atlanta | cincinnati | cleveland | columbus | dayton | new york | washington, d.c. the health &...


Benefits of 3PL Contracts

Achieve efficiencies in managing the logistics supply chain

“One-stop shopping” to obtain integrated service offerings

Cost savings, control and predictability

Limitation of risk / liability

Customization for specific commercial needs & requirements

Clarity of performance expectations



Structure and terms of 3PL contracts may vary based on:

geographic scope (domestic vs. international)

types of services to be provided (transportation, logistics, customs)

inclusion of subsidiaries and affiliates

corporate objectives (e.g. uniformity in terms)

corporate resources (e.g. contract administration)

government regulation

market conditions (capacity, demand, competitive landscape)

contract term



Self-contained documents vs. multiple documents

general terms

modal specific terms

No one-size-fits-all approach

Contract structure can be developed to meet your business and service needs


Key Contract Terms: Scope of Services

Clearly define the 3PL’s scope of services:

types of service (e.g., transportation, brokerage, freight forwarding) geographic scope (e.g., interstate, intrastate, foreign, Canada/Mexico

cross-border) include SOPs to clarify operational requirements exclusivity of provider

Develop service requirements that promote efficiencies, reliability, and planning

capacity needs / guarantees equipment availability and condition (tractors, trailers, containers,

chassis, railcars) e-commerce / communication


3PL Performance

Clarify 3PL performance expectations

develop KPIs to measure 3PL performance (e.g. capacity, on-time deliveries, cargo loss/damage, etc.)

some contracts include remedies for failure to meet KPIs (e.g. right to cure, termination option(s), financial penalties)

Address specific service issues and concerns

refused deliveries (notice, cargo disposition instructions, liability for storage or other assessorial charges)

late deliveries (notice, expedited service, plant shut-downs)

lack of capacity or rolled cargo for int’l ocean


3PL Use of Subcontractors

Subcontractor/carrier selection and due diligence

licensing; insurance; and safety fitness

right to avoid carriers with poor safety or performance records

truck issues: DOT safety rating and CSA

3PL responsibility to manage subcontractors’ performance

3PL liability for subcontractors’ failure to perform

3PL responsibility to pay subcontractors

Waiver of cargo liens


Rates

Rates may be “all-in” or itemized, depending on the services/modes of transportation and party preferences

To promote rate stability, limit all rates and charges to those specified in the contract

rate changes or additions should be mutually agreed and added to the contract

be wary of incorporated tariffs and documents which can result in rate add-ons, surcharges, etc.

ensure that the contract terms govern if there is a conflict between the contract and any bill of lading, tariff, etc.


Liability: Cargo Loss & Damage Different legal regimes may apply depending on the services

(truck vs. ocean vs. air)

3PL may be responsible under the law or may contractually assume responsibility for cargo loss/damage

Liability limits are common but negotiable (except for int’l air)

“package” definition may impact recovery

consider the value of goods and level of protection needed

3PL should carry cargo insurance to cover its liability risks

Shipper will need insurance to cover risk above liability limits


Indemnity

3PL contracts typically require indemnification against liabilities, claims and damages resulting from the acts and performance of the other party

Indemnity may cover:

negligence

contract breaches

failure to comply with laws

conduct of third parties

attorneys’ fees

Truck Issue: anti-indemnification statutes

12ATLANTA | CINCINNATI | CLEVELAND | COLUMBUS | DAYTON | NEW YORK | WASHINGTON, D.C.12

Contract Negotiating Tips for Shippers

Identify and prioritize your contracting objectives

Prepare your own contract form tailored to your business objectives

Consider a bidding process

Look for ways to increase leverage (scope, affiliates, etc.)

Work with the 3PL to help meet its business needs (e.g. better forecasting, communication, volume commitments, etc.)

Avoid a “price-only” focus

Encourage collaboration


THANK YOU!

Karyn A. Booth202.263.4108

[email protected]

atlanta | cincinnati | cleveland | columbus | dayton | new york | washington, d.c. the health &...

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