Supply Chain Security, Benchmarking, and 3PL Logistics

Benchmarking Methodology and Objectives

A benchmark is defined as an agreed-upon or standard reference point used to measure quality or value. In the business environment, the benchmarking process is one through which a company agrees upon standards to measure its progress. This process can be used both externally and internally. There are two fundamental parts of a benchmarking process: performance assessment and continuous improvement. There are also three basic types of benchmarking: the first involves comparison using internal data, the second has the company assess relative service performance, and the third involves evaluating the supply chain performance of various organizations, even those that may not necessarily be competitors. The benchmarking process makes use of supporting processes such as data analysis and reporting. When done properly, benchmarking can help bring about product innovation, which can in turn help a company achieve significant growth, establish a competitive edge, and create new customer value. Benchmarking is also important because it helps organizations move forward decisively and meet new challenges head on. One challenge that can arise when implementing benchmarking processes is a lack of cross-functional cooperation across a company. This challenge can, however, be overcome by forming cross-functional management teams that encourage collaboration and support decisions for product innovation (Gilmour, 1999).

Benchmarking can also be defined as the measurement of the quality and value of a company's products, strategies, policies, and programs, and the comparison of these with internal data or with similar data from organizational peers. A benchmarking process has three key objectives: first, to determine whether any improvements are needed and where they are required; second, to determine how an organization's peers are achieving high growth levels; and third, to use this data to enhance the company's own performance or growth. A properly executed benchmarking process identifies and puts into practice the best industry practices. Leaders contrast the performance of their processes or products with those of their top competitors, and then adapt the processes they find are driving the most growth among their peers. In other words, a benchmarking process seeks superior performance and then tries to understand the policies, programs, or processes driving that performance. Organizations then seek to enhance their own performance by integrating those superior processes — not through outright imitation, but through improvisation or innovation. Organizations typically engage either in best practices benchmarking, where the focus is on how best processes should be executed, or results benchmarking, where the focus is on quantitative performance assessments.

There is a need to incorporate all the components of a global supply chain and to focus on related aspects such as product specifications, software solutions, management practices, and operational performance in order to benchmark a supply chain business effectively. When used together with improvement programs, a benchmarking process is a useful tool for measuring performance, determining best practices, identifying which improvements need to be implemented, and evaluating a business's performance against its internal standards. In measuring supply chain deliverables, managers must first fully understand their organization's main objectives and their stakeholders' demands and desires. Once this has been done, managers should translate those demands and objectives into specific functional, process, or facility deliverables, which should then in turn be defined in metrics (Matthews, 2006).

Organizational objectives are often set by executives and consist of a wide set of goals, including quantifiable ones. If the organization is a publicly owned firm, these objectives are communicated to stakeholders through an annual general meeting and an accompanying annual report, which may include specific quantifiable deliverables such as return on assets or sales growth. Underlying these quantified measures are several implied business-unit or company-level goals that must be achieved to support those results. The main objective of the first phase of developing a benchmark is to establish several functional strategic goals, including supply chain and business-unit level objectives (Suri, n.d.). As supply chain managers engage their superiors and other stakeholders, several major strategic objectives ought to start emerging. These identified strategic objectives often lack specific details about how they will be attained; thus, at this stage the process is not complete. Unless supply chain managers specifically define their strategic objectives and set milestones for their achievement, the objectives might never be realized. The next phase in the supply chain benchmarking process is to develop targets for improvement. This entails determining the current baseline performance for all defined measures and then contrasting this performance with that of competitors. When evaluation metrics are used in conjunction with continuous improvement, a competitive edge can readily be gained (Handfield, 2015).

A detailed opportunity assessment in supply management calls for a careful evaluation of improvement opportunities in areas such as return on invested capital, cash flow, profits, and capital intensity (Rudzki, 2008).