What The F Is A Supply Chain Benchmark?
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A typical answer we receive when we ask a perspective client if they've done a supply chain benchmark is, "what is a supply chain benchmark?"
That answer is simple - a supply chain benchmark is no different than any other type of benchmark. It's a comparison between one or more things where performance is measured.
For example, if you are shopping for a new smart phone and want one with the fastest processor available and better than average battery life then you'd need to know what the fastest processor is and what average battery life is for other smart phones on the market, right?
Or, if you're shopping for a new freight carrier you may want to know who offers the fastest service at the lowest rates. Unfortunately, unlike phones, supply chains all run on completely different operating systems. So, in order to properly benchmark other carriers, a shipper first needs to benchmark their own existing supply chain.
Want to guess what the second most popular answer we receive is when we ask perspective clients if they've done a supply chain benchmark?
"No."
The Objective
When you benchmark your supply chain, you're trying to determine two key things:
- How good is the service you currently receive
- How good does it have to be to differentiate yourself from your competitors
Cost and speed are the two most obvious areas where a benchmark can immediately provide clarity but there's also a host of other issues they can correct as well. Shippers afraid that they don't have the correct processes in place know that a broken system can lead to audit errors, overpays, non-pays, and delays. Potential gaps in communication between IT, operations, finance, and warehousing creates exposure to all levels of risk within the supply chain.
The objective of your supply chain benchmark is to help your company:
- Understand relative cost position – Benchmarking reveals a company's relative cost position and identifies opportunities for improvement
- Improve performance – Benchmarking identifies and measures methods of improving operational efficiency and improves best practices
- Gain strategic advantage – Benchmarking helps companies focus on capabilities that are critical to building strategic advantage
- Increase the rate of organizational learning –
Benchmarking brings new ideas into the company and facilitates experience sharing
The Components
When you start hearing words like "audit" and "benchmark" some shippers scurry away from the spotlight. The fear is that they're about to be looked at under a microscope in an invasive process. Fortunately, while benchmarks do shine a light on processes, they don't have to be disruptive. In fact, they can be tailored specifically to your requirements and what you need to measure.
There's no law that a shipper has to KPI or benchmark themselves against any one particular data set or organization. Shippers can and should isolate areas and goals that mean the most to their supply chain. The questions we should be asking are about best practices.
If best practices are the component that all results are derived from, modeled after, and improved towards, then the end result is a best-in-class supply chain that incurs lower costs than their less-capable peers. Aborn & Co. looks at five key core components of your supply chain:
- Carrier selection
- Load planning
- Monitoring and reporting
- Freight audit and payment
- Technical Capabilities and Processes
Why now?
As trucking rates hit all-time highs and intermodal rates follow, shippers need to seek new avenues for cost saving and efficiency in order to gain a competitive edge. According to a report by APQC 76% of respondents to their survey feel that benchmarking is ingrained in their business methods however, 29% say their organizations don't measure the financial impact, Supply Chain Management Review reported. Another 33% of respondents did not know the financial impact of benchmarking, while 59% claimed the findings were not made available across departments.
In order to fully benefit from benchmarking companies need to follow best practices and understand the cost potential of their supply chain. Actionable purposes that drive internal growth, encourage best practices, and improve efficiencies should be considered as part of the value of a benchmark as should cost reduction. The 71% of companies who do measure the financial impact of benchmarks already experience that competitive advantage.
Have you benchmarked your supply chain?
Contact
a trusted adviser at Aborn & Co. today for a complimentary consultation.
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