3 Good Reasons for External Supply Chain Benchmarking
Have you benchmarked your company’s supply chain operation yet? If not, read on to learn about three good reasons why you should put an external benchmarking project on your corporate to-do list for 2019.
1. It’s an Objective Way to Identify Weaknesses… And Strengths
While it is possible to have an intuitive sense of your supply chain’s strengths and weaknesses, it’s also possible for that sense to be wrong, and frankly, without some form of objective measurement, there is no way to be sure.
By benchmarking your supply chain performance against industry peers and even supply chains in other industries that operate similarly to yours, you will gain an objective view of how your procurement, inbound logistics, warehousing, distribution network, and outbound logistics functions are performing, as compared to regional or global averages in your industry.
You will also be able to see which functions and in some cases, which processes are contributing to your supply chain strengths and weaknesses.
2. It’s a First Step in Creating Objective Performance Measurements
After external benchmarking has highlighted your supply chain’s areas of strength and weakness, you will have a baseline against which to begin measuring performance in those areas. You will have the information you need to set objectives for improvement, and to monitor the effects of any steps you take to raise performance.
It’s not essential to do both. Nevertheless, in a situation where you have to choose, how should you decide? Of course, it is possible to set performance targets and KPIs without benchmarking the supply chain first, but it will be much tougher to identify the right KPIs to implement.
A supply chain benchmarking exercise will give you a good idea of which KPIs are currently in use in your industry, serving as a useful reference for selecting functional and cross-functional metrics.
3. It Will Help You Reduce Costs and Improve Service
Companies that achieve superior supply chain performance do so by increasing efficiencies and removing waste. As a result, their operating costs are reduced and they typically deliver higher levels of customer service than their peers can achieve.
For example, a warehouse operation that can keep picking errors to a minimum generates little in the way of rework costs.
Accurate picking also helps to keep transport costs down, since the operator rarely needs to execute costly expedited deliveries, which are a common consequence of erroneously picked (and hence, incorrectly delivered) orders.
There are many other examples of how superior service leads to lower supply chain costs. However, the important point for this post is that if you want the cost-benefits of being among the top supply chain performers, you must first know what levels of service you need to achieve—and the only objective way to do that is to benchmark your supply chain against those of leaders in your industry.
Is Supply Chain Benchmarking on Your 2019 To-Do List?
If your company hasn’t got around to benchmarking its supply chain against competitors, industry peers, or similar types of operation in other industries, there’s little time to waste.
The number of enterprises that use external supply chain benchmarking is much higher than it was just a few years ago, so it is likely that some of your competitors are working toward goals that will place them high in industry performance rankings.
If your enterprise does not possess similar intelligence, there is every chance that those competitors are pulling away from you without you even realising.
A benchmarking exercise will help you gain that intelligence and give you the data you need to start measuring performance objectively, addressing your supply chain weaknesses, and boost performance for reduced costs and competitive advantage.