Personal best supply chains

Have you been wanting to measure your supply chain performance but can't find any established benchmarks for what you want to do? Then maybe you should develop your own.

Many industry organizations and software vendors today do offer various types of industry benchmarks. Two widely used examples are the Council of Supply Chain Management Professionals' (CSCMP) Supply Chain Management Process Standards, and the Supply Chain Council's Supply Chain Operations Reference (SCOR) model. Some software vendors can provide more narrowly focused benchmarks for companies to measure activities like picking and receiving in warehouse operations.

But sometimes no industry benchmark data is available to fit a specific need. In those situations, says consultant Phil Schoepke with the firm Global Productivity Solutions, a company could develop an internal benchmark using its own data. Schoepke recently helped Kraft Foods' Cheese and Dairy division develop its own metrics for inbound transportation.

Suppose you want to benchmark your transportation cost per mile for each inbound lane but there are no benchmark data available for your industry vertical. What you could do, Schoepke says, is gather data on your cost per mile for all shipments, and identify the lowest 20 percent in each lane. Then you can average the cost per mile for those lowest-cost shipments in each lane to determine your own "best in class" cost. Companies can conduct this statistical analysis with Six Sigma tools.

This approach is similar to one that many athletes have used for years to improve their personal performance. Rather than try to beat an Olympic record, for instance, they strive to surpass their own "personal best" achievement. In doing so, they steadily get better at whatever sport or activity they are involved in.

Similarly, a company can aim to exceed its own "personal best" measurement of supply chain performance. In essence, by competing against itself, the company will still improve its operational excellence and reduce costs.