FAQ: Contractual Agreement

A supply chain optimization project with Lokad is guided by highly skilled supply chain scientists, rigorous documentation, and a careful deliberation of terms with each client. This FAQ provides clarification regarding common contractual queries surrounding our collaborations and services, including, amongst others, pricing, operational costs, and intellectual property concerns.

Intended audience: Legal and/or supply chain departments.
Last modified: April 8th, 2025

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1. Base pricing

1.1 Does Lokad offer a free trial phase?

Yes. A free trial account can be requested by sending an email to contact@lokad.com. Please provide us with some context regarding your intentions for this account. A production Lokad account includes a substantial quota of computing resources, and Lokad reserves the right to decline such requests, although we rarely do.

Alternatively, Lokad’s read-only ‘demo account’ provides direct access to a production-like setup. This account is the easiest way to get a sense of the User Interface and User Experience (UI/UX) of Lokad, by taking advantage of a pre-loaded dataset.

Also, the Envision Playground of Lokad offers a free, immediately accessible, reduced version of the programmatic environment provided by Lokad. This playground does not require user registration for access. However, please note that data pushed to the playground is not protected by an authentication mechanism.

Discover our Demo Account to experience the power of advanced analytics first-hand.

Watch the Demo Account Video to see our innovative features in action.

Explore the Envision Playground to experiment with real-world scenarios using our interactive tools.

1.2 Is your pricing structure based on fixed fees or usage?

The vast majority of our clients opt for a fixed monthly fee structure, independent of usage. This fee is divided into two parts: the platform fee and the support fee. The platform fee covers all computing resources and everything typically expected from a Software as a Service (SaaS) offering. The support fee covers Lokad’s supply chain scientists who are dedicated to the client’s account.

However, most of our agreements include a usage cap, typically set well above expected usage. Our fees are competitive and, being fixed, might not accommodate companies experiencing rapid growth, especially during mergers and acquisitions.

1.3 What is your license model or subscription fee, and the cost drivers for the license model, such as perpetual licenses, subscription licenses, fee per named user, fee per concurrent user, fee per frequent user, and enterprise? If there are multiple models, could you provide details for each option?

Lokad typically charges a flat monthly fee, which we might consider as ’license fees’ related to the platform’s subscription. This fee is attached to a scope, usually defined by a type of supply chain decision (e.g., reorder quantities) over a given segment (e.g., a country). The scope often includes some caps, such as the number of users, although these caps are usually set quite high and are not expected to be reached during the initiative. These caps are intended to reflect a ‘fair use’ of Lokad rather than an upsell mechanism.

Over time, Lokad may be entrusted with additional scopes by the client. These new scopes are typically reflected through an addendum to the contractual agreement with Lokad, and the addendum does include an extra monthly fee for the Lokad platform.

For companies unsure about their future usage of Lokad, the contractual agreement with Lokad may include provisions (to be negotiated) for situations where some caps might be exceeded, with corresponding extra fees (e.g., a certain number of users). However, we also strive to keep those agreements reasonably simple to keep administrative costs low for both parties, Lokad and its clients.

As Lokad operates a multitenant SaaS offering, there is no perpetual license.

1.4 Can you give us a price range per user per module per month?

Lokad does not typically charge per user.

However, it is important to note that the marginal cost associated with adding an extra user to a given Lokad account is low. Moreover, our platform is engineered to deliver constant-time response ‘by design’, regardless of the number of active users. Consequently, Lokad’s accounts with 1000+ users are as responsive as those with just a handful of users. This achievement in both cost and performance is possible because, unlike most competitors, Lokad’s platform does not rely on SQL databases or OLAP cubes.

Lokad generally charges per “module” on a monthly basis if we consider a module to reflect a type of supply chain decision (e.g., inventory replenishments) over a certain scope (e.g., a country). Such a module includes both the automated generation of supply chain decisions and all necessary instrumentation, possibly including the validation workflow.

As a rule of thumb, the starting price per month for a distinct type of supply chain decision, as opposed to merely a scope extension for the same decision, starts in the low-digit thousands of EUR or USD. The monthly fee reflects both the amount of computing resources and the dedication of Lokad’s supply chain scientists.

