Why You Should Benchmark Your Supply Chain Performance
Despite a wealth of available advice as to why supply chain benchmarking is essential, there are still plenty of companies that for one reason or another, simply haven’t got around to doing it.
There are plenty more supply chain organisations that do perform benchmarking, but seemingly without a clear understanding of why.
Hopefully yours isn’t one of those companies, but just in case, this post will explain the most important reasons for supply chain performance benchmarking, and why those reasons are important to your company’s success.
A Foundation for Performance Objectives
If your enterprise hasn’t benchmarked supply chain performance, you really can’t know what your strengths and weaknesses are. You might have some idea, but you won’t really know.
That’s not a particularly good position to be in, because…
A) Improvement efforts can easily be misdirected, eroding competitive capabilities.
B) Without objective benchmarks, it may be difficult to find motivation to improve at all.
If you benchmark your supply chain you’ll know exactly which elements of your operation are performing strongly (compared with others in your industry) and which require some effort to improve. From this position, your management team can target specific performance areas for improvement—and set objectives for each.
Know Who and What You Have to Beat
Benchmarking your supply chain against competitors or better still, against the known top-performers in your industry, gives you vital intelligence about where your company stands in terms of performance. Moreover, it informs you who the top performers are and what makes them best in class.
If you’re of the perception that those top performers must be burning money to get where they are, it’s time to change the paradigm, because all evidence points to the contrary, at least in terms of tradeoffs between cost and service.
In reality, best-in-class supply chain operations offer their customers the best service… at approximately half the cost of those delivering average service levels. So you see, getting your company into the upper echelons of the performance league tables is not simply a matter of prestige, but much more importantly, is a pathway to profitability.
If You Don’t Benchmark, Your Supply Chain WILL Fall Behind
In the introduction to this post, we mentioned that there are still quite a few companies out there that haven’t benchmarked their supply chain performance (or have gotten it wrong). That is indeed a fact, but it’s also true that many more companies are coming to understand why benchmarking is essential.
As more and more of your peers and competitors become proficient with benchmarking, your company will be increasingly disadvantaged unless it also takes steps to understand comparative performance levels.
Will you remain ignorant of where your supply chain stands against others, and allow your competitors to identify and address their own shortfalls while you stand still?
Or will you invest in the intelligence needed; not just to stay out in front of the competition, but to move up the field and access cost savings and increased profits?
Get the Answers Your Company Needs
If the reasons offered here prove sufficient to convince you and your team of the importance of supply chain benchmarking, you might like to know just what types of information a benchmarking project can provide.
Of course it is possible to go overboard and try to capture too much data, so before you start benchmarking, you should evaluate which aspects of your supply chain you wish to focus on.
As a rule of thumb though, you should expect benchmarking to help answer the following questions, among others:
- How competitive are our supply chain costs?
- Which operational characteristics do we share with top performers?
- What should our short and medium-term technology objectives be?
- How effectively is our operation structured?
- How does our distribution network compare with our peers, in terms of reliability and effectiveness?
Remember too, that effective benchmarking includes looking at how peer organisations are achieving results. Best practice identification is an important element of supply chain benchmarking, although it’s important to evaluate which best practices make sense to implement and how they might need to be adapted.
Don’t Stay Blissfully Unaware
Supply chain benchmarking may well reveal some surprises for your organisation, as many Benchmarking Success clients have discovered.
But really, that’s a good thing, because remaining blissfully unaware (or even feeling that you have a good idea of your supply chain performance) places your company in a tenuous competitive position, and almost certainly allows cost benefits to go unrealised.
With this year fast heading to a close, now might be a good time to get supply chain benchmarking on your list of initiatives for 2018.
You now know why it’s such a good idea and when you’re ready, Benchmarking Success can assist you with the how. Why not check out our service pages and see how your company can benefit from the help of our team?