Jana King Allen

The Federal Maritime Commission (FMC) is an independent federal agency responsible for regulating the United States’ international ocean transportation system. The FMC’s mission is to ensure a competitive and reliable international ocean transportation supply system and protect American exporters and American consumers of imported goods from unfair and deceptive practices, particularly by international shipping lines. It was established in 1961 at a time when the use of intermodal shipping containers, which could be transported by ship, rail, or truck, was rapidly expanding, reducing transportation costs and boosting global trade. Although it was founded during the Kennedy Administration, the FMC can trace it roots to the United States Shipping Board, created under the Shipping Act of 1916 to ensure a stable and reliable source of international ocean transport during a time of war in Europe by discouraging shipping liner collectives from unreasonably raising rates or reducing their services.

Outsourcing has become a key strategy for businesses seeking cost reductions, enhanced efficiency, and a focus on core competencies. However, suppliers entering into outsourcing agreements often face numerous challenges that can affect their ability to successfully meet obligations. These challenges can span operational, legal, financial, and relational areas, making it essential for suppliers to be fully aware of the potential pitfalls. This article examines the most significant challenges suppliers face when entering into an outsourcing contract and ways to mitigate them.

In the current competitive business environment, organizations increasingly turn to outsourcing to improve efficiency, cut costs, and access specialized skills. However, ensuring that suppliers consistently deliver high-quality services and meet performance expectations can be challenging. One effective strategy for managing supplier performance in outsourcing agreements is the implementation of a bonus and malus system. This article delves into how this system functions, its advantages, and best practices for successful implementation.

In a previous article, we explored strategies for managing and resolving issues with suppliers in outsourcing agreements. The essence lies in fostering open communication, adhering to the contract, and consistently evaluating the supplier’s performance against the agreed standards. This article delves into two specific actions a customer can take when the supplier fails to meet contractual obligations: Increased Monitoring and Step-In Rights. It’s crucial to address these options in the contract to ensure the customer’s right to enforce them.

Outsourcing vital business functions can be an efficient way to reduce costs, access advanced expertise, and enhance service delivery. By setting clear expectations of the supplier, using predefined evaluation methods, regularly reviewing supplier performance, and fostering collaboration, companies can ensure outsourcing efforts achieve their intended outcomes. Despite these efforts, suppliers may sometimes fail to meet contractual expectations, posing significant challenges. Here are some options available to companies when dealing with supplier underperformance.