See Pricing for an overview of our plans and find the best fit for your supply chain needs.

2. Operational costs

2.1 What are the operational costs for running and operating the solution?

Three types of costs are involved in operating the Lokad solution: the fees charged by Lokad (typically monthly), the IT overhead related to the data pipeline, and the client-side manpower (typically supply chain practitioners) needed to operate Lokad. The sum of these costs represents the quasi-totality of the Total Cost of Ownership (TCO) of the Lokad solution.

The design of the data pipeline supporting Lokad presents unusually low IT overheads. Lokad expects to operate over raw/untransformed/unprepared business data as found in existing business systems. Lokad’s supply chain scientists fully handle this aspect.

Moreover, the degree of automation delivered by Lokad is remarkably high, allowing many clients to operate for weeks without any human intervention on their side. Thus, the amount of supply chain practitioners involved in supervising the Lokad solution largely depends on the client’s choice rather than being a constraint imposed by the software vendor (Lokad). Consequently, Lokad presents unusually low manpower requirements.

Finally, concerning Lokad fees, we simply stay on budget. The monthly fee is what we charge. Period. Unlike many of our peers, our initiatives do not end up in a maze of cost overruns: there are no hidden “consulting” or “integrator” services, no hidden “tier 1” support, no hidden “customization fees”.

See Grand experiment on the TCO of a supply chain software to dive deeper into our insights and learn how we can optimize your supply chain costs.

2.2 What type of changes to the solution will incur a cost to the client?

Most changes do not incur additional costs to the client; these changes are covered as part of the usual monthly fee charged by Lokad. However, any change that fundamentally exceeds the scope, as defined in the contractual agreement, would involve separate costs, and possibly an addendum to the contractual agreement.

A typical subscription of Lokad includes the support of Lokad’s supply chain scientists. Our supply chain scientists take a broad commitment toward resolving a stated challenge (e.g., optimizing purchase orders). As the challenge itself changes over time, either because of the business context or the applicative landscape of the client, the solution delivered by Lokad is continuously revised (and improved) by the supply chain scientists. This work happens on a per-client basis and is the usual intended path for a Lokad initiative. Our clients do not pay any ’extra’ for changes that merely reflect the continued resolution of the same supply chain challenge.

However, if the change within the Lokad solution is intended to support the delivery of a distinct type of supply chain decisions (e.g., production orders vs. purchase orders), then this change requires revisiting the original contractual agreement. In such circumstances, Lokad would typically propose an addendum that reflects an extension of our commitment toward the client.

Also, our contractual commitment may include a negotiated scoping provision (e.g., a country). In those situations, any change intended to support the delivery of supply chain decisions beyond the original scope would then be subject to a revision of the original agreement. Those scoping provisions are frequent with large clients that operate over many countries.

2.3 What kind of updates are included in the license fee and what are excluded?

If we interpret ’license fees’ as the portion of the monthly subscription of Lokad relative to the platform, that is, the multi-tenant SaaS offering minus direct support, then all updates are included. All our clients are continuously upgraded to the same production version of the Lokad platform.

Furthermore, our platform-level updates are also carefully engineered to not require manual interventions from our clients to remain operational. In other words, we also pay attention to the implicit costs (client-side manpower) in addition to the explicit costs (Lokad’s monthly fees).

See also Operational costs 2.2 in this FAQ.

2.4 Is there a requirement for the client to purchase additional licenses for your solution, e.g., to move data or files from a source to your solution?

No. Moving data into the Lokad platform, or from the Lokad platform, is already covered through the flat monthly fee associated with the Lokad platform.

Usually, the contractual agreement between Lokad and the client restricts the usage of the Lokad platform to a specific scope (detailed in the agreement). All data movements that are part of this scope are covered through the platform’s monthly fees. Most agreements are written with a perspective of ‘fair use’, meaning we do not list every single piece of data expected to be processed by Lokad, as this would be highly impractical. Instead, we outline the scope of the challenge, drawing the line at whether the data is relevant for the challenge at hand.

