Everything You Need to Know About a Service Level Agreement
The Indian online retail market has been witnessing a phenomenal growth rate in the past few years. It is the fastest growing e-commerce market in the world, growing at an annual rate of 51%. In fact, 2016 was the biggest year for e-commerce in India, despite the demonetization frenzy that the nation witnessed towards the end. Being a part of a market so competitive and vibrant is not an easy thing, especially because as a seller, you need to deal with the customers’ expectations.
Perhaps this consideration towards customer expectations is one of the main reasons for the stunning growth rate of the market. The major online retail marketplaces operating in India – Flipkart, Amazon and Snapdeal, have been trendsetters in going the extra mile to provide high-quality customer service. These companies operate on the deep-rooted realisation that more than the discounts, the sales and the twitter wars, it is efficient customer service that leads to loyalty and market share. It is with this in mind that these marketplaces enter into a contract with their sellers, that stipulate the terms and conditions of the services to be provided by and to each other. This contract is known as a Service Level Agreement or an SLA.
What is an SLA?
In essence, a Service Level Agreement stipulates and defines particular aspects of a provided service – from the time frame to the quality among various other specifics. Since the marketplace that is directly answerable to the customer, the seller essentially has to enter into an SLA with the marketplace, so that certain assurances that the marketplace provides the customer are being met. There can be many types of SLAs – a customer-based SLA that stands between the buyer and a seller, or a service-based SLA that operates between a seller and a service provider, for example, a logistics company. SLAs are taken quite seriously by most online marketplaces because their reputation depends on them. For example, in early 2016 Flipkart revamped the terms of its SLA to limit the procurement time provided to the sellers to only 48 hours.
Why is the SLA Important?
It Leads to Lower Cancellations
An SLA provides you with a definite time frame that you can stick to while processing and delivering an order. This way, entering into an SLA with your marketplace is one way to make sure that your product reaches your customer on time, reducing cancellations.
It Increases Loyalty
Adhering to the terms of an SLA is a sureshot way of getting better seller’s ratings and therefore increasing the level of commitment and loyalty of the customer. The SLA is a great way to have transparency and mutual agreement between the different parties in the transaction, namely the seller, the customer and the marketplace.
It Manages Expectations
From the seller’s point of view, an SLA is a great way to manage the customer’s expectations. While marketplaces tend to push for faster delivery times, it is not always possible to provide such services for various reasons. A well drafted SLA prepares the seller and the marketplace for such possibilities and envisions a set of consequences if such situations do occur. This might include a penalty system for the seller, the logistics provider or the relevant service provider.
Things to Consider before signing an SLA
- Is the SLA aligned to your business objectives?
- Are the terms of the SLA manageable?
- What are the specific benchmarks that are monitored in the process?
- How does the SLA measure performance and how does it deal with non-performance?
- Is there a reward system for exceptional performance?
- Creating a plan in case of liabilities.
Honouring Your SLA – Improve Your Shipping Time
Having an efficient picking, packing and logistics system is the only way that you can honour the terms of your SLA and reap its benefits. If you are outsourcing your logistics needs, then you might need to sign another service level agreement with your logistics provider, except for the fact that in this case, they would be the one liable to provide the service. Here are some tips that would help improve your shipping time and therefore make the most of your SLA –
Automate Your Inventory Management
Use a multi-channel inventory management software like Browntape to automate your warehouse. This will save you valuable man hours of doing rut work and drastically reduce the chances of mistakes.
Use Trustworthy Logstics Providers
Or, just use the logistics services provided by your marketplace. This way, the shipping liability falls on them and in turn you only have to worry about product quality and packaging.
Having an efficient packaging system saves a lot of time and effort in a warehouse. Try to automate as much of the process as you can. Create standardized methods and steps that the package must go through, from quality checks, to invoicing, adding shipping stickers and safety materials to make sure that the package is safe and sound when it travels. This reduces the chance of damage during transit and therefore, product returns.
Finally, always be accessible to your customer and your service provider. Try to find quick and efficient solutions to problems by establishing dialogue. The longer you let a problem sit idle, the more time consuming it becomes.
A Service Level Agreement can either become a hassle, or it can become an efficient tool to keep track of your progress, depending upon how you look at it. For any further information about the intricacies of a service level agreement, get in touch with Browntape. We are India’s leading e-commerce experts, and we are always happy to help!