Supply Chain Efficiency Metrics Operations Manager Must Benchmark

Published : June 28, 2016

Supply chain efficiency benchmarks

The origin of the term "benchmarking" comes from surveying practices. It refers to a mark made on a stone wall that helped surveyors reposition measurement equipment in the same place from visit to visit. When applied to supply chain metrics, proper benchmark measurements help fulfillment center professionals gauge their growth or the scope of a problem and precisely determine the efforts and resources required for problem-solving applications. In a busy company, however, the process of determining and adhering to benchmark standards can be tricky as they require true-to-life and in-the-moment glances at a stream of industry that doesn't always have the luxury of pausing. Where, then, should a fulfillment center team start?

Determine What You're Benchmarking

Even though different industries share commonalities, particularly in warehousing techniques, your company is unique. Even if you begin using the same standards as your closest rival, the movement of commerce and natural fluctuations in your supply chain may demand a shift in tactics shortly after.

As Lora Cecere writes in Supply Chain Shaman, automated processes also won't cut it for initial data-gathering if you're looking for truly actionable results. While it can be labor-intensive, you'll need to really dig into the day-to-day processes that run your fulfillment center, and possibly confront past mistakes head-on to look for warning signs. If, for example, you experienced a major shortage of product just before a busy season, you'll need to solve for "X" —  hop in your theoretical time machine, figure out how far in advance you should have ordered more and use that as your pre-holiday benchmark going forward.

Through this lens, benchmark goals can be periodical and forward-looking — for anticipated times of high or low volume movement — or the responsibility can be shifted to suppliers that align with your shipping and receiving needs when the proverbial going gets tough. Which brings us to our next step, using these carefully-constructed goals to steer your company's operations.

Determine How You'll Gather That Data

While 100% automation is likely to introduce errors into your new system, particularly if it's switched over to it in a hurry, don't discount the role of digital collection entirely. According to a recent survey by Supply Chain Digest, more than 75% of respondents reported that some form of digitization was a company initiative, yet less than half reported having a clear view of what that meant. Under a third admitted to pursuing that goal "aggressively."

In industry surveys like this, where the weight of importance is heavier than the effort given to achieving that goal, it points to confusion and lack of direction, those lifelong enemies of operational efficiency. Take this information to heart and respect the challenges ahead of you in terms of digitization. Work to make your methods of data collection as smooth and trouble-free as, ideally, the results themselves. 

As your methods will all require human interaction at some point, don't make sweeping decisions about digital initiatives without running them by your team first. As the "boots on the ground," your warehouse team is best equipped to spot problems with a system, or report faulty equipment in a timely manner. Explain the purpose behind new data-gathering, and don't simply require the upload of reports or scheduled scans without consequences attached to their failure; if you don't cover the risks of lackluster digitization rollout, don't expect your employees to treat it with the same emphasis you do. If possible, do some research and have your team vote on the best practices from several alternatives. If you give them a stake in your company's move into the future, they'll be a lot more likely to show ownership, and drive down issues like mis-scans and skipped uploads.

Determine Where You'll Use Your Benchmarks

Naturally, just knowing if you are — or aren't — making the grade won't do your fulfillment center much good. You will need to design a series of actions to be taken if a benchmark falls short, whether it be punitive in nature for those who failed to manifest it, or beneficial for those that rallied and made it happen. The path you choose will depend largely on your current management style and approach. For external supply chain metrics, such as fill rates from your chain partners, you will need the support of the c-suite to give your applications "teeth" at the negotiation table.

Deanna Ransom of Logistics Viewpoints explains that these benchmark checks — and, potentially, confrontations — are vital for ensuring your service providers are adhering to your mutual contracts. Without detailed, periodic analysis, your company could be paying for services that they aren't even using, or worse, paying for services that they need, but aren't actually receiving. The fast pace of the warehouse can cause a lot of these shortfalls to go unnoticed, at least at volume, and the problem may not be caught otherwise until years later, if it’s ever caught at all.

Once your benchmarks have been decided and measured, confer with your C-suite to see how often they would prefer to be briefed. Assume that the issue will come up in financial planning and budget presentations, of course, but they also need to know how things are progressing when immediate money isn't on the line. While some companies have tight, interdisciplinary management teams, others may not want the information as it comes, but rather as a quarterly or annual report. 

Research, But Don't Obsess

If you're savvy enough in your research, you may turn up information about a rival's benchmarks, particularly if they have a "pet project" number that's often repeated in the warehouse, such as X% error-free orders, or X% shipments sent on time. But keep in mind that you're unlikely to get the whole picture — these are your competitors, after all — and pursuing that one number alone may very well lead your team on a wild goose chase of unrealistic expectations. Always view your potential benchmarking through the lens of your own fulfillment center's capabilities, not as a wish list for keeping up with other industry players.

Benchmarks and supply chain metrics are all relative in terms of importance and difficulty level. While you may envy your nearest competitor’s ability to get orders out the door quickly, you may be dominating another category that they're struggling with. Attempting to duplicate, exactly, the benchmarks of your competitors will only frustrate your team and sap motivation, so don't fall into the trap of competition in anything except overall performance and the open market.

Likewise, before taking your own employees to task, ask if the variables outside of your warehouse have been adjusted as much as possible, as well. If your 3PL is overcharging you, or your warehousing costs are unusually high for your industry, even the hardest-working team can't mitigate those costs at the source. As a management professional, this is your sector to address, so empower your numbers by paying close attention to opportunities to reduce these variables without affecting overall warehouse performance.

Supply chain metrics are important to your workflow optimization, but without a basis of comparison, you won't be able to measure progress. Set up your benchmarks correctly, however, and you'll be able to pinpoint problems, recognize opportunities for improvement and keep your fulfillment center operations at peak efficiency with very little additional effort. In short, benchmarking will improve nearly every aspect of your operations, given a long enough timeline. 

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Topics: Supply Chain Logistics, Supply Chain Efficiency

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