When introducing exceptionally large datasets, typically third-party datasets, to refine the supply chain decisions of interest (e.g., competitive intelligence data) while generating substantial overheads for the Lokad platform, the agreement clarifies whether those datasets are deemed in-scope or out-of-scope.

2.5 Are edits, made by users, to the reports or dashboards limited or is there a different pricing for edits?

No. Edits are already covered through the flat monthly fee associated with the Lokad platform.

The flat monthly fee for the Lokad platform is defined in the contractual agreement between Lokad and the client. This agreement usually defines the usage limits of the Lokad platform in terms of scope (e.g., a type of supply chain decision in a given region). Thus, as long as the edits or changes made by users are relevant to the agreed scope, they are included as part of the package.

3. Implementation pricing

3.1 How is the implementation cost for the solution calculated? What are the cost drivers?

The proposed implementation fee is typically equivalent to six months of production. The onboarding phase, during which the implementation happens, is billed monthly, at the same rate as the production phase later on. The implementation fee is primarily driven by the allocation of Lokad’s supply chain scientists to the client initiative.

In practice, the amount of resources (i.e., supply chain scientists) allocated during the onboarding phase exceeds that for which the client is nominally paying. The target of Lokad is to break even in two years after a 6-month onboarding phase. This approach creates proper incentives for both Lokad and the client. Sizeable upfront fees give the software vendor an incentive to ’take the money and run’. Conversely, charging too little initially gives the vendor an incentive to significantly increase its prices afterward to make up for the risky investment.

One usual way for the client to lower the implementation cost consists of appointing an employee as the sole point of contact for the supply chain initiative carried out by Lokad. A sole point of contact improves the productivity of the supply chain scientists and reduces costs on Lokad’s side.

Our contractual agreements do include a cap on the number of hours of supply chain scientists to be allocated to a given initiative on a monthly basis. As stated above, we are usually not enforcing this cap during the onboarding phase (i.e., we do not charge the hours beyond the quota); however, if the client is unable to meet its commitments (e.g., there is no single point of contact), then the duration of the onboarding phase is likely to increase.

3.2 Do you have any other costs that would be considered initial cost or implementation costs?

No. Our supply chain scientists offer comprehensive onboarding support, covering various roles typically handled separately (though not at Lokad), including integrator, data engineer, business analyst, data scientist, consultant, and project manager.

However, some other software vendors may charge fees for additional features, such as providing extra SQL access or enabling the extraction of historical data from the client’s business systems. While these costs are essential for optimizing the supply chain, they might catch clients off guard.

See also Implementation pricing 3.1 in this FAQ.

3.3 Do you offer a pay-as-you-go subscription model that aligns with the rollout or implementation phase?

Yes, we can offer a pay-as-you-go subscription, although this is not a practical option for most supply chain challenges.

Supply chain challenges require holistic/end-to-end solutions; otherwise, problems are merely displaced, not solved. For example, achieving an extremely high service level at a single retail store is trivial when done at the expense of service levels at other stores in the retail network. Thus, it does not usually make sense to “fragment” a given supply chain to address a problem progressively. It is, however, possible to progressively roll out the solution, but the solution must address the whole problem (whole supply chain network) from day one.

If we are considering a large company with fairly isolated supply chain segments (either in terms of geographies or market segments), then it is possible to envision a subscription model that reflects those segments.

As a principle, Lokad does not favor pay-as-you-go expressed in computing resources, because this mechanism gives a massive incentive to the software vendor to be as inefficient as possible. On the contrary, a fixed platform fee, as typically done by Lokad, provides the opposite incentive: any performance improvement translates into making Lokad more profitable. Maintaining the integrity of our ambient incentives is critical for the long-term interests of our clients.

4. Support services

4.1 Does Lokad provide managed services?

Yes, the ‘managed’ part of Lokad comes through our teams of supply chain scientists.

A client will be assigned one or possibly several supply chain scientists. This person is both a supply chain expert and a data scientist. The supply chain scientist usually spearheads the whole supply chain initiative on behalf of the client. The responsibilities of the supply chain scientist include, but also largely exceed, what is usually expected from technical support.

See The Supply Chain Scientist Lecture to explore how our experts innovate in supply chain management, offering you cutting-edge solutions tailored to your needs.

4.2 What is your perspective on acceptance criteria? Will detailed acceptance criteria be specified in the delivery contract and will general acceptance be based on the service being fully prepared for production?

Acceptance criteria cannot be anything but a unilateral decision from the client. Thus, Lokad usually offers subscriptions with little or no commitment beyond the current month.

Formal/quantitative acceptance criteria can be trivially gamed by any enterprise software vendor worth their salt. Informal/qualitative acceptance criteria are impossible to reliably enforce at a contractual level. Supply chain optimization invariably entails a long series of subtle trade-offs. Furthermore, those trade-offs evolve over time along with the market and the strategy of the company.

The closest thing we have to an ‘acceptance criteria’ is the zero-percent nonsense principle: not a single decision (e.g., replenishment quantity) proposed by Lokad must be insane. Achieving 0% forecasting error is impossible, but achieving 0% insanity is not. A decision is deemed as ‘sane’ when a supply chain practitioner would validate this decision if it had been produced by a colleague (instead of Lokad). In other words, the practitioner might have done it differently, but as it is, the decision is good enough not to be worth objecting to.

See Assessing the Success of Quantitative Supply Chain for an in-depth exploration of how quantitative approaches are transforming supply chain management.

See Experimental Optimization Lecture for insights into our methodology and how we leverage data to drive supply chain improvements.

4.3 Will support and maintenance services be offered? including the support model for different tiers of support services (Tier 1, Tier 2, etc.)?

Yes, support services are provided by Lokad’s supply chain scientists and the maintenance of the Lokad platform (a multitenant SaaS offering) is delivered by the software engineers of Lokad.

When considering a typical ‘managed’ Lokad subscription, that is, a subscription package that includes the regular services of our supply chain scientists, Lokad does not differentiate between tiers of support services. Instead, Lokad appoints one supply chain scientist (possibly several for larger initiatives) to the client, and this person provides end-to-end support to the client. This person is directly and personally responsible for the adequacy of the supply chain decisions generated by Lokad. However, this person isn’t alone – in a sense, the whole corporate structure of Lokad is there to support our supply chain scientists in any way we can.

Indeed, the predictive optimization of any given supply chain is a challenging task. It takes at least days, and frequently weeks, for even a talented, experienced engineer to gain the familiarity needed to provide adequate advice and guidance for a given company. Support escalations, hopping from one person to the next, tend to worsen the situation due to the newly introduced people not being as familiar with the situation as they need to be.

4.5 What is the expected lifecycle of your system used to provide the services? Define any major “End of Support” and “End of Life” dates known for the used platform and how you plan to overcome those situations.

The Lokad platform will be indefinitely supported by Lokad, the software company. Furthermore, as the Lokad platform is a multitenant SaaS, our clients benefit from an ‘evergreen’ software product. We do not plan for any termination of this platform.

There are two main reasons for a software vendor to terminate its offering: because it loses interest or because it goes bankrupt.

Regarding the first point, our revenues are almost exclusively (*) derived from our core software platform. Failure is not an option for us; we are strongly incentivized to keep developing this platform for as long as possible. The situation of Lokad is very unlike that of many large enterprise software vendors that offer services beyond supply chain optimization. For those vendors, terminating any non-core service deemed not profitable enough is always a possibility.

Regarding the second point, Lokad is a bootstrapped, profitable company, still dominantly founder owned. Our development over the last 15+ years has been steady and quite uneventful. We are confident in our ability to support this platform for the near future. While no company can claim to be completely safe from default, Lokad carries much less risk than companies that have raised funds. In particular, for enterprise software vendors, the higher the fundraise, the bigger the risk of default.

For large clients, we offer the possibility to put the source code of the Lokad platform in escrow, precisely to give them an option to continue the service of the Lokad platform if the unfortunate event where Lokad, the company, would cease its operations altogether. The costs and modalities of such an offer are detailed in the contractual agreement between Lokad and the client.

(*) A minor portion of Lokad’s revenue comes from side projects, like selling books.

See also Microsoft to end Supply Chain Center preview less than a year after launch, Kelly Stroh, Supply Chain Dive, October 11, 2023.

4.6 Can you specify the training packages you offer and the price for these?

Delivering training materials and sessions is typically part of the mission of Lokad’s supply chain scientists, who spearhead the initiative on behalf of the client. Thus, we usually do not offer a ’training package’ per se; training is part of the overall package that our clients receive from Lokad.

Training, as delivered by the supply chain scientists, is tailored depending on the relevant audiences: supply chain executives, practitioners, data scientists, consultants, other managers within the company (e.g., finance, etc.). Unless the client seeks to replicate the competency of the supply chain scientists themselves, the amount of training involved with Lokad is extremely limited compared to comparable enterprise software products. However, Lokad typically demands a deeper understanding of high-level concepts (e.g., the role of uncertainty in supply chain).

In cases where the client wishes to replicate in-house the competency of the supply chain scientists, we can propose a dedicated package, negotiated as part of the contractual agreement. We estimate that establishing a supply chain science practice requires a minimum of three full-time employees to maintain relevant institutional knowledge over time, as well as being able to address supply chain emergencies in a timely fashion. The process would typically take six months, with in-training supply chain scientists being mentored by Lokad to gradually take over the initiative of the client.

4.7 What is the cost per hour for your professional services, including roles such as project management, subject matter experts, architects, technicians, etc.?

All these roles are covered by Lokad’s supply chain scientists. The hourly cost is negotiated as part of the contractual agreement between Lokad and the client. However, the hourly cost is usually only a secondary concern, as Lokad rarely charges by the hour. The hourly rate for the supply chain scientists is introduced in the contractual agreement as a baseline in case Lokad ends up, at the client’s request, exceeding its original commitment; however, this clause is infrequently put into effect.

The mission of the supply chain scientists, as envisioned by Lokad, is much broader than that practiced by other enterprise software vendors. This approach is more challenging as it requires more talented and experienced employees. However, it offers a superior form of service from the client’s perspective, eliminating entire classes of delays and organizational problems.

The reason the hourly rate is infrequently called upon is that Lokad takes a commitment primarily to deliver supply chain results for a given flat monthly fee. This aspect is critically important to ensure that Lokad is properly incentivized to work efficiently. While hourly rates are, to some extent, unavoidable in enterprise services, they reward mediocrity: the more inefficient the vendor, the more it earns. Lokad mitigates this problem by keeping the hourly rate as an ‘escape hatch’ for handling edge cases in the relationship with its clients, however, intending for it to remain infrequently used.

4.8 What types of support and maintenance packages does your enterprise software dedicated to supply chain optimization offer and what is the annual cost?

A typical supply chain initiative carried out by Lokad comes with a flat monthly fee. This fee covers both the computing resources for the Lokad platform and the expertise delivered by the supply chain scientists. This fee is typically flat: it is the same monthly fee during the onboarding phase and during the production phase. The package delivered by Lokad covers all support and maintenance.

Supply chain optimization is not like usual enterprise software. No matter how good the initial setup might be, every passing month brings a lot of change to any nontrivial supply chain: market conditions change, the applicative landscape evolves, the supply chain is reorganized, etc. Only the easiest changes can be addressed through mere configuration. Frequently, changes go much deeper and require rethinking and rewriting part of the solution.

As a result, Lokad adopts a proactive approach to the maintenance of the solution. The production phase entails the continuous improvement of numerical recipes, but frequently, entire sections of the Envision codebase dedicated to the client - Envision being the Domain-Specific Language (DSL) engineered by Lokad for predictive optimization of supply chains - require rewriting.

This approach is adopted out of necessity. More than a decade ago, we learned the hard way that, as far as supply chain optimization is concerned, any implementation left as-is quickly becomes irrelevant, no matter how much “configuration” is applied to it. Consequently, supply chain practitioners invariably revert back to their original spreadsheet after a year or so.

4.9 Assuming that the client starts with a delimited scope (like a business unit or a product segment), is the extension of the scope already included in Lokad’s offering?

Yes, if this extension is explicitly covered by the contractual agreement between Lokad and the client. Most agreements between Lokad and clients are precisely framed in terms of scope: a type of supply chain decision (e.g., replenishments) over a given portion of the business (e.g., a region or a product segment). Thus, the extension of the scope usually entails a revision of the agreement.

However, depending on the intent of the client, some extensions might already be pre-negotiated as options. If the client wants to start with a small pilot with the explicit intent to broaden the supply chain initiative at the end of the pilot if it is deemed successful, then we would most certainly include, as part of the initial agreement, the financial terms associated with the intended scope expansion.

Conversely, if the client starts on a scope that is very unlike the rest of the supply chain, precisely because this scope is deemed troublesome due to its unique nature, then it is common to postpone the assessment of the cost of an extension of the Lokad initiative until Lokad has proven itself on the scope of interest. Indeed, such extensions frequently entail entirely separate initiatives and require efforts, both from Lokad and from the client, to be accurately assessed.

4.10 How does Lokad handle scope extensions within a client’s subscription, particularly regarding licensing policies?

Scope extensions with Lokad typically involve additional charges for both the Lokad platform (computing resources) and Lokad service (supply chain scientists). We generally prefer flat monthly fees unless there are specific reasons to choose otherwise. The details of these fees are outlined in the existing contractual agreement between Lokad and the client.

Practically, scope extensions are managed by Lokad’s supply chain scientists. They ensure that any changes are thoroughly vetted for production readiness before implementation. This process involves close collaboration between Lokad’s supply chain scientists and the client’s supply chain practitioners.

4.11 How does Lokad allocate resources for projects, and what are the profiles of the Lokad team members? Can we access their CVs?

Lokad primarily assigns resources based on supply chain scientists. For small initiatives (companies with less than 100M EUR or USD turnover), typically less than one full-time equivalent supply chain scientist is involved. Intermediate initiatives (companies between 100M and 1B EUR or USD turnover) usually have one to three supply chain scientists. Large-scale initiatives (potentially worth several billion USD or EUR in inventory) typically engage a single-digit number of supply chain scientists.

Our supply chain scientists are predominantly engineers, with a few holding PhDs. We recruit individuals with backgrounds sought after by reputable companies like Amazon, Microsoft, and McKinsey. While we cannot provide CVs without employee consent, most team members have LinkedIn profiles.

Reviewing these profiles should offer insights into their academic and professional backgrounds. Approximately two-thirds of our team are supply chain scientists.

See Lokad’s company page for insights into our team’s expertise and to connect with our professionals.

4.12 What is the minimal duration of the contract with Lokad? Do you accept contracts that are less than three years?

According to our usual terms, the clients of Lokad can terminate the contract at any time, but the fees associated with the current month are due. Thus, in terms of the duration of commitment, Lokad implies a monthly commitment. This means that the minimal contract duration is one month.

We are reluctant to sign yearly commitments from the start of the initiative while the solution to be delivered by Lokad remains unproven. Yearly commitments give a major incentive to the enterprise software vendor to “take the money and run,” an all-too-frequent pattern in supply chain optimization.

Once Lokad is in production, and its value is confirmed, we are happy to engage in longer commitments, usually yearly commitments, to lower costs for both parties.

4.13 Do you allow tacit renewal of the contract after its initial duration?

Yes, tacit renewal is usually our default contractual terms. As Lokad is often considered a mission-critical ingredient of the operations of the client, we do not interrupt the service without receiving direct confirmation from a known contact that it is indeed the intent of the client. In particular, we are mindful of potential social engineering attacks intended to disrupt the operations of our clients.

Furthermore, if the client requires explicit renewal, this can be arranged as well.

5 Contractual terms and liabilities

5.1 Will the prices remain frozen for the entire initial duration of the contract, provided that the scope and relevant volumes (e.g., transactions, users, sites, and/or companies covered) do not change significantly? If prices are not frozen, will the escalation be permitted only once per contractual year, be based on a mutually agreed revision formula, and have an upper limit?

Yes, we aim for simple and unsurprising pricing. Our agreements typically include an inflation clause with a yearly revision of the monthly fee, based on a public inflation index agreed upon by Lokad and the client as negotiated through the contractual agreement.

Putting an upper limit on an inflation index is possible but not typically advised. We have no control over inflation, and significant inflation affects both the client’s revenues and Lokad’s costs. If substantial inflation occurs without allowing Lokad to adjust its prices accordingly, we might be forced to exercise an exit clause of the contractual agreement.

However, aside from inflation considerations, it is possible to freeze Lokad’s prices for the duration of the contract. This is one of the key reasons why some of our clients negotiate multi-year contracts. By default, Lokad comes with little or no commitment. We suggest keeping it that way until Lokad is in production, and its value has been demonstrated.

5.2 Will Lokad be fully responsible for any damage caused to the client and its affiliated companies during the course of the project and contract? Is there room for discussion regarding the exclusion of indirect, consequential, and/or punitive damages? If the proposed terms align with the client’s expectations, is there potential to discuss a cap on Lokad’s liability? If so, will this cap apply per contractual year and be no less than the amounts for which Lokad is insured?

Under certain circumstances, we can be amenable to a liability clause capped at the last 12 months of payments made to Lokad. This specific detail would need to be explicitly covered in our contractual agreement. However, for most clients we serve, this liability clause is much more restrictive.

Lokad plays a crucial but narrow part in the client’s supply chain. The value delivered by Lokad is deeply intertwined with other processes of the client, making it challenging to isolate the effects of Lokad’s actions from other factors. Lokad is not in the business of selling insurance services. If the client perceives its supply chain as a whole to be at risk, we recommend taking an independent insurance contract to cover those risks.

It is also important to note that Lokad aims to be more reliable than the manual processes it replaces. One of the main drivers of ROI that Lokad generates is the reduction of consequential mistakes through routine decisions (e.g., purchase orders). However, the future’s uncertainty is irreducible; Lokad cannot entirely eliminate decisions that, although reasonable at the time, turn out to be suboptimal later. It is not reasonable to expect that Lokad should never make any “damaging” mistake, as every supply chain decision involves some level of risk.

The correct contractual approach is not to make the supply chain software vendor liable for the supply chain’s overall performance, as this is not a feasible option for complex decision-making processes. Instead, ensuring that the client can terminate the relationship with little or no delay is crucial. Lokad is more than willing to allow the client to operate with little or no commitment.

No, Lokad will not be required to obtain insurance for subpar supply chain performance due to two main reasons.

Firstly, while Lokad significantly influences supply chain performance, its contribution is only one aspect of a broader business operation. Evaluating Lokad’s performance requires subjective judgment, considering the overall business context. This complexity makes it impractical to define contractual terms solely based on performance metrics.

Secondly, practically, insuring Lokad’s supply chain performance is not feasible, similar to insuring a company against financial losses. The associated costs would likely outweigh the benefits, making it economically unviable for the company.

See also Contractual terms and liabilities 5.2 in this FAQ.

5.4 What are the penalties if Lokad fails to meet SLAs?

Lokad’s service agreements automatically include a Service Level Agreement (SLA). According to this SLA, if Lokad fails to meet its obligations, the client may be eligible to have their entire monthly fees waived.

However, it is important to note that SLA incentives can pose risks for the client. For software vendors like Lokad specializing in supply chain optimization, achieving near-perfect SLAs is relatively simple: returning “bad” results whenever “good” results are unavailable.

In situations where Lokad must choose between delaying a supply chain decision by an hour to ensure accuracy and delivering potentially incorrect results immediately, delaying the decision is typically the safer choice. Unfortunately, SLAs often incentivize the opposite behavior.

