Benefits of Benchmarking in Supply Chain Management

Estimated reading time: 4 minutes

 

In supply chain management, benchmarking is critical to establish resilient operations and to be cost-competitive. With the utilisation of historical information to identify standards and best practices, it enables comparison of past projects’ performance with present projects, allowing for a more informed analysis of the next step to be undertaken.

 

The purpose of benchmarking is to prevent inaccurate estimates leading to unrealistic expectations which will decrease the probability of management success. Furthermore, by evaluating past performance, it encourages the process of reflection – to learn from past mistakes, and also increases the assurance for management transparency.

 

To ensure a successful project benchmarking, here are 3 factors that need to be kept in mind:

1. Comparability: Companies should only benchmark what’s comparable by standardizing the formats for comparison.
2. Compliance: Strict compliance with antitrust rules must be adhered to.
3. Change: With the aim to make change for the betterment of supply chain management, detailed recording of the required information must be taken care of e.g. information of the company’s processes.

 

Ultimately, supply chain benchmarking, if applied correctly, is able to be used for the optimisation of performance, identification of areas for improvements as well as for the achievement of a new target goal. The definition of the best supply chain may defer for every company, but what’s definite is that the benefits of benchmarking are able to pave the way for the organisation to have the best supply chain.

 

Here are the benefits of benchmarking in supply chain management:

1. Clear expectations of project

Benchmarking only allows for accurate information of past performance details. It has no room for estimations, leaving supply chain managers with no choice but to precisely evaluate its past performance, and set clear objectives as well as come up with a detailed plan on how it can move on to the next step.

 

2. Reduced conflicts between the objectives of the supply chain’s and the corporation’s

Benchmarking ensures that the objectives of the supply chain are aligned with the business objectives. By coming up with clear expectations of the project as mentioned in point 1, there are clear baseline information for goal settings, hence avoiding any conflicts in the objectives of the supply chain’s and the corporation’s.

 

3. Identification of relevant performance metrics

With reference to the saying, ‘What gets measured gets done.’, regular measurement and reporting allows for more informative decisions. Yet, it is not wise to measure every single metrics. For efficient usage of time and other resources, identify the relevant performance metrics and only measure those metrics. These metrics will be the previously agreed-upon measurements that reflect the supply chain’s / corporation’s goals for success.

 

4. Supports performance monitoring and assurance

Once the relevant metrics are identified, tracking of current performance can then be done and evaluated over the project lifecycle. Comparison of performance with other supply chain operators can also be done, allowing for implementation of the best practices to increase supply chain value.

 

Properly applied, benchmarking is able to generate much more benefits that what’s mentioned above. An all-rounded benchmarking will be able to look beyond the initial costs of the whole process but rather the whole gestalt of the corporation and its business.

 

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To aid people to develop a firm understanding of project costs and performance, the Infrastructure and Projects Authority (IPA) has published this document. Targeted to drive a change in the quality of benchmarking being applied, this document outlines IPA’s recommended methodology for cost and performance benchmarking. It provides information on the following areas: introduction to benchmarking, challenges to benchmarking, involvement of people in benchmarking and steps to top-down benchmarking.

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“Best Practice in Benchmarking”