Benchmarking in supply chain management (2024)

Benchmarking in supply chain management

Benchmarking in supply chain management

Supply chain management (SCM) or network resourcing, supply pipelinemanagement, value chain management and value stream management have becomesubjects of increasing interest in recent years, to academic, consultants andbusiness management (Hines, 1994; Lamming, 1993; Saunders, 1997; Croom et al.,2000). With active involvement and participation of suppliers in thebenchmarking initiative, companies should identify value-adding strategies andpractices for improving supply chain performance and competitiveness ofintegrated supply chains. This process involves identification, selection anddetailed fieldwork with both buyers and sellers in the supply chain to identifyvalue-adding opportunities that benefit both the individual firms and theoverall supply chain.

The major steps in a generic benchmarking process include:

1. 1.

   measuring own and best-in-class performing companies;

   See Also

   The Law of Supply Explained, With the Curve, Types, and ExamplesSupply Chain Career Paths: Exploring the Diverse Roles, Titles and Types of Jobs in Logistics and Supply Chain ManagementLean Six Sigma Certification in Supply Chain Management: Overview & Career OptionsTop 5 Careers in Supply Chain Management | Career Advice & Interview Tips | WayUp Guide

2. 2.

   compare the performance at various levels such as strategic, tactical andoperational; and

3. 3.

   developing strategies and methods for improving the performance of ownorganization (Andersen et al., 1999).

Benchmarking activities include the development and maintaining of a databasefor information related to purchasing, leadtime, make-or-buy procedures,supplier-customer relationship and supplier selection. Some of the key areas inSCM benchmarking practices are total performance measurement, integrated supplychain management and information systems/technology (Reutterer and Kotzab,2000).

Benchmarking SCM requires evaluating strategic cost management throughout thesupply chain, integration between procurement and supply chain management,insourcing/outsourcing strategy and process and determining value throughout theintegrated supply chain (Caplics and Sheffi, 2000). The process of achievingstrategic cost management for all types of purchases throughout the supply chaininvolves identifying key drivers and measures of strategic cost management, andmeasuring and managing total cost performance with alliance and non-alliancesuppliers. Benchmarking SCM involves identifying processes for linking andintegrating procurement with sales, marketing, finance, production/operations,engineering, research and development, and suppliers and customers.

Researchers and practitioners should focus on the following SCM benchmarkingobjectives:

• •

  consistent application all over the company and supply chain;

• •

  improved awareness of procurement and supply chain best practices anddevelopment of significant current practices;

• •

  comparison of cross-business units;

• •

  capability of cross-company benchmarking;

  See Also

  Top 5 qualities of an effective supply chain manager

• •

  continuous improvement through the self-assessment and benchmarking surveyupdates;

• •

  independent analysis of current performance, strategies and methods;

• •

  provide online access to comparative benchmarking data worldwide for keyprocesses and selected effectiveness measures.

Since the supply chain is viewed as a single entity, not fragmented areas ofresponsibility for functional areas such as purchasing, manufacturing anddistribution, the process of benchmarking becomes a challenging task in a globalenterprise environment (Holmberg, 2000; Croom et al., 2000). For example,shorter product life cycles and increased competition have raised the level ofinterest in the management of new product development processes. Concurrentengineering encourages the participation of suppliers in the early stage ofproduct design to eliminate any non-value adding activities downstream of thesupply chain. In the design of supply chains, firms seek to establish the mostefficient systems. The design parameters of these supply systems include (Ragatzet al., 1996; Tan et al., 1999):

• •

  concentration of the core activities of the business;

• •

  consolidation of supply chain activities to realize economies of scale;

• •

  integration of all supply chain activities by using the same standards andinformation technology standards at every echelon in the system;

• •

  performance measurement to achieve better service levels and lower costs.

Holmberg (2000) has identified the following problems in supply chainmanagement:

• •

  strategy and measurements are not connected;

• •

  a biased focus on financial metrics;

• •

  too many isolated and incompatible measures; and

• •

  the problems in a supply chain context.

The adoption of systems thinking and the development of more sophisticatedexplanations based on system structures, suggest that measurement activitiesmight facilitate the integration process across supply chains. Therefore,further research is needed in the area of performance measurements andbenchmarking in a supply chain context.

There are numerous ways to meet the unexpected challenges and success ofbenchmarking. Some of them include partnering for benchmarking activity takinginto account the characteristics of such partnering firms, acceptance of bothquantitative and qualitative benchmarking information, lack of business processunderstanding, effective data collection process (interviews, mailquestionnaires and the Internet) and comparability of companies and processes(Andersen et al., 1999). The benchmarking approach in SCM can includeassessing the current status of the industrial partners, identifying performancemeasures, use of a generic benchmarking questionnaire, performing thebenchmarking visits in teams and analysing the processes for best practices andperformance improvement.

Gilmour (1999) describes a group of benchmarking measures as applied tosupply chain processes. These measures are based on a set of capabilities thatincorporate the extent of integration and use of technology in supply chainmanagement. The set of capabilities includes process capabilities, technologycapabilities and organizational capabilities. The process capabilities includecustomer-dialogue driven supply chains, efficient distribution, demand drivensales planning, lean manufacturing and supplier partnering and integrated supplychain management. Integrated information systems and advanced informationtechnologies come under the technology capabilities. The organizationalcapabilities cover integrated performance measurement, teamwork and alignedorganizational structure. The capability dimensions includestrategy/organization, planning, business process/information flow, product flowand measurement (Neely et al., 1997).

Computer-aided benchmarking tools incorporating Data Envelopment Analysis(DEA), statistical analysis, flow charts and mathematical models, facilitate thebenchmarking process to be more effective and accurate. However, the datacollection process plays a major role in benchmarking. There are several methodsfor this purpose as noted earlier. However, a web-based data collection hasbecome more common and effective method together with other traditional methodssuch as interviews, questionnaire surveys, etc.

BIJ invites contributions on benchmarking techniques and tools insupply chain management. Empirical research, analytical models and case studiesaddressing the benchmarking tools and practices in supply chain management arewelcome.

A. Gunasekaran

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