With over a decade of experience operating a multitenant SaaS platform that is expected to be available 24/7, 365 days a year, we are confident in our ability to maintain extremely high SLAs. While we include an SLA by default, if a client faces a scenario where delayed delivery of Lokad results could jeopardize operations, we recommend implementing technical solutions to address the challenge proactively, rather than relying solely on contractual penalties. Our extensive experience in this area allows us to adapt to the unique needs of each situation.

6. Intellectual property

6.1 What are Lokad’s policies regarding intellectual property and ownership rights for knowledge created during a client-paid installation?

The client retains non-exclusive rights to materials provided by Lokad’s supply chain scientists. These materials include Envision source code tailored for the client’s case and the Joint Procedure Manual (JPM), which serves as the comprehensive guide for the initiative.

While these materials are customized for the client, they are not entirely new creations. The codebase consists of adapted code snippets, and the JPM incorporates elements from Lokad’s prior materials, adjusted to align with the client’s terminologies.

The knowledge generated during the initiative primarily pertains to the client’s specific supply chain and operational context. This knowledge belongs to the client but is not transferrable to other companies.

Lokad does not customize its platform during onboarding. Thus, there is no immediately transferrable knowledge created during the client-paid installation. However, over the course of the initiative, supply chain scientists gain experience, indirectly contributing to Lokad’s platform development. This process is funded by Lokad’s gross margin from each initiative, rather than directly charged to the client.

Therefore, beyond insights specific to the client covered by Non-Disclosure Agreement (NDA) terms, it is generally unreasonable for the client to claim ownership of the knowledge involved in a Lokad initiative.

6.2 How does Lokad ensure compliance with industry regulations and guidelines?

Lokad’s software engineering team is responsible for designing the Lokad platform to meet all relevant regulatory requirements. Our approach prioritizes integrating compliance measures directly into the platform’s design, rather than addressing them as an afterthought, as is often the case with enterprise software.

For instance, we typically refrain from collecting personal data from our clients, as such data are unnecessary for supply chain optimization purposes. By avoiding the collection of personal data altogether, we can often bypass many associated regulations. From our perspective, personal data represent a liability rather than an asset.

Navigating industry guidelines can be challenging. Many guidelines are issued by self-appointed bodies that tend to prioritize selling certifications over practical software considerations. In our experience, software guidelines are often too vague or outdated to offer practical value. The most effective guidelines in software tend to be high-level principles, which are not easily subject to simple compliance checks.

For regulations outside the realm of software (e.g., regulations governing the transport routes for cyanide containers), we rely on the expertise of our clients to ensure full compliance with relevant requirements. Lokad’s supply chain scientists implement the necessary constraints based on our clients’ communications. However, it is the responsibility of our clients to provide us with relevant insights and to validate that our implementation accurately reflects their understanding of the regulations.

Yes, Lokad ensures that no fees will be charged to the client for standard compliance aspects within the software industry, such as managing personal data.

Additionally, as the Lokad platform aids in making supply chain decisions, it is important to adhere to relevant regulations. For instance, a facility might not meet the requirements to store certain products. In such cases, we rely on the client to communicate these constraints to us. Our team of supply chain scientists will then incorporate these constraints, along with others, into the overall solution.

However, some industry-specific regulations can be intricate. To accurately assess the workload needed to implement these constraints, we require transparent communication and sharing of relevant information from the client before providing a quote. It is helpful if the information is simplified and clearly defines what Lokad needs to address, rather than referencing extensive regulatory documents. This ensures that our implementation aligns with the client’s expectations.

Yes. Lokad prioritizes compliance with regulations and client security guidelines. To achieve this, we do not require personal data for supply chain optimization.

Therefore, we request clients to remove or mask any personal data before sharing it with us, eliminating GDPR compliance concerns. Additionally, Lokad does not internally process credit card information. While some clients pay by credit card (with wire transfers being the primary method), we use third-party payment processors to ensure Lokad never possesses third-party payment card data.

We offer technical assistance to help clients enforce these practices effectively.

6.5 Does Lokad license any patents for its solution?

No. Lokad does not hold any patents, nor do we license any third-party patents.