Key Contractual Issues with Logistics Outsourcing

Introduction

The outsourcing of logistics and third-party logistics appears to have originated in the 1980s as an important means for improving supply chain effectiveness (Maloni and Carter, 2006). Like other outsourcing arrangements, third-party logistics continues to grow. Estimations indicate that the proportion of companies in the United States that have implemented third-party logistics (TPL) has increased by 5-8 per cent annually (Ashenbaum et al., 2005). According to a 2004 survey no less than 80% of the Fortune 500 Companies said they rely on TPL, and two-thirds of these companies had been involved in TPL for more than five years (Lieb & Bentz, 2005). As these contracts come up for renewal it is useful to reflect on what has worked and what has not. This chapter focuses on some of the issues currently troubling customers, service providers and advisers with their logistics outsourcing contracts. These issues include:

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  Scope of the services;

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  Change control;

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  Service levels and service credits;

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  Risk allocation – limitations and exclusions of liability; and

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  Benchmarking.

Logistics Outsourcing