You benchmark in supply chain by planning your activities, collecting quantitative and qualitative data from your own and other organizations, analyzing what you collected, and then adapting your findings to take action.
To benchmark a supply chain, it’s important to begin with a clear understanding of what problem you are trying to solve. Why are you benchmarking? For many organizations, they benchmark their supply chains to understand how their organization compares to others to help identify what they’re doing well, prioritize potential improvements, and identify best practices to adopt or role models to emulate.
How to Benchmark Your Supply Chain
APQC’s benchmarking methodology has four main phases.
- Plan—Set strategic direction—In the planning phase of benchmarking, examine the key business processes and issues across organizational lines (e.g., departments, functions, and geographies). Identify and select opportunities to improve a key business process(es).
- Collect—Identify benchmarks and best practices—In the collection phase of benchmarking, examine the key business processes and issues outside of the organization or internally across units/divisions/departments. Gather quantitative and qualitative data and insights. Identify specific organizations for in-depth analysis. Download APQC’s free Interactive Supply Chain Planning Tune-Up Diagnostic.
- Analyze—Understand processes and opportunities—In the analysis phase of benchmarking, analyze the collected data for an in-depth understanding of why and how best-practice organizations execute the process to gain a competitive advantage. Evaluate best practices to determine applicability.
- Adapt—Create a process improvement strategy—In the adaptation phase of benchmarking, create an implementation plan with mechanisms to monitor and report progress. As needed, organizations may recalibrate and recycle the benchmarking activity as part of a plan for continuous improvement.
Do Not Overlook the Importance of Planning
Spend time planning your supply chain benchmarking before you jump into execution. A common mistake is to limit the benchmarking activity to industry peers. For breakthrough improvement, it is imperative to learn from other industries performing a similar process successfully. As the American founder Benjamin Franklin said, “If you fail to plan, you are planning to fail!” Let’s delve into the important planning stage of benchmarking.
Identify the Strategic Business Opportunity
- Clearly articulate the business problem and the purpose of the research
- Ensure alignment with organizational/business strategy
- Focus on process performance and/or practices
- Think through how to quantify results where possible
- Be specific: identify where in the supply chain the challenges exist
Align to Organizational and Business Strategy
- Trace a value path for benchmarking
- Start at the strategic level of the organization
- Cascade downward from enterprise-level strategies to objectives at the supply chain level then to processes and programs and staff activities
- Have accompanying measures for each component of the value chain
Scope the Benchmarking Project
- A benchmarking team’s first objective is to clearly understand what business outcomes are expected by management.
- The team should then determine what is in and out of scope for a benchmarking project.
- A helpful tool to assist in scoping benchmarking is APQC’s Process Classification Framework (PCF)®.
Situate the Process in the Environment
- Understand suppliers, input requirements, output requirements, and customers
- Consider all the relationships inside and external to the organization that impact the process
Identify Process Performance Measures
- Select a balanced set of measures across categories such as cost and cycle time
- Normalize the selected metrics, e.g., put measures on a consistent basis with a common denominator (e.g., per unit)
- Ensure the measures link to organizational strategy
- Consider critical success factors
Additional Planning Steps
- Establish your baseline – collect your “as is” performance data
- Brainstorm benchmarking partners
- Build your benchmarking project team
- Plan the benchmarking deliverables
- Develop the project plan
- Plan communication and change management
Benefits of Supply Chain Benchmarking
APQC’s research results indicate that supply chain functions recognize the benefits of having benchmarking as part of the key decision-making process for the organization. Because supply chain functions themselves are often data focused, they look for ways in which to identify performance gaps and improve processes. Benchmarking, with its assessment of the performance and practices of other groups, is a natural extension of this focus.
For supply chain organizations that have not yet embraced benchmarking as a regular way of assessing their performance and practices, APQC’s research into the value of benchmarking provides lessons on what to aim for and pitfalls to avoid. These organizations should take steps to ensure that benchmarking efforts become an integral part of organizational decision making. They cannot overlook quantifying the impact of benchmarking on the organization, because without clear benefits benchmarking may lose its appeal. Organizations should also expose a variety of their supply chain employees to benchmarking both to increase buy-in for these efforts and to ensure continuity.
Supply Chain Benchmarking By Function
Supply chain benchmarking can be aimed at:
- Supply chain planning
- Sourcing and procurement
- Logistics
- Manufacturing
Why is supply chain planning benchmarking important?
Crossing enterprise, geographic, political, and functional boundaries, supply chains are incredibly difficult beasts to manage. To make any kind of progress, leaders need to understand how their supply chain is performing in comparison to industry peers as well as best-in-class companies. Once they know how they are doing, they can set goals that are appropriate for their supply chain strategy and identify the best practices that they need to implement in order to achieve those goals.
From a functional perspective, every supply chain planner needs to be able to report the impact that their initiatives have on improving supply chain efficiency. Many organizations have never taken a comprehensive look at how their supply chains are performing against competitors. In such cases supply chain benchmarking can unearth opportunities that could save an organization millions or tens of millions of dollars.
Why is procurement benchmarking important?
More executives are recognizing procurement’s role in achieving operational excellence objectives, driving innovation, and increasing shareholder value. To deliver on that promise, procurement professionals must study what their colleagues in other firms and industries have done to find and implement successful practices that can work for their organization. Procurement benchmarking offers guidelines and analysis that can help evaluate external suppliers’ performance as well as internal process efficiencies and target resources where they will have the greatest impact.
Why is logistics benchmarking important?
Because numerous organizations outsource transportation, and many outsource warehousing and other logistics services as well, logistics is subject to intense market forces. Logistics managers are continually negotiating contracts and evaluating what they do in order to determine what can be effectively performed in house, and what others can do better. Such evaluations require a thorough understanding of partner capabilities and sustainability efforts, in addition to market rates. Benchmarking allows logistics managers to find out how competitive they and their partners actually are.
Because logistics is subject to so many market factors, benchmarking must be done at regular intervals. These factors include fuel costs, regulatory changes, political developments, and continually changing rates for truck, intermodal, and water-borne transportation. Faced with such variables, logistics benchmarking can provide an overall view of current performance, and a valuable indicator of market trends and opportunities.
Why is manufacturing benchmarking important?
It’s difficult to lead an organization in the direction it needs to go if you cannot articulate a vision of what the future will look like. Manufacturing benchmarking offers an opportunity to identify performance levels and successful practices in a variety of areas, from production and quality control to analytics and emerging technologies.
Benchmarking in manufacturing can be easier to initiate than in other areas because processes are relatively easy to see and there’s often an excess of performance metrics. But a beer bottling operation bears little resemblance to the assembly line for a jetliner. The challenge—aided by APQC’s Process Classification Framework—is to normalize such activities and measurements across different industries and processes.
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