Benchmarking essential to improving supply chain, report states

By Ahmed ElAmin

- Last updated on GMT

Related tags Management Supply chain Logistics Prologis

Companies that benchmark the performance of their supply chains
against other peers in theindustr performance typically cut nearly
$80m (€62m) within the first year, according to anew report.

"Benchmarking, when used properly, can lead to significant increases in supply-chain efficiency,"​ said Leonard Sahling, first vice president of research forProLogis, which produced the report. "Today, the best performers in this area are spending far less on logistics than the median, while their logistics performances are much better than the median. In short, effective benchmarking can provide a huge competitive advantage in the marketplace."

Many companies today are striving to create best-in-class supply chains, with the aim ofachieving a substantial improvement to their bottom lines and gaining a competitive edge over theirrivals, ProLogis stated in the report. The difficulties in making supply chains efficient arecompounded as they become more global and hence more complex.

"The hallmark of best practice companies is a conscientious and disciplined approach to learning and continuousimprovement,"​ ProLogis stated. "Companies that eschew rigorous benchmarking exercises are destinedto lose their way in the competitive fray - and become second-rate performers."

Benchmarking is a way of improving performance by identifying, understanding, and adapting the best practices and processes foundinside and outside an organisation, the company said in the new report.

Companies successfully embarking on a formal benchmarking project typically had an average payback ofabout $80 million within the first year, Prologis said, referring to a recent American Productivity & QualityCentre study.

"Companies that eschew rigorous benchmarking exercises are destined to lose their way in the competitive fray,"​ Sahling said. "However, those with the foresight and discipline to institutionalize benchmarking stand to reap substantial rewards in the form of improved efficiency and lower costs."

In launching a benchmarking project, the first step is to decide what standard of comparison to use - pools or surveys of competitors,companies in other industries, customers, or other divisions or facilities within one's owncompany, the company advised.

To become best in class, companies must look beyond quantitative benchmarking targets and identify the unique processes, practices, orcorporate cultures that drive success among the industry leaders. Once companies have identified best practices and assessed how theirown practices compare to these gold standards, they must next plan how to bridge the gap and then execute the planned actions.

High-level management participation and support is generally a hallmark of any successful benchmarking effort.

"Companies must be prepared to change their organizations in light of the findings of their benchmarkingstudies,"​ ProLogis warned. "If the results of these studies are tucked away into vinyl binders without any follow-up actions, theirpaybacks will be zero."

Companies can often access industry benchmarking data at little or no cost through industry, trade and professional associations simply by providing their own operational metrics on a confidential basis.

Benchmarking and performance metrics are today the number one priority for logisticsexecutives, the company stated, citing another research study.

ProLogis is one of the world's largest owners of distribution facilities, with operations in 81 markets acrossthe world.

Related topics Processing & packaging

Related news

Show more

Follow us


View more