Service level agreement: How to secure quality, timelines, and support from your suppliers?

Service level agreements (SLAs) turn supplier commitments into measurable objectives, securing quality of service, timelines, and support. True management tools, they strengthen transparency, limit contractual risks, and foster a sustainable, value-creating supplier relationship.

Contents:

• What is an SLA?
• What does a service level agreement contain?
• What types of indicators should be included in your SLAs?
• Why implement SLAs?

As part of supplier contract management, service level agreements (SLAs) play a key role. A genuine management tool, they turn contractual requirements into concrete, measurable objectives. Delivery times, product quality, service availability... So many commitments that need to be clearly defined. By formalising the responsibilities of each party, the SLA fosters a more transparent, performance-driven relationship.

What is an SLA?

The SLA definition is clear: a service level agreement is an agreement negotiated between two parties, a customer and its service providers, which defines the levels expected in terms of quality, performance, and reliability of the goods or services provided.

This document describes the level of service a supplier commits to providing to its client, as well as the consequences when requirements are not met. These commitments then translate into quantifiable performance indicators, ensuring clarity, accountability, and transparency alike.

As Olivier Wajnsztok, Associate Director at AgileBuyer, points out: “This contractual relationship is built on the basis of each individual client-supplier relationship, and it is up to both parties to find the right compromises. When setting one up, it’s important to bear in mind that SLAs help establish a healthy relationship between the client and the supplier. To do this, you need to be open to negotiating supplier commitments, get project teams on board, consolidate third-party commitments, anticipate ‘grey area’ conflicts and, lastly, draft a balanced contract.”[1]

The SLA is also an essential tool for objectively assessing supplier performance. It links contractual commitments to operational performance and ensures ongoing monitoring of service quality. These documents are often incorporated into or appended to supplier contracts to govern the delivery of services.

What does a service level agreement contain?

Each service level agreement is unique, shaped by the discussions and negotiations between the two parties. That said, these documents generally follow a common structure.

Scope

First, service level agreements specify the nature of the services covered, as well as the limits and exclusions of these services.

Performance indicators

To measure the expected level of service, the parties define key performance indicators. These can cover availability, responsiveness, quality, or compliance, for example. These KPIs make it possible to track service performance over time.

Roles and responsibilities

The document sets out the responsibilities of each party to ensure transparent governance. The service provider guarantees continuity of service, while the client is responsible for the approvals and feedback needed for the services to run smoothly.

Penalties, incentives, and corrective measures

SLAs set out the consequences of meeting or failing to meet the defined service levels. These can include penalties such as service credits or financial deductions, rewards in the form of bonus payments, or action plans to correct recurring failures. This mechanism ensures commitments are honoured, while encouraging a collaborative approach to continuous improvement.

Monitoring and reporting

SLAs go hand in hand with ongoing monitoring of service levels. Teams can set up dashboards, automated reports, and regular activity reviews. This reporting system provides real-time visibility into both performance and compliance.

Claims resolution mechanism

In these agreements, the parties also define the procedures, timeframes, and escalation levels to follow if contractual objectives are not met. This makes it easier to resolve issues while preserving service continuity and the quality of the business relationship.

Agreement duration and review

SLAs are designed to evolve in line with customer needs and market conditions. The parties can therefore periodically review key performance indicators, objectives, or certain governance elements to ensure the agreement remains relevant.

What types of indicators should be included in your SLAs?

Within SLAs, key performance indicators can cover various areas: availability, logistics, quality... It’s important to select relevant indicators that are easy to measure and track using reliable, automated tools.

Availability

• Availability of products or services.
• Frequency of service interruptions.
• Availability of the Punch-Out service.

Logistics

• OTIF (On Time In Full), i.e. the proportion of deliveries made in full and on time.
• Lead time, or the average time between order and delivery.

Quality

• The non-conformity rate, i.e. the proportion of incidents.
• The audit pass rate.
• Invoice compliance.

Responsiveness

• Average response times.
• Average resolution times.

CSR

• The proportion of eco-responsible products.

What is an eco-responsible product?

At Manutan, an eco-responsible product is a product that: carries a recognised environmental label (for example, the European Ecolabel, Ecocert, PEFC, etc.), discover all our labels, and/or is made from at least 25% recycled materials, and/or is second-hand (used or refurbished). (available in Belgium, Czech Republic, Denmark, Sweden, Finland, France, Germany, Hungary, Italy, the Netherlands, Norway, Poland, Slovakia, Spain, Switzerland, the UK, Portugal, at the time of content publication)

Why implement SLAs?

SLAs offer many benefits for organisations looking to strengthen their supplier management.

Accountability

SLAs define the responsibilities and commitments of each party. Everyone knows the obligations they must meet and the resources needed to meet them.

Clarity

All expectations are clearly spelled out: services, performance levels, tracked indicators, and evaluation methods. This limits the risk of differing interpretations or misunderstandings between the parties involved.

Protection

Service level agreements provide a predefined framework for handling any disruptions and claims. They also offer each party legal protection in the event of non-compliance with requirements. This facilitates conflict resolution and helps preserve the client-supplier relationship.

Service level agreements have thus become a key tool for managing the supplier relationship. They provide a framework for control, but also a lever for performance and continuous improvement. This creates the conditions for a long-term, value-creating collaboration.