Supply chain benchmarking isn’t just something for large corporations to be concerned with. Small businesses too, rely on the supply chain to keep customers satisfied.
Your customers’ loyalty, and your business growth, depends on the ability to benchmark, measure, and continuously improve supply chain performance.
If you aren’t doing that, some of your competitors are, and more small businesses will do so as they look to the supply chain for competitive advantage.
It All Begins With Benchmarking
Supply chain benchmarking is the all-important first step on the supply chaihn excellence journey. Until you have benchmarked the performance of your supply chain, you have no way to really know how it performs in comparison with competitors, peers, or even the industry average.
A supply chain benchmarking study will provide the snapshot you need to understand your company’s current supply chain performance, and serve as a guide for improvement. Indeed, benchmarking should be seen as an essential activity for any small business wishing to improve in areas such as:
- Supply chain flexibility
- Order fill performance
- Customer service
- Inventory management
- Supply chain operating costs
Supply chain benchmarking is only the start of the supply chain excellence journey, but it’s a good start, as it helps you answer questions about performance, strengths and weaknesses within your operation.
Qualitative and Quantitative Benchmarking
To answer these questions fully, you will need to perform both qualitative and quantitative supply chain benchmarking. Quantitative benchmarking uses metrics and key performance indicators (KPIs) to explore certain select aspects of supply chain performance.
Qualitative benchmarking on the other hand, allows you to build on what the quantitative data tells you about performance. Quantitative benchmarking is about examining best practices both from within your industry and outside, to find those which can be exploited for operational improvement.
Now … Back to Those Questions
Without a focused approach, it’s easy to lose your way in a benchmarking study, as many companies large and small have found to their cost. One of the most common mistakes is to scope the study too broadly. That’s why it’s best to start by deciding exactly what you want to know about supply chain performance in your business.
Here are a few examples of the questions you might want to answer:
- How does supply chain performance measure up against your competitors?
- How do your costs compare with those of similar operators?
- Are there weaknesses in your supply chain strategy and if so, what are they?
- What best practices are being used successfully in your industry, especially by those companies with leading supply chains?
- How does performance compare with peers in your industry, or those with similar supply chain characteristics?
These and similar questions will determine your benchmarking objectives. Having defined the questions to which you need answers, you will also be able to decide where your benchmarking activity will be focused.
What to Benchmark?
It’s possible to benchmark many different facets of your supply chain, but more often than not, the answers to performance-related questions can be revealed by some form of functional benchmarking study.
For example, logistics benchmarking studies frequently reveal meaningful opportunities for supply chain improvement, particularly for companies that manage logistics internally, as opposed to those using outsourced services.
Outsourced logistics operations are a little different, since the outsourcing customer must benchmark the provider’s performance, and improvements must be driven by collaborative efforts between the two parties.
Whether you are measuring internal performance or that of your service provider, supply chain benchmarking will often focus on warehouse or transport processes. In either area, a benchmarking study will typically target service levels, operational expenditure, process performance, or perhaps all three.
The Supply Chain Benchmarking Cycle
As already mentioned, supply chain benchmarking provides a snapshot of performance. If you’re able to successfully act on the results, the picture will change as you implement and maintain improvement initiatives.
The rankings of your peers will also change over time. To derive maximum benefit form benchmarking therefore, it’s something which should be seen not as a one-time initiative, but as a cycle.
Ideally, this cycle should begin with the benchmarking study after which, best practices should be investigated and if suitable, adopted. Improvements are then monitored using suitable metrics and at some point, perhaps after a couple of years, benchmarking should be repeated to evaluate progress and identify further improvement needs.
Some of your competitors will already have recognised this, and are right now acting on the insights gained from supply chain benchmarking. If this bothers you (and it should), the time might be right for your small business to get on its benchmarking bike.