When you buy freight, you buy a service. Always define the service you expect.
Include the must-have service characteristics in your RFQ, as separate parameters in your bid-sheets to allow for detailed analytics later and also to help LSP identify them easily.
Agree up-front with your internal stakeholders on the acceptable cost of these service characteristics, look at them in two separate groups:
- The characteristics that are necessary – must have’s
- The characteristics that are nice to have – if cost is within agreed tolerance
It is always possible to reduce the costs of your transport. Simply reduce your service requirements. If you don’t define your service requirements well, the LSP may erode the service offered (with less cost to the LSP) without sharing that saving with you. Or even asking you if OK.
Select KPIs that are objectively measurable. Agree on an escalation process if performance is below agreed levels (actions to be taken by the LSP and when). What will happen if the LSP fail to deliver the agreed service?
- Loss of business?
This should be decided up-front during the closing contract negotiations. Do not rely on the competence alone. Ensure you are not stuck in a transport solution without possibility to exit without financial ruin if conditions are bad.
Lastly, the key to a successful relationship with your LSP is to communicate. Share your outlooks, concerns and opportunities. Allow your LSP to share theirs. Then you will have the support to actually improve the service and reduce costs. Done properly both parties will have savings to share and an easier life together.