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Benchmarking efforts in Supply Chains often lead to suboptimal solutions.
Many companies undertake benchmarking initiatives from time to time. The objective is to see how their supply chains are performing vis-à-vis their competitors. The exercise generally degenerates into elementwise cost comparison and ends up carrying out a huge set of local optimizations. Let’s take an example.
Can you really benchmark your freight cost vs your competitors? There are many factors which affect the freight cost, and these are vastly different for each company, such as manufacturing footprint, consumer footprint, product shelf life, channels of distribution, product pricing, own fleets vs contracted vehicles, etc. Moreover, consumers don’t really care about these internal parameters of companies or the elements of cost.
If we want to benchmark, we should do it only for consumer facing parameters, such as product availability at point of purchase, product freshness at point of purchase measured as a percentage of remaining shelf life, and product assortment visible to consumers. If we are better than the competition, let’s increase the lead over them.
Improvement on these parameters is a never-ending journey…