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Why Benchmarking in Your Supply Chain is Vital?

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Why Benchmarking in Your Supply Chain is Vital?

A well-running, well-optimized supply chain is a dream for any shipping manager. Unfortunately, setting up and maintaining such a chain is anything but easy. To make this task manageable, managers need to utilize various tools and techniques. And one of the best ones to start with is benchmarking in its multiple forms. For this article, we will take a closer look at why benchmarking in your supply chain is vital.

Understanding benchmarking in your supply chain

In practice, benchmarking means setting goals, long-term or short-term, specific or reasonably broad. By setting goals, you can monitor how well your supply chain is doing and whether there are areas you can improve. At first glance, this may seem simple. But, it doesn’t take much experience with benchmarking to learn that setting the right goals and monitoring supply chain performance is anything but easy. In most cases, proper benchmarking requires experience within a specific supply chain and broad knowledge of the relevant industries.

While there are different ways to look at benchmarking, we will use the common practice of separating it into three groups. Internal, external, and competitive.


Companies that run several facilities within a single supply chain mostly rely on internal benchmarking. Through it, they can compare and analyze various processes within the supply chain and see how well each facility is doing. Specific benchmarks like inventory turnover or perfect order index give precise info on how well each of the facilities in the supply chain is performing. The more specific a benchmark is, the easier it is to outline potential issues and how
they can be addressed.


External benchmarking includes analyzing areas outside your company’s direct industry or sector. It is mostly used after the internal benchmarking has been taken care of. External benchmarking can give you new ideas on how your company can expand and to which areas if done correctly. You’ll have a hard time finding a more productive way to find new ideas, as external benchmarking includes industry analysis and investment evaluation.


An intelligent person learns from their mistakes. But a more competent person learns from their competitors. If you feel this can apply to your supply chain, then competitive benchmarking is
your best choice. If a company is doing well, it can often be challenging to reverse engineer its success. This is why competitive marketing is often done by consulting and research firms that specialize in providing benchmarking studies. Through such studies, you can identify both the strengths and weaknesses of a specific company and see whether you can use any.

The benefits of benchmarking

Three types of benchmarking. Three ways in which you can gather, analyze and implement data. But, what are the most significant benefits you stand to gain by going through the arduous benchmarking process? When it comes to making savvy business decisions, benchmarking is your most valuable tool, particularly if you use all available methods.

Knowing where you stand through financial analysis

Knowing where your company stands will give you a good idea of how to proceed. For instance, you may feel that your company isn’t gaining enough revenue. But, a comparison with your local competitors will show that this is not due to poor performance but due to market oversaturation. You will need to implement external benchmarking instead of improving your company through internal benchmarking.

Comparing processes and performance

Running a supply chain entails numerous parallel processes that often have a massive impact on one another. It can be hard to determine which processes are beneficial and working as intended
and which are ineffective and in dire need of change. Here is where specific, well-organized benchmarking can bring you the necessary answers. Perhaps you will learn that outsourcing is your best option. Or that you may need to use a more powerful piece of technology to handle the increasing demand. You can set clear metrics to follow and determine how your processes can improve through benchmarking.

Understanding specific functions within your supply chain

Benchmarking in your supply chain can also help you learn more about your company. If you wish to examine the more minute details, you can set up internal benchmarking for specific functions. For instance, you can investigate a single customer’s journey through your company and see how their needs are met with your supply chain, from order placement to transport and storage management. Such investigation can outline the weak links in your supply chain and help you identify potential solutions.

Strategy development

On the other hand, benchmarking can be used to gather the more robust data necessary for strategy development. If you wish to expand your supply chain and move into new markets, you will need to rely on external and internal benchmarking. Using them lets you learn how suitable different markets are for your company. Furthermore, you can use competitive benchmarking to
learn whether other companies within the market aren’t making full use of it. And if so, why. Such information can be invaluable as it saves you from risky investments and business moves.

Final thoughts

It should be evident that you need to have enough room for benchmarking in your supply chain. Using it can set you up to learn about your company and your marketing. And only through learning can you ensure that your company improves and grows. Without benchmarking, you will have to rely on your innate business savvy and analytical skills. And while those two can be powerful, you still want to use the hard data that benchmarking provides.

Author bio

Justin Chandler has worked as a transport manager and logistics agent for over 20 years. He now focuses on consultation work and writing helpful articles for Beltway Movers and other companies.