From A to B: key issues in logistics and warehousing contracts

In this episode of DLA Piper's 'Better Contracts' podcast series, Khaled Dadi catches up with Chris Rennie and Lana Turpie to explore logistics and warehousing contracts. As well as sharing insights from their experience of drafting and negotiating such contracts, they explore the dynamic landscape of the logistics sector and how businesses can use robust contracts to help manage risk and improve supply chain resilience. This can act as a helpful reminder of the content of these agreements, but also as a tool to use in proactively reviewing existing agreements to consider any supply chain gaps.

Understanding the model

Customers have an increasing array of options in the types of outsourced logistics services available to them. This offers flexibility to manage costs and meet demand, but it also requires an understanding of the service model being procured, to determine if it will fit the customer’s requirements and to ensure that the risks posed are appropriately addressed in the contract.

In light of this, the podcast kicks off with a look at the main logistics models used and key differences between them, covering inbound, outbound and reverse logistics, as well as transport modes.

The panel goes on to consider issues that businesses should be considering when entering into contracts for these services, touching upon:

• sustainability and ESG matters, including a need to assess whether the logistics arrangements align with corporate and public statements about environmental commitments
• the impact of law and regulation, both sector-agnostic (for example, in the EU, the Data Act, the AI Act, and the new Product Liability Directive) and any regulation specific to the products or materials being handled or transported (for example, in the US, the rules and guidelines of the Occupational Safety and Health Administration and the Food and Drug Administration relating to hazardous materials and pharmaceutical products)
• appropriate apportionment of risk, taking account of liability provisions and insurance.

Key trends and market challenges

Our panel considers some of the key trends shaping the sector and how these are impacting contracting practices, highlighting:

• the susceptibility of logistics chains to geopolitical risks and the importance of stress testing contracts to improve supply chain resilience
• the need to address the implications of increasing digitalization and adoption of technology, such as data usage and compliance issues arising through the use of AI, the internet of things (IoT), driverless vehicles, and robotics
• the increasing parallels with business process outsourcing arrangements, as businesses become ever more reliant on their logistics service providers.

Key contract considerations

The final part of the podcast turns to common contractual issues that every business should be thinking about, including the 'battle of the forms' that can arise when using standard terms, limitations on liability, compliance with law provisions, and sound exit strategies to avoid vendor lock-in and assist supply chain resilience.