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Effective Benchmarking in Supply Chains Supply Chain Benchmarking adds value not only by improving a given supply chain process but also by helping companies evolve more quickly and effectively into ‘learning organizations’ and facilitate the transition to a total quality culture especially in the transformed process areas. This also generates substantial payback and yields higher returns particularly when it is driven by strategic objectives and backed by senior management. The article shares an approach and process of undertaking a benchmarking exercise, provides the basic concepts and draws from examples of actual implemented projects in TCS.

About the Author Devashis Das Devashis Das is a lead supply chain consultant with the Innovation and Transformation Group of the Manufacturing ISU in TCS. He has about 18 years of experience including 8 years in the domain of Supply chain management and 10 years in manufacturing industry. He has consulted in a variety of supply chain areas including Demand Management, Inventory Management, S&OP, Supply Chain Visibility, Service and Spares to name a few; to both domestic and large international clients and managed end to end implementations. He comes with an MBA , B.E and is Certified in Production and Inventory Management from APICS. He can be contacted at [email protected]

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Table of Contents 1.0 Introduction

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2.0 What is Benchmarking?

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3.0 Why Benchmark Supply Chains?

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4.0 Benefits of Supply Chain Benchmarking

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5.0 Types of Benchmarking

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Internal

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External

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Best Practice / World Class

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6.0 The SCM Benchmarking Process

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Diagrammatic Representation of Benchmarking Process

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A Systematic Approach

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7.0 Benchmarking – Possible Supply Chain Critical Areas

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8.0 Preparing For The Benchmarking Project

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9.0 Benchmarking: 6 Step Process

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9.1 Step-1:

Identify & Understand Your Processes

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9.2 Step-2:

Identify What And Who To Benchmark

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9.3 Step-3:

Collect Data

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9.4 Step-4:

Analyse Data And Identify Gaps

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9.5 Step-5:

Plan & Action Improvements

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9.6 Step-6:

Review

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Summary

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1.0 Introduction The word benchmarking might just be one of the simplest and most misinterpreted business terms. It typically refers to the process of continuously improving your organization by comparing it with world class organizations and evaluating it/learning from their process benchmarks and best practices. It is a simple and powerful idea. Benchmarking, pioneered by Japanese manufacturers after World War-II, was elevated by America's most successful companies such as Wal-Mart and Motorola in the 1970s and 1980s, and yet remains substantially underutilized even today.

2.0 What Is Benchmarking? The first written definition, published by Michael J. Spendolini in The Benchmarking Book in 1992, