By Safock Procurement Research Team9 min read
In a month when your distributor delivers 2,285 of the 2,400 cases your restaurants ordered, and 9 of its 96 deliveries arrive late or incomplete, what do you get back?
If the supply agreement only says the supplier will "use reasonable endeavours", nothing: there is no number for anyone to miss. Under the supplier SLA in this guide, that month's performance (a 95.2% fill rate and 90.6% on time in full) earns a 3.5% credit: $5,250 on $150,000 of spend, applied to the next invoice without negotiation.
A supplier SLA turns "the deliveries have been bad lately" into a figure both sides agreed in advance.
A supplier service level agreement sits alongside the main supply contract. The contract covers what is supplied and at what price. The SLA covers how well: how much of each order arrives, whether it arrives on time, whether substitutions are allowed, how prices may change, and what the supplier owes when it falls short.
For a business with many sites, the SLA matters more than it does for a single location. Every site experiences the supplier separately, and without agreed measures, each site's complaints stay anecdotes.
The Supplier SLA Builder's default agreement, for a restaurant group buying dry goods, dairy, frozen and disposables for 24 sites, sets four measures. Each is a fraction of something both sides can count.
| Measure | Definition | Target |
|---|---|---|
| Fill rate | Cases delivered ÷ cases ordered (substitutions the buyer approved count as delivered) | 98% or higher |
| On time in full (OTIF) | Deliveries arriving in the agreed window with every line complete ÷ all deliveries | 95% or higher |
| Lead time | Orders delivered within the agreed lead time ÷ all orders | 100% |
| Price accuracy | Invoice lines at the agreed price ÷ all invoice lines | 100% |
Fill rate and OTIF measure different failures. A supplier can deliver 98% of cases and still miss OTIF badly if most deliveries are late or each one is short a single line. Track both.
The default also sets the operational rules that the measures depend on: orders placed by 2:00 pm delivered the next business day, inside each site's delivery window (6:00 to 10:00 am unless the site agrees otherwise), and emergency orders fulfilled within 24 hours where stock is available.
The default SLA measures performance from the buyer's receiving records, which the supplier may inspect. That one choice settles most disputes before they start. A case refused at the door for temperature, or a line that arrived short, is already on the goods received note, so it counts against fill rate and OTIF without anyone having to raise it.
If performance is measured from the supplier's delivery records instead, give yourself the right to audit them against your receipts.
Substitutions are where service quality and price leak together. The builder offers three rules:
Whichever you choose, add two clauses: the supplier tells the site about shortages before dispatch, and short or refused items are not invoiced, or are credited in full on the next invoice.
A price freeze fixes contract prices for a set period. The builder's default freezes them for 12 months, during which "no increase, surcharge or fee may be invoiced". After that, prices may move once every 12 months in line with an index, up to a cap, with 60 days' written notice and the index data attached. Decreases are passed on too.
The default index is the US Consumer Price Index for All Urban Consumers, food away from home (series CUUR0000SEFV), and the default cap is 3%. That cap matters right now. The index stood at 385.451 in September 2025 and 398.783 in September 2026 (FRED, Federal Reserve Bank of St. Louis), a rise of 3.5%. Under this clause, a supplier adjusting prices in September 2026 could raise them by 3%, not 3.5%.
A freeze only protects you if someone checks invoices against it. In our contract price compliance guide, a meat supplier raised prices 4% in the middle of a freeze. The freeze was worth $484.62 over 17 weeks to a buyer who compared invoices with the contract, and nothing to one who didn't.
Service credits are the agreed consequence of missing a target: a percentage of that month's invoiced spend, credited on the next invoice. The builder's default tiers:
| If, in a calendar month… | The supplier credits |
|---|---|
| Fill rate below 98% | 1% of that month's invoiced spend |
| Fill rate below 96% | 2.5% |
| Fill rate below 93% | 5% |
| OTIF below 95% | 1% |
| OTIF below 90% | 3% |
Three rules make the table easy to apply. For each measure, only the highest tier that applies counts. Credits for different measures are added together. And the total is capped at 8% of the month's spend.
Three example months for a supplier billing $150,000 a month:
| Month | Fill rate | OTIF | Fill-rate credit | OTIF credit | Total |
|---|---|---|---|---|---|
| A | 97.5% | 96.0% | 1% | none | 1%, $1,500 |
| B | 95.2% | 90.6% | 2.5% | 1% | 3.5%, $5,250 |
| C | 92.0% | 88.0% | 5% | 3% | 8%, $12,000 (at the cap) |
The SLA also says credits are "not a penalty and do not limit the Buyer's other rights." Whether a credit regime is enforceable, and how it interacts with other remedies, depends on your jurisdiction and the main contract. Have your counsel review the clauses before signing.
Enter a month's invoiced spend, fill rate and OTIF to apply the default tiers and cap. The defaults are month B.
One month's service credit · the builder's default terms
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Credits compensate for a bad month. A supplier that misses month after month needs a stronger remedy, so the default SLA adds a persistent-failure clause: if fill rate or OTIF is missed for three consecutive months, the buyer can require a written corrective action plan within 10 business days, and if performance hasn't recovered within the following 60 days, end the SLA and the related supply for the affected categories on 30 days' notice.
Two habits make that clause usable:
A supplier service level agreement sets measurable targets for a supplier’s performance, such as fill rate, on-time delivery and price accuracy, how they are measured, and what happens when they are missed, usually through service credits. It sits alongside the main supply agreement.
Fill rate measures how much of what you ordered was delivered, usually cases delivered divided by cases ordered. OTIF (on time in full) measures deliveries: the share that arrived in the agreed window with every line complete. A supplier can have a high fill rate and a low OTIF if most deliveries are late or each one is missing a line.
When a monthly target is missed, the supplier credits a percentage of that month’s spend against the next invoice. Tiers set bigger credits for bigger misses, credits for different measures can be added together, and a cap limits the total in any month.
A clause that fixes contract prices for a set period, often 12 months, during which no increase, surcharge or fee may be invoiced. After it ends, prices usually move in line with an agreed index, up to a cap, with written notice.
Ideally the buyer, from its own receiving records, with the supplier able to inspect them. Measuring from the buyer’s goods receipts means a case refused at the door or a short delivery counts against the supplier automatically.