August 29, 2022 | Supply Chain Software Blogs
There has been a marked strategic change — from cost savings to agility and resilience — in supply chain management.
According to a new Economist Impact survey of 400 senior-level executives commissioned by GEP, 75% of the participants reiterated the necessity to make significant supply chain changes over the next year.
The reasons for this change were the disruptions the world has seen over the past 24 months.
These changes that the leaders are looking for would require them to not only invest in new technologies but also measure their supply chain capabilities on an ongoing basis against their competitors or industry benchmarks.
The performance measurement of the supply chain processes against standard guidelines and KPIs and competitor capabilities is known as benchmarking in supply chain management. It measures the efficiency of the various processes quantitatively and qualitatively against benchmarks for promoting agility and resilience.
Strategic benchmarking ensures that improvement efforts and resources focus on activities that propel the organization forward. Benchmarking data gathered from competitive organizations for comparison reveals critical performance gaps that can spark change within underperforming areas and, as a result, focuses limited resources on these areas.
Organizations that survive and thrive during and after disruptions focus on assessing their current capabilities as the baseline for strategic planning and performance improvements.
These models help assess the current business scenario and set goals based on vital competitive criteria. A mature process must have complete functionality, digitization, factual data, and ongoing improvement capabilities. Attaining each maturity level will increase process capabilities (controllability, consistency, effectiveness, and efficiency).
Strategic planning necessitates collecting and evaluating data and information from myriad sources. For example, competitive intelligence, business unit objectives, economic indicators, and geopolitical perspectives play a role in strategy development. Strategic planners can use higher-level maturity capabilities to describe how the supply chain must perform to aid company strategy and the measures and funding being recommended as part of the supply chain strategy.
Benchmarking can be defined as the systematic pursuit of best practices, innovative ideas, and more ingenious operating methods.
Identify the processes vital to the company and its objectives. The focus will be on those producing ineffectual results compared to industry best practices and whose improvement would significantly impact performance.
However, many supply chain metrics tracked are interdependent, such as supplier on-time, supplier quality, and inventory levels. Once the gaps and co-dependencies are identified, businesses should consider suitable initiatives to achieve measurable improvements.
Businesses must use the insights gained from the collected data to develop an action plan. Data transparency and comparative evaluation can enhance supply chain effectiveness, but they frequently result in change management issues that businesses must handle with caution by involving employees from across the organization in the benchmarking process.
Peer benchmarking is measuring and comparing essential scorecards and practices against competitors and industry peers to determine how and where the company needs to improve.
Peer benchmarking allows for better resource allocation to strategic priorities and compares costs in the supply chain budget against other industry leaders, allowing for better planning of the upcoming yearly supply chain budget.
To begin benchmarking the supply chain, select a part or a process of the supply chain to focus on. The five dimensions of supply chain management are planning, procurement, production, distribution, and returns.
Concentrating on one aspect of the supply chain will allow the business to formulate specific key performance indicators (KPIs).
Quantitative benchmarking analyzes the supply chain by collecting performance data from various touchpoints. Most KPIs are quantitative, and the metrics are focused on improving the supply chain's profitability. Quantitative KPIs that the supply chain should monitor include order rate, stock turnover, and on-time delivery percentages.
Qualitative benchmarking collects data based on best practices. It examines the differences in methods such as manufacturing techniques, quality assurance, sustainability, training regimes, and morale and adopts suitable methods to enhance their supply chain performance.
Companies are forced to establish fast, productive, and efficient supply chains as global product demand rises and order deadlines shrink. Organizations can use supply chain maturity models to improve efficiency of operations.
Some components of supply chain benchmarking are prioritizing the supply chain metrics, improving supply chain effectiveness, and peer benchmarking on the supply chain budget.
The primary goal of the supply chain is to help boost shareholder value by making the business more competitive and profitable. Thus, supply chain key metrics help the business to achieve those goals.
Benchmarking is the systematic pursuit of best practices, innovative ideas and ingenious operating methods. It measures the efficiency of the various processes quantitatively and qualitatively for promoting agility, resilience and business growth.