How benchmarking can help supply chains save costs and drive growth

Original Post Source

Dive Brief:

  • A recent survey conducted by APQC reveals 76% of respondents feel that benchmarking is ingrained in their supply chains’ business methods, but only 61% feel benchmarking is a vital component within their organizations’ decision making, Supply Chain Management Review reported Tuesday.
  • In addition, 41% of supply chain respondents said their organization made the results of benchmark studies available throughout the company, and 68% believe the data is used to advocate for growth or improvement. 
  • However, 29% of supply chain members say their organizations don’t actively measure the financial impact of benchmarking and 33% do not know the financial impact of benchmarking themselves.

Dive Insight:

As executive focus turns to supply chain for operational savings and to drive greater efficiency, benchmarking is an increasingly pivotal reference point for companies. After all, without a benchmark — or various benchmarks over time — it is near impossible to measure improvements, particularly as they relate to costs. 

According to a recent article on The Balance, benchmarking can help organizations find areas of improvement across the entire value chain, from inventory and shipping accuracy, to storage density or bin-to-bin time. Whether internal, external, or competitive, the process can also help identify best practices not currently used by taking a birds-eye-view approach to operational efficiency.

Even though benchmarking has been an industry process for decades, however, the survey reveals the data is used for actionable purposes but rarely valued against itself in terms of cost efficiency. The law of diminishing returns implies a process can only be improved so much before it becomes cost-ineffective. Striving to be best-in-class in every category will ensure your supply chain is flawless, but at a marginal benefit to the buyer.

Two lessons, then, can be derived from the survey. First, benchmarking is always a good practice and can help drive internal growth and cost savings. However, in the advent of Big Data and a push toward greater visibility, not every data point requires a benchmark — companies should measure the value of benchmarks not just in terms of insight gained, but costs potentially reduced from the reports.

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