Benchmarking: Strengths and Opportunities in Supply Chain Management

How can companies, especially those in manufacturing and distribution, identify both strengths and areas for improvement in their supply chains? The key is to benchmark, which simply means to compare or test performance indicators against set standards.

It’s essential that companies set benchmarks, both internal and external, for their supply chains to determine performance, progress and expected results. Although most companies do have internal benchmarks in place, few have reliable external benchmarks for comparing performance with similar companies – quite often competitors.

Benchmarking – a three-step process

Here’s a case in point. We’ve been working with a national food manufacturer that had no idea as to how it was performing in relation to major competitors. Our job was to work with the company to identify strengths and find more efficient ways to manage the supply chain. This involved a three-step program spread over eight weeks.

The chart that follows offers an overview of the program. The first step defined the scope of the benchmarking project, such as identifying other companies for comparison, establishing confidentiality guidelines and setting out timelines. The second step involved conducting a study which included preparing and distributing a benchmarking package, as well as scrutinizing data and creating reports. The third step was an assessment to review results, determine gaps and have strategies in place to improve performance along the supply chain.

Benefits of benchmarking for companies

For this food manufacturer, the process gave the company better insight into the performance of its supply chain management, compared to competitors. The benchmarking report offered a full analysis, including performance gaps and strategies to fix problems.

As a result, this client had a much clearer view of its strengths and weaknesses along its supply chain, gained insights on the competition and had a benchmark for the future.

A reliable and useful benchmarking study allows companies to:

• Understand how their performance compares to similar companies, including direct competitors;

• Identify areas of strength and opportunities to improve areas in the supply chain;

• Establish a baseline to gauge improvement over time;

• Broaden or adjust their internal performance metrics;

• Conduct post-reviews to improve performance and eliminate problems;

• Establish a basis for developing future strategies.

We’d like to know about your experiences with benchmarking in the supply chain, whether internal or external, and welcome your comments and questions.

If you have questions or comments on this blog, please contact Bill Simpson at bsimpson@supplychainsystems.com.

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