Future Internet PPP Use Case Project

Future Internet PPP

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When a shipper and a consignee decide to do business with one another they do so based on contracts. Contracts also are established between the various intermediaries and agents that act on behalf of either the shipper or the consignee.

Contracts are legally enforceable documents that stipulate the terms and conditions of a sale or purchase. Contracts can specify penalties and bonus malus payment schemes as well. When such mechanisms are stipulated in a contract service level requirements and/or key performance indicators are also stated. The inclusion of such terms have become very common in contracts, particularly contracts between large shippers and their logistics service providers.

Enforceable contracts must stipulate a legal jurisdiction upon which they are based. This jurisdiction may be the country in which the shipment originates, the destination country or another country where the contracting parties have a legal presence. This legal jurisdiction is not only where the terms and conditions must be judged, but it is also the location where any disputes between the contracting parties must to adjudicated. Many times the jurisdiction is selected based on how “friendly” it is to one party or the other.

While the development of contracts between parties involved in international freight movements is both a requirement and a common activity, managing the actual execution of the freight movements according to the stipulations in a contract is not easy. Some examples of problems that arise in managing shipments to contracts are:

- Actual volumes carried versus contractual volume commitments;
- Global conformance versus local exceptions;
- Integration of disparate information systems from partners to monitor service levels and key performance measures;
- Contractually required reporting versus operationally necessary reporting;
- Matching of invoiced services against actually delivered services;
- Anticipated costs versus actual incurred costs;
- Maintenance of up to date contact and escalation processes.

All of these challenges have a negative impact on operational costs, working capital requirements and revenue.

See Contract

Last change: 2011-11-14

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