Logistics outsourcing is no longer just about storage space or pallet transport costs. Contracts with third-party logistics (3PL) providers have evolved from standard agreements into increasingly complex tools that go far beyond legal documents.
Kearney’s report “The Fine Print of 3PL Warehousing Contracts” focuses precisely on how to design a logistics contract that not only prevents problems but also serves to build a strong operational relationship that can grow and evolve alongside the business.
From vendor to strategic partner: the evolution of 3PL logistics
The starting point for this transformation in logistics contracts is the shift in logistical needs. For years, companies sought a more or less linear goods management model: basic warehousing and, above all, a transport system from point A to point B. Today, however, companies need their logistics providers to act as true partners across a much broader and more demanding supply chain.
This evolution is reflected in the growing prominence of the warehouse within the full scope of 3PL services. It’s no longer just a space to store goods, but the nerve center from which everything else is orchestrated. While transportation remains the largest segment by business volume, other segments are growing at a faster rate.
3PL Market evolution in the U.S. by segment:
As the chart shows, Kearney projects that between 2022 and 2027, transportation will grow by 43.6%. However, warehousing services are expected to grow by 53% and complementary services (such as technology, inventory management, or packaging) by up to 66.7%. This indicates that the market is shifting toward more complex contracts, with more integrated services and a broader role for logistics operators. Tenders are no longer looking for a simple goods mover, but for a partner who can adapt, anticipate and help improve the entire supply chain through greater use of technology.
Which departments should be involved in a logistics agreement?
One of the most common mistakes is leaving contract negotiations solely to legal or IT departments. The result is an agreement that may cover the basics but doesn't reflect actual operations. This tends to show over time: cost overruns, implementation issues, rigidity as the business changes, and difficulties maintaining service quality.
Kearney emphasizes that purchasing and operations teams must be at the negotiation table from the start. It's not enough to set general goals, the contract must define how performance will be measured, which tools will be used, how to resolve misalignments and what happens if operations expand or shift direction.
10 Keys to successfully drafting a logistics contract
- Start with a solid RFP or tender
Before drafting a 3PL contract, it’s crucial to begin with a well-structured Request for Proposal (RFP) or tender. This should clearly outline the company's needs, expectations from the logistics provider and the conditions of the partnership. If this document is well prepared, the contract will be a natural extension of what’s actually needed. Otherwise, the agreement may be misaligned from the start.
- A pricing structure that evolves with operations
Pricing structure is one of the most decisive aspects. There are fixed, variable and hybrid models, each better suited to different project phases. It’s common to start with a cost-plus model and renegotiate later, ideally after five years, once initial investments have been amortized, for a more efficient model based on actual volumes and adjusted prices.
- Growth scenarios defined from the beginning
If there are plans to launch new products, enter new markets, or handle seasonal peaks, the contract should define how scaling will be managed, what resources will be needed, in what timeframe and under what conditions. Leaving this out can cause major operational issues later on.
- Well-constructed performance indicators
KPIs should focus on what truly matters: on-time and in-full delivery (OTIF), inventory accuracy, warehouse productivity and meeting preparation deadlines. The report recommends setting different targets for the start-up phase and the steady-state phase. Importantly, the contract should define when the steady state is considered achieved to avoid an indefinitely extended adaptation period.
- Clauses to promote continuous improvement
Beyond penalties, contracts can include incentives for operators who improve efficiency, reduce errors or generate cost savings. This helps align interests and fosters a more proactive, long-term relationship.
- Negotiated payment terms
Extending payment terms can bring significant financial savings. It’s also possible to negotiate discounts for early payments. Many companies miss out on these opportunities simply because they’re not addressed early on.
- Penalties and exit clauses tailored to the client profile
Contracts usually include penalties for non-compliance, minimum commitments, or early termination conditions. However, these terms can be adjusted based on the company’s profile. For example, a business expecting rapid growth might accept a higher initial volume commitment if the contract offers flexibility to end the agreement should operations evolve differently.
- Clear rules for handling errors
The report recommends setting up a governance model to manage charges for operator errors, such as late deliveries or incorrectly prepared orders. Though this can be difficult to negotiate, it helps avoid conflicts and financial losses.
- Clearly defined technology integration
The contract must specify which systems will be used, how they connect with the client's systems, what data will be shared and who is responsible for each part. Without this clarity, hidden costs or delays may arise that impact the entire operation.
- A realistic governance structure
Weekly meetings to review operations, monthly meetings to track KPIs and costs and quarterly or annual meetings to redefine strategy. This shared governance enables agile adjustments and prevents problems from becoming entrenched.
Are you defining your 3PL contract?
At Rhenus, we support companies across multiple sectors in outsourcing their logistics operations. We actively participate in tender processes and agreements that lay the foundation for long-term strategic collaborations.
We understand the challenges involved in these decisions and work side by side with our clients to ensure each contract realistically and operationally reflects their logistics needs. If your company is at this stage and you're looking for a reliable logistics partner, reach out to our team of professionals.