Benchmarking Supply Chain

Contents
Benchmarking: ................................................................................................................................ 3
What to Benchmark?....................................................................................................................... 3
How to Benchmark Supply Chain?................................................................................................. 3
Mapping Supply Chain process ...................................................................................................... 4
Supplier and Distributor Benchmarking ......................................................................................... 5
Setting Benchmark priorities .......................................................................................................... 6
Identifying Key Performance Indicators ......................................................................................... 6
Benchmarking:

Benchmarking is defined as the process of measuring products, services, and processes

against those of organizations known to be leaders in one or more aspects of their operations.
Benchmarking provides necessary insights to help you understand how your organization
compares with similar organizations, even if they are in a different business or have a different
group of customers.

Benchmarking can also help organizations identify areas, systems, or processes for
improvements—either incremental (continuous) improvements or dramatic (business process re-
engineering) improvements.

What to Benchmark?
A supply chain benchmarking involves the benchmarking of major supply chain
processes, which includes the following.

• Planning
• Sourcing
• Making
• Deliver

How to Benchmark Supply Chain?

The process of benchmarking can be broken down into six core steps:

1. Identify the problem areas.

This may be accomplished through a number of methods including surveys, focus groups, or
informal conversations with customers and employees. Regardless of the method used, the goal is
to discover which areas within the organization need improvement when compared to the rest of
the organization.

2. Identify other industries that have similar processes.

The organization must find industries that have processes similar to those the organization is
seeking to improve. Effective benchmarking consists of comparing apples to apples, not apples to
grapefruits.
3. Identify the leading organizations in these industries.

The idea behind benchmarking is that an organization betters its processes by comparing them to
the ―best‖ practices. To do this, the organization must determine which companies are worth
being compared alongside.

4. Survey companies for practices and comparative measures.

The organization contacts these leading organizations for basic information regarding the
processes that they are looking to improve. This contact is usually done through surveys.

5. Visit the “best” companies to identify leading edge practices.

Organizations will typically mutually exchange information about the processes in question. The
results of this surveying are usually shared by all companies within the benchmarking group.

6. Initiate the new business practices.

After the research aspects of benchmarking have concluded, the organizations involved can take
the information obtained and see what is implied regarding their own practices. Appropriate plans
can then be drafted to implement new processes based off the information obtained from the
benchmarking project.

The companies that can benefit the most from benchmarking practices are as flexible as
possible. Due to the nature of the business and technological worlds, new practices and
technologies are constantly being developed that companies can use to improve their existing
processes. The more flexible a company is, the more able the company is to readily adapt to, and
adopt, these new processes and retain a competitive advantage.

Mapping Supply Chain process

Supply chain mapping (SCM) is the process of documenting information across
companies, suppliers, and individuals who are involved in the company’s supply chain, to create
a global map of their supply network. For example, the exact source of materials and all shipments
used will be mapped. The supply chain map is then used in order to identify opportunities and
mitigate risk in the company’s supply chain.
Supply Chain mapping process involves series of steps which includes the following:

Identify stakeholders: Identify everyone who contributes to the production, storage and
distribution of your product. You can document the name of the business and your points of contact
either on paper or using supply chain planning software. You may have different supply chains for
different products.

Understand supplier relationships: Understand the relationships between all parties

Establish costs and timings: You should work out the costs and time frames involved in each
part of the chain.

Acknowledge risks: Acknowledge the risks associated with each entity, including political, legal,
economic, and environmental threats.

Data tracking: Track the flow of information and data through the supply chain. Transferring
information efficiently, including orders, shipments, and returns, can be as important in controlling
costs as the movement of physical goods.

Supplier and Distributor Benchmarking

Supplier benchmarking is a monitoring tool that lets you evaluate your suppliers against
an agreed set of criteria for both ongoing and concluded contracts.

Distributor Benchmarking is monitoring tool that lets you to evaluate the distributors
against the agreed set of criteria for the contracts and making sure the products are obtained in
time and of good quality.

The purpose of Supplier and Distributor benchmarking are as follows:

• Commitment to continuous improvement.

• Acceptance of innovation and change.
• Use of regular and formal and benchmarking.
• Employee concern for the ultimate consumer.
• Leadership involvement.
Setting Benchmark priorities

Identifying Key Performance Indicators

One benefit of a rigorous approach to logistics and supply chain benchmarking is that it
soon becomes apparent that there are a number of critical measures of performance that need to be
continuously monitored. The idea of ‘key performance indicators’ (KPIs) is simple. It suggests
that, whilst there are many measures of performance that can be deployed in an organization, there
are a relatively small number of critical dimensions that contribute more than proportionately to
success or failure in the marketplace.

The major areas of focus and means to find KPIs are:

Step 1: Articulate logistics and supply chain strategy.

How do we see our logistics and supply chain strategy contributing to the overall
achievement of corporate and marketing goals?
Step 2: What are the measurable outcomes of success?

Typically, these might be summarized as ‘Better, Faster, Cheaper, Closer’. In other

words, superior service quality, achieved in shorter time-frames at less cost to the supply chain as
a whole, built on strong relationships with supply chain partners.

Step 3: What are the processes that affect these outcomes?

In the case of ‘Better, Faster, Cheaper, Closer’, the processes that lead to ‘perfect order
achievement’, shorter pipeline times, reduced cost-to-serve and stronger relationships need to be
identified.

Step 4: What are the drivers of performance within these processes?

These activities are the basis for the derivation of the key performance indicators. Cause
and effect analysis can aid in their identification.

In this framework the four key outcomes of success are suggested to be: Better, Faster,
Cheaper, Closer. This quartet of interconnected goals are almost universal in their desirability.
They are significant because they combine customer based measures of performance in terms of
total quality with internal measures of resource and asset utilization.
References

1. https://www.americanexpress.com/en-gb/business/trends-and-insights/articles/supply-
chain-mapping/
2. https://web.wpi.edu/Pubs/E-project/Available/E-project-032008-
145437/unrestricted/SupplyChainBenchmarkingMQP.pdf
3. https://www.cio.com/article/222381/what-is-scor-a-model-for-improving-supply-
chain-management.html
4. https://slideplayer.com/slide/5669443/
5. https://www.thebalancesmb.com/benchmarking-in-the-supply-chain-2221201
6. https://www.achilles.com/feature/supplier-benchmarking/