International Business Law Advisor Insights on International Litigation & Transactions

Global Supply Chain Logistics: How to Negotiate a Contract with a Third Party Logistics Provider.

Posted in Business Transactions

international attorney, international business attorney, miami lawyer & attorneyWith the global economy starting to stabilize, the volume of international trade is reaching staggering heights. In Miami alone it’s reaching record levels.

So much so that the City of Miami has invested one billion dollars to build a massive underground tunnel to ease the congestion of container trucks now clogging the city’s roadways.

Everywhere I look, I see the global supply chain at work. From the manufacturer, to the distributor, to freigh forwarders, Miami’s economy–like so many others– thrives on global supply chain logistics.

It’s hardly a surprise that Ryder Systems, one of the world’s largest third party logistic providers, is based here in Miami.

I mention all this because Global Trade Magazine published an excellent article on the third party logistics industry or “3PL.”

The article, The Age of Value-Added Services in Global Logistics, provides an overview of the benefits a company gets when using a 3PL.

The article goes on to list a set of best practices to utilize when contracting with a third party logistics provider:

1. Know Your Business:  The more you understand your company’s business, the more likely you’ll find a 3PL that is best suited for your particular needs.

2. Present Key Performance Indicators (KPI) to the Vendor:  Logistics providers often have their own internal KPIs. A great practice is to come to the negotiating table with your own KPIs, which capture and measure end results.

3.  Check References: It’s always a good practice to get as many references as possible from the vendor. a good rule of thumb is to obtain six to eight references. Doing so will cast a wide net and give you peace of mind in the vetting process.

4. Use More than One Vendor: You’ll always be in a better bargaining position if your not locked in to just one vendor.

5. Approach Negotiation with Objectives that Will Benefit Both Parties:  Think about the vendor as a partner and explain how you intend to grow your business. You’d be pleased to know  that vendors will consider a tired pricing arrangement based on the increase in sales volume you anticipate. This helps both your businesses to grow together.

It’s a great list. However, I’d also add that its critically important to communicate. While this may sound like common sense, you’d be surprised how often parties fail to articulate a companies aims and objectives in the negotiation process.

 Conclusion

Follow the guidelines above and you’ll be well on your way to negotiating a solid third party logistics provider contract.