Benchmarking in supply chain management

Citation

Gunasekaran, A. (2001), "Benchmarking in supply chain management", Benchmarking: An International Journal, Vol. 8 No. 4. https://doi.org/10.1108/bij.2001.13108daa.001

Benchmarking in supply chain management

Benchmarking in supply chain management

Supply chain management (SCM) or network resourcing, supply pipeline management, value chain management and value stream management have become subjects of increasing interest in recent years, to academic, consultants and business management (Hines, 1994; Lamming, 1993; Saunders, 1997; Croom et al., 2000). With active involvement and participation of suppliers in the benchmarking initiative, companies should identify value-adding strategies and practices for improving supply chain performance and competitiveness of integrated supply chains. This process involves identification, selection and detailed fieldwork with both buyers and sellers in the supply chain to identify value-adding opportunities that benefit both the individual firms and the overall supply chain.

The major steps in a generic benchmarking process include:

1. 1.

   measuring own and best-in-class performing companies;

2. 2.

   compare the performance at various levels such as strategic, tactical and operational; and

3. 3.

   developing strategies and methods for improving the performance of own organization (Andersen et al., 1999).

Benchmarking activities include the development and maintaining of a database for information related to purchasing, leadtime, make-or-buy procedures, supplier-customer relationship and supplier selection. Some of the key areas in SCM benchmarking practices are total performance measurement, integrated supply chain management and information systems/technology (Reutterer and Kotzab, 2000).

Benchmarking SCM requires evaluating strategic cost management throughout the supply chain, integration between procurement and supply chain management, insourcing/outsourcing strategy and process and determining value throughout the integrated supply chain (Caplics and Sheffi, 2000). The process of achieving strategic cost management for all types of purchases throughout the supply chain involves identifying key drivers and measures of strategic cost management, and measuring and managing total cost performance with alliance and non-alliance suppliers. Benchmarking SCM involves identifying processes for linking and integrating procurement with sales, marketing, finance, production/operations, engineering, research and development, and suppliers and customers.

Researchers and practitioners should focus on the following SCM benchmarking objectives:

• •

  consistent application all over the company and supply chain;

• •

  improved awareness of procurement and supply chain best practices and development of significant current practices;

• •

  comparison of cross-business units;

• •

  capability of cross-company benchmarking;

• •

  continuous improvement through the self-assessment and benchmarking survey updates;

• •

  independent analysis of current performance, strategies and methods;

• •

  provide online access to comparative benchmarking data worldwide for key processes and selected effectiveness measures.

Since the supply chain is viewed as a single entity, not fragmented areas of responsibility for functional areas such as purchasing, manufacturing and distribution, the process of benchmarking becomes a challenging task in a global enterprise environment (Holmberg, 2000; Croom et al., 2000). For example, shorter product life cycles and increased competition have raised the level of interest in the management of new product development processes. Concurrent engineering encourages the participation of suppliers in the early stage of product design to eliminate any non-value adding activities downstream of the supply chain. In the design of supply chains, firms seek to establish the most efficient systems. The design parameters of these supply systems include (Ragatz et al., 1996; Tan et al., 1999):

• •

  concentration of the core activities of the business;

• •

  consolidation of supply chain activities to realize economies of scale;

• •

  integration of all supply chain activities by using the same standards and information technology standards at every echelon in the system;

• •

  performance measurement to achieve better service levels and lower costs.

Holmberg (2000) has identified the following problems in supply chain management:

• •

  strategy and measurements are not connected;

• •

  a biased focus on financial metrics;

• •

  too many isolated and incompatible measures; and

• •

  the problems in a supply chain context.

The adoption of systems thinking and the development of more sophisticated explanations based on system structures, suggest that measurement activities might facilitate the integration process across supply chains. Therefore, further research is needed in the area of performance measurements and benchmarking in a supply chain context.

There are numerous ways to meet the unexpected challenges and success of benchmarking. Some of them include partnering for benchmarking activity taking into account the characteristics of such partnering firms, acceptance of both quantitative and qualitative benchmarking information, lack of business process understanding, effective data collection process (interviews, mail questionnaires and the Internet) and comparability of companies and processes (Andersen et al., 1999). The benchmarking approach in SCM can include assessing the current status of the industrial partners, identifying performance measures, use of a generic benchmarking questionnaire, performing the benchmarking visits in teams and analysing the processes for best practices and performance improvement.

Gilmour (1999) describes a group of benchmarking measures as applied to supply chain processes. These measures are based on a set of capabilities that incorporate the extent of integration and use of technology in supply chain management. The set of capabilities includes process capabilities, technology capabilities and organizational capabilities. The process capabilities include customer-dialogue driven supply chains, efficient distribution, demand driven sales planning, lean manufacturing and supplier partnering and integrated supply chain management. Integrated information systems and advanced information technologies come under the technology capabilities. The organizational capabilities cover integrated performance measurement, teamwork and aligned organizational structure. The capability dimensions include strategy/organization, planning, business process/information flow, product flow and measurement (Neely et al., 1997).

Computer-aided benchmarking tools incorporating Data Envelopment Analysis (DEA), statistical analysis, flow charts and mathematical models, facilitate the benchmarking process to be more effective and accurate. However, the data collection process plays a major role in benchmarking. There are several methods for this purpose as noted earlier. However, a web-based data collection has become more common and effective method together with other traditional methods such as interviews, questionnaire surveys, etc.

BIJ invites contributions on benchmarking techniques and tools in supply chain management. Empirical research, analytical models and case studies addressing the benchmarking tools and practices in supply chain management are welcome.

A. Gunasekaran

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