Service level agreements – or SLAs - had long been seen as the domain IT service provision but are now broadly used in many industry sectors to help provide a framework of understanding. These can encompass such critical areas as mechanisms for monitoring and reporting of service, as well as service standards.
For a company like IronmongeryDirect, which is growing rapidly, this has been recognised as critical to enable further growth. Like many businesses we had relied on goodwill and ‘gentleman’s agreements’ up until around 12 months ago. Now we are in the process of formalising agreements with suppliers, both in the UK and overseas, through SLAs.
Our customers rely on the quality of product and delivery. Therefore any cost savings have to be balanced against product quality and service levels so as not to impact customer expectations.
SLAs provide a means to identify key services to meet business needs. Avoid producing a long list of details. Points indicated should be clear to ensure, where necessary, which areas should be actioned for further improvements. In some ways it’s a work in progress document for regular review.
There is a delicate balance to be reached, as is true in any broad SLA arrangements that can only be achieved through ongoing communication. These agreements should be a collaboration between a provider and customer; and therefore clarity is key for both parties.
Your suppliers can be part of your growth. Careful negotiation and discussions should ideally demonstrate the desire for truly long-term relationships. Forecasting as much information as possible relating to purchasing, for the benefit of both parties can enable this. Dialogue is not only important in terms of maintaining relationships but for both parties to grow their businesses.
We have found that core UK suppliers who have signed up to the agreements are willing to reduce stockholding on our site and hold the product themselves allowing our business to become more of a distribution centre and leaner as a result.
Good supplier relationships are based on more than just money. Negotiating better deals with key suppliers is about a mutual understanding. Retaining a supplier or taking on a new one requires careful analysis of service levels and ultimately SLAs are put in place to improve service for everyone in the supply chain.
Alan Josiah is IronmongeryDirect’s head of customer fulfilment. Stuart Wilson, head of marketing, also contributed to this piece.