SLA (Service Level Agreement)

An SLA (Service Level Agreement) is a contract or clause that sets out, in a measurable way, the level of service a provider commits to deliver. It is not a vague promise: it sets concrete metrics, time windows and consequences if they are not met.

In logistics and operations, a typical SLA defines how much time can pass between an order being placed and its delivery, what percentage of deliveries must arrive on time and in full, or how quickly a complaint must be answered. Measuring compliance with these commitments in real time is part of what Trazzo makes possible with end-to-end traceability.

The key to an SLA is that it turns expectations into auditable numbers: both parties know in advance what is measured, against what threshold and what happens if it is missed. That is why a well-written SLA always has indicators, targets and a calculation method.

What a well-built SLA includes

A serious service level agreement does not stop at "we'll deliver fast". It defines each commitment with three pieces: the indicator (what is measured), the target (the acceptable threshold, for example 98%) and the measurement method (how and how often it is calculated). The usual components are:

• Metrics and thresholds: the KPIs to be tracked, such as OTIF, response time or availability, each with its numeric target.
• Measurement window: the period over which performance is evaluated (monthly, quarterly), because 98% measured per day is not the same as 98% measured per year.
• Exclusions: force majeure cases that do not count against the provider (road closures, strikes, natural disasters).
• Penalties and incentives: discounts, credit notes or bonuses depending on whether the target is missed or exceeded.
• Governance: how often the SLA is reviewed, who reports and how breaches are escalated.

Why it matters in logistics and operations

In the supply chain, the SLA is the language a customer uses to demand a service level from its logistics provider, and the one that provider in turn uses with its carriers. A large retailer in Argentina can impose on its supplier an SLA of deliveries at 98% OTIF and fine every point below it. If the supplier does not measure that number in real time, it finds out about the breach when the debit note has already arrived. That is why the SLA and continuous measurement are inseparable: a commitment you cannot see while it is happening is a commitment you break blindly.

A concrete example (Argentina)

A consumer goods distributor signs an SLA with a supermarket chain that requires: a delivery window of 24 to 48 hours from the purchase order, a minimum OTIF of 96% measured monthly, and responses to complaints in under 4 business hours. The contract sets a penalty of 0.5% of the order value for each OTIF point below 96%, with a monthly cap. The distributor monitors compliance delivery by delivery; when a route falls behind, the system flags it before the month closes, and the team can act so as not to miss the target for the period.

Common mistakes when defining an SLA

• Metrics without a calculation method: agreeing on "98% compliance" without defining what counts as an on-time delivery leaves everything open to interpretation and ends in a dispute.
• Impossible targets: agreeing to thresholds that the actual operation has never reached only guarantees permanent penalties.
• Not measuring live: discovering the breach at month-end removes any chance to correct it.
• Confusing SLA with SLO: the SLA is the contractual commitment with consequences; the SLO (service level objective) is the internal goal, usually more demanding, that the team sets so it never gets close to the contract's limit.

SLA vs KPI and OTIF

These terms get mixed up, but they are not the same:

Put simply: a KPI is the metric, an SLA is the commitment signed on that metric, and OTIF is one of the KPIs most often used as an SLA clause in logistics. A good operations dashboard shows all three together: the SLA target, the actual KPI value and the gap left before a breach.