Benchmarking within the supply chain spans multiple areas, from procurement to distribution, and impacts overall efficiency.
Supply Chain Benchmarking plays a crucial role in enhancing performance and effectiveness. Companies adopt various practices to implement it successfully.
Trent Morris will shed light on these practices and their benefits.
For a deeper dive into these insights, watch the video below.
Welcome back to our exploration of supply chain management. This week, we’re focusing on the critical topic of supply chain benchmarking, with a particular emphasis on cost benchmarking. I’m excited to have Trent Morris join us again. Trent’s extensive experience in the field will provide valuable insights into how businesses can effectively evaluate and manage their logistics costs.
Understanding Cost Benchmarking
Cost benchmarking has become increasingly important in today’s business environment, where rising costs and fluctuating demand present significant challenges. Trent explains that cost benchmarking is a practical approach for assessing whether your logistics expenses are competitive. Instead of engaging in lengthy and expensive sourcing processes like RFPs (Requests for Proposals), cost benchmarking offers a quicker, more cost-effective solution. By comparing your logistics costs with industry standards, you can determine if you’re paying more or less than others in your sector, helping to identify potential areas for cost savings.
Effective Benchmarking Methods
Trent describes his method for conducting effective benchmarking. This process starts with collecting approximately a year’s worth of transaction data in key areas such as transport, warehousing, and ocean freight. This data is then compared to industry benchmarks and validated through third-party sources. If there are any gaps or discrepancies, Trent’s team may issue a small RFI (Request for Information), clearly stating that it’s intended for benchmarking purposes rather than immediate sourcing. For those who prefer not to work with consultants, there are other resources available. Industry reports, such as the Drewry World Container Index for ocean freight and the Australian Institute of Petroleum’s fuel price index, provide valuable insights into market trends and help businesses understand how their costs compare to industry standards without committing to a full benchmarking exercise.
Leveraging Industry Connections
Networking can also be a valuable tool for benchmarking. Engaging with industry peers and potential suppliers allows businesses to gain informal insights and comparisons. Maintaining strong relationships with current suppliers can provide additional information about market trends and potential cost-saving opportunities. These conversations help businesses stay informed about competitive rates and industry practices, offering a broader perspective on their own performance and potential areas for improvement.
The Value of Regular Benchmarking
Benchmarking is crucial for maintaining competitiveness and making informed decisions. As Trent and I discussed, it’s similar to running a race—you may think you’re performing well until you see how you compare to others. Regular benchmarking helps ensure you’re aligned with industry standards and identifies opportunities for optimization. Understanding where you stand in the market is essential for continuous improvement in logistics operations.
Related articles on this topic have appeared throughout our website, check them out:
- Freight Benchmarking: What Is It? Why Do It?
- How to Select the Right KPIs for Supply Chain Benchmarking
- The What, Why, How of Supply Chain Benchmarking
- Common Sense Warehouse Performance Metrics for Supply Chain Benchmarking
- 8 Uses for Supply Chain Benchmarking and Their Most Valuable Benefits
Editor’s Note: The content of this post was originally published on Logistics Bureau’s website dated November 15, 2023, under the title “Supply Chain Benchmarking with Trent Morris“.
