A Service Level Agreement, or SLA for short, is an agreement between a logistics service provider and a customer that specifies, usually in measurable terms, what services the logistics service provider will furnish.
The definition of “service” can vary widely depending on the industry. In some industries like retail, the service is providing a product to customers within 24 hours of their order; in others it means ensuring shipments are on time.
Regardless of industry, an SLA is necessary to set clear expectations with your customers and help them understand what they’re getting when they buy from you. It lays out exactly what the company is responsible for, how it provides those services, and when it has to do them.
The best SLA’s happens when all parties have a clear idea of what they need from the other party. The person with the responsibility of measuring and tracking these measurable standards is the quality assurance person.
We’ll explore what an SLA is and why you need one for your company in this article!
What is a Service Level Agreement?
A Service Level Agreement (SLA) is a contract that defines the level of service to be provided. For example, an SLA can set up how often a company will maintain its servers or what level of customer service it provides.
Benefits of an Service Level Agreement
SLAs are usually created on an annual basis and must be agreed upon by both parties. It can be a contract with a provider or between partners in a supply chain. SLAs specify the response time for handling customer inquiries, the time frame for completing work, and penalties for not meeting requirements. SLAs are critical to the successful implementation of your cloud strategy. The following are some key benefits of a well-implemented SLA:
It communicates the agreed upon level of service from your organization to the provider or partner. It gives you leverage when negotiating prices and a wide range of services. When there is service failure, it provides an expected recourse for customers, which makes future purchases more comfortable for them.
Impacts of an SLA on Logistics
The agreement is usually in place to define standards of service, such as availability, response time, and quality of service. This agreement is often used in logistics because it helps stakeholders determine how much inventory they should keep on hand or what their processes should be for handling broken products.
The contract specifies the level of service to be provided and the penalties for not meeting those levels. The agreement may contain provisions for different service levels for different time periods. In addition, it may include provisions specifying penalties in the event that certain service levels are not met.
Service Level Agreement is a promise from the service provider that says what service you can expect. It is important for companies to have Service Level Agreement because it establishes contractual obligations and formulates expectations. If a company does not provide what it promised, it will need to compensate its customers with a refund and money back.