Benchmarking is an essential thing to do in your supply chain. In this article, which is based on a YouTube video on the subject, I will explain why this is so by addressing the following three questions: What is benchmarking, why do it, and how to do it?
The Origins of Benchmarking
So how did this concept come about? A benchmark, in fact, is an old woodworking term. You would put a mark on the bench and cut bits of wood and measure every bit of wood that you cut against that.
What does it mean in terms of business? In business, a benchmark is a measure of performance. It allows you to track your performance over time and, ideally, how it compares to others.
Rating Your Performance against Others
We asked a great question at our recent webinar on the subject of benchmarking. The question was: If you want to be the best at something, let’s say the best at the 100 metres sprint, what is the one critical piece of information that you need to know?
The key bit of information is, in this case of course: How fast is the fastest person?
Benchmarking is a little bit like that because we use benchmarking to rate our performance against the performance of others.
Why do we Benchmark?
The reason we benchmark—the why—is so that we can understand the gap in our performance and what we need to do to lift our game and improve our performance to be nearer the best.
Think about your business. You might be looking after the complete supply chain, you might be looking after transportation, or you might be looking after warehousing.
In the case of warehousing, the questions you would ask are:
- What would world-class pick rates be for your warehouse?
- What are your competitors doing?
- What are people in your industry doing?
That’s the whole purpose of supply chain benchmarking. It is recognised as one of the best management tools out there.
How to Benchmark
First, you need to determine what your current performance is. Then you need to find out what the performance is like in your industry and how your business compares against that standard. Finally, you need to identify the gaps in your performance and then start working out how to close those gaps.
If you are working in a very large business, let’s say for example that you are benchmarking warehouse performance, maybe you have a whole bunch of different warehouses in the business—you can benchmark them against each other.
You could say, wow you are doing really well, what are you doing differently? What do your processes look like and how do they differ from ours? And maybe we can use that as a best practice model.
If you really want to use benchmarking effectively, though, you’ve got to look externally and try to find some metrics on other businesses in your industry, maybe even internationally. You need to ask what the best in class companies are doing. That’s when you can really stretch out and do a lot better.
I’ll say it again: Benchmarking is a critical part of supply chain management.
Our YouTube Channel
There are lots of videos dealing with the various aspects of benchmarking and performance measurement in general on our Supply Chain Secrets YouTube channel. There’s also a lot of information about Key Performance Indicators (KPIs) on the channel.
If you are serious about really high-performing supply chains you need to get your head around KPIs and benchmarking.
If you have any questions to ask or comments to make on benchmarking, please do so down below. And if you haven’t yet subscribed to the channel, why not pay a visit and do it now?
Editor’s Note: This post was originally published on December 10, 2020, under the title “The What, Why, How of Supply Chain Benchmarking” on Benchmarking Success’ website.