsourced now a days. In all the cases, the service supplier organize assets, add manpower, move the material, pack the material and deliver it. In some case the commitment on the part of the service provides are very expenses and charge the same from the company. More the risk, more complex will be the contract. In some articles, which has self-life, penalty and rewards are part of the contract. For a smooth and long run association ship both the parties should sign a contract containing all the conditions which both the party wants to have. Both has to work as per the agreement. Following parts should be included in the contract – 1) Name of place and date of agreement 2) Name and address of both the parties binding to the contract. 3 www.scm-re-engineering.com Logistics Service Contract 3) Scope of the services to be rendered – Area, Nature of the logistics service, while giving services which part belongs to which party. 4) Payment Terms - %, Time 5) Delivery requirement – Lead time to be defined 6) Charges for the services, component wise. 7) Extra services, if any requirement from time to time. 8) Damage and Pilferages – - Losses – Damage and pilferage - Insurance Claims - Delay in delivery penalty - Delay in loading penalty - In transit damages 9) KRAs and KPIs – Performance Measurement 10) Security deposits 11) Job Responsibilities – - Different Functions - Employees requirement - Warehouse management - Inventory control and Management - Movement of material - Transportation of material - Labour engagement - Safety and security of material - Office management - Sampling - Insurance Claims - Order Booking, invoicing 4 www.scm-re-engineering.com Logistics Service Contract 12) 13) 14) 15) - Daily, weekly and Month MIS - Payment Collection and deposit - ‘C’ Form Collection - ST returns with the department - Compliance to the Govt. Rules and Law Risk Sharing Termination of the contract - Notice period, - Stock Handover - Govt. Statutory compliance report - Security refund Notice for Claims and settlement Deputing Authority in case of any dispute This kind of contract are prepared by the legal experts of the company and signed by the top-level management executives, preferably proprietor. Lower / Middle management employees may transferred or leave the company during the term of the agreement. In that case agreement needs to be renewed. In nut shell, Agreement should be signed by the top-management of the companies, with clear terms and conditions, so that they work for a long period under the same agreement. Frequent changes in agreement are not advice able. 5 www.scm-re-engineering.com Logistics Service Contract Example of Agreement 6 www.scm-re-engineering.com Logistics Service Contract 7 www.scm-re-engineering.com Logistics Service Contract 8 www.scm-re-engineering.com Logistics Service Contract 9 www.scm-re-engineering.com Logistics Service Contract 10 www.scm-re-engineering.com Logistics Service Contract Author – Rajinder Singh Mann, B.Sc., PGDCS, MBA, MPhil. Having Experience of 25 years in S&OP, Education, Logistics, SCM. Has worked in diverse industries like Publishing, Fasteners, Paints and Varnishes, Food Processing, Education and Training, Steel wares and Table-wares. Presently associated with Ceramics Industry heading Supply Chain Department. Notice of Rights: All rights reserved. No part of this article may be reproduced in any form without the written permission of the copyright owner. For getting permission for reprints and excerpts, contact online to www.scm-re-engineering.com to send a message via the website. Notice of Liability: The information contained in this Article and on the accompanying website is distributed on an “as is” basis, without warranty. Every precaution has been taken in writing this article, the author shall not have any liability to any person or entity if any damage or loss has been caused directly or indirectly by any contacts of this article. For additional information contact: Online: www.scm-re-engineering.com – Supply Chain, Inventory Management, Logistics, Vendor Management, Quality Circles, etc., Visit Online: www.posititude.com For articles on Communication Skills, Positive Working environment, parenting, learning Body language, etc., 11 www.scm-re-engineering.com