Benchmarking Logistics Performance
Benchmarking Logistics Performance
Benchmarking is a primary tool that would help companies to measure their competitive advantage over the other competitors in the market and use their findings to develop a continuous improvement strategy for the business. In logistics, performance is based on the company’s efficiency in handling the process and live up to their customer’s expectations. However, not all logistics strategy is the same and having one derived from internal analysis of the company’s process is not enough to assume its maximum efficiency. That is the reason why benchmarking is an important tool for the company to determine the strength of its own strategies and compare it against the competitors. It is also crucial to consider the different elements of the logistics operation such as the policies, procedures and programs to allow a more effective benchmarking (Sekhar, 2010).
As mentioned earlier not all benchmarking methodologies will work on all business structures or can be used to effective on all sort of logistics operations. However, there are a few benchmarking methods that can be applied specifically to work best with logistics. The two-stage benchmarking method for example utilizes evaluation metrics and followed by an improvement metrics in achieving competitive advantage. The effectiveness of the approach was derived from the method of breaking down the metrics into two phases. The first one is to measure the performance output of competitors by setting a particular level and criteria. In this stage, the competitors are the ones that are being analyzed, factors such as policies, procedures, strategy, performance and programs are being evaluated and then followed by placing the competitor in the appropriate level. This process continues until all the strengths and weaknesses of the competitors have been identified. The next stage if about finding the best strategy that yields the highest performance level. Once the alternative strategy has been identified, it will be used as an alternative approach to be implemented as an optimal solution to logistical development.
The benchmarking process does not end after implementing the alternative strategy, there is a need to evaluate the outcomes in order to keep a continuous momentum of improvement (Chan et al., 2006). This approach would enable any organization to optimize their logistical operations while achieving the highest competitive advantage as possible. It is because continuous improvement means continuous learning. Meaning the company will be looking closely at the competitor’s strategy and identify the secret of their successful logistics operation. The identified strengths will then be revolutionized to be integrated to the company’s internal strategy. Once implemented, the results would constitute a much improved logistics operation that outlasts those of the competitors and the company itself would be strong enough to challenge the competition to attract higher market shares. Therefore, in order to gain advantage companies should use their competitor’s strength as a weapon against them.
The inclusion of the second phase of the two-stage methodology is related to continuous improvement because as companies learn more and more about their competitor’s approach they would also continue to develop their own approach. It is synonymous to trial and error approach, meaning one company will evaluate his competitor. Upon knowing the key of their success, the evaluating company will use his findings to rework his own strategy. After reworking and tweaking, the evaluating company would be able to come up with something more effective than its competitor. For example, a boxer would tend to lose from his first, second up to the third bouts. However, as the boxer loses from the previous fights he was able to observe and pick-up the signature moves of the other boxer that he is competing with. In the gym, the boxer and his coach will talk about what they have observed from the other boxer, so what will happen next is that the losing boxer and his coach will develop new fighting strategies to counter that of his competitor. This is analogous to the concept of benchmarking the competitor’s logistics approach and use second phase of the methodology to continuously improve performance.
One example of a two-stage methodology is the Analytical Hierarchy Process (AHP). The concept of this method is to divide the benchmarking process into separate areas covering performance evaluation and continuous improvement. Each of this areas work to complement one another and they can be applied different types of organization with their own logistics operations. This methodology uses major performance criteria in assessing logistics of competitors and other organizations. It is based on three important principles such as comparative judgment, decomposition and synthesis of priorities. The major performance criteria found in the AHP structure are adequate enough to assess the logistical approach of any business because it is based on both the tangible and the tangible factors. In addition, the performance criteria allows both the quantitative and qualitative attributes to be included in carrying out the evaluation
On the other hand, the logistics arm of business organizations should also consider the role that 3PL’s play in implementing an effective benchmarking approach. Third party logistics together with the company could form a strategic alliance program. In this program 3PL’s will be helping the company to identify the processes that the company conducting the benchmarking is not aware of. 3PL’s could determine the key strategies and the parameters that enable effective initiation of the competitor’s logistics strategy. After which, the company and 3PL providers could work together in organizing around the quantified data obtained from evaluating the competitors. The 3PL providers could also facilitate the dissemination of information and share relevant insights for the company during discussions on performance improvement.
References
Chan, F. T., Chan, H. K., Lau, H. C., & Ip, R. W. (2006). An AHP approach in benchmarking logistics performance of the postal industry. Benchmarking: An International Journal, 13(6), 636-661.
Sekhar, S. C. (2010). Benchmarking. African Journal of Business Management, 4(6).
