Have you ever considered the best way to identify strengths and weaknesses in your company’s supply chain management? Or, have you focused on how to prioritize opportunities in improving supply chain components? For supply chain managers, it can be challenging to set a market strategy and tactical goals because there could be too much information that is poorly organized or has no reference points. This is where benchmarking comes into play. Benchmarking measures the performance of company’s supply chain by considering quantity, value and time. Benchmarking formulates a tangible measure of the efficiency of main processes in the supply chain and serves to create a solid foundation of an organization’s performance. It also measures the impact of each improvement made by managers subject to proper measurement indicators.
Based on different purposes and outcomes, benchmarking can be divided into qualitative and quantitative.
Qualitative benchmarking uses best practices of competitors or similar organizations and their data on successful techniques for improving supply chain performance. It analyzes differences in strategies and practices in order to find fitting opportunities.
Quantitative benchmarking consists of KPIs (key performance indicators), estimation and analysis. Business metrics such as inventory turnover, revenue and profit are usually used – however, any custom KPI could work. Quantitative benchmarking examines the supply chain by gathering data on performance and not practice.
After data and standards are projected, one can note which processes should be improved. Main areas for benchmarking and improving in supply chain management are:
- warehouse management and inventory accuracy
- shipping/receiving accuracy
- storage density
- quality control
There are several levels of benchmarking:
1) Internal – benchmarking on a tactical level with the main focus on operations. It allows companies with multiple facilities, divisions or branches to compare and contrast the ways in which processes perform. For example, compare three different warehouses within one organization.
2) External – deliberate level of benchmarking that takes a company outside its own industry and exposes it to different methods and techniques. This type of benchmarking often requires hiring a consulting firm to perform proper research.
3) Competitive – compares a company’s operational performance against competitors’. Obviously, it is unlikely for competitors to share their specific knowledge on best industry practices, so using industry-standard metrics could be an option.
Benchmarking the supply chain helps organizations determine their relevant performance and amend operations to stay competitive. Although the process of benchmarking could consume a lot of time, effort and resources, it provides a company with unique knowledge on business activity, perspectives, opportunities and weaknesses.
For more information, download PLS Logistics ebook, Logistics Management Best Practices.