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Does benchmarking in Supply Chain lead to complacency?
It’s a hotly debated topic. Should we benchmark our supply chains?
Many benchmarking efforts don’t really lead to sustained improvements. Is it a problem with the concept of benchmarking? Or is it the process of benchmarking deployed by the teams? I feel it’s the latter.
I have noticed three specific lacunae in the process of benchmarking used by supply chain teams. Let’s tackle them one by one.
If you are benchmarking supply chain KPIs like availability and freshness, it’s unlikely to yield major improvements, as the market context and business model differ substantially from company to company. What we should be benchmarking are the underlying processes. Do we see more agile processes out there?
If you are benchmarking with the industry leader, it will yield only marginal improvements. The leaders themselves struggle with similar issues. We should instead take the whole group of industry players to look for current best practices. We should also remember that the current best practices may be quite sub-optimal.
If you are benchmarking within your own industry, the improvement ideas will be quite limited. Best ideas come from other industries who have taken a big leap. Production flexibility, for example, should be benchmarked with power generation companies, who must maintain uninterrupted availability, without the comfort of finished goods inventory, in a fluctuating demand scenario.
Benchmarking is a powerful concept, if used in the right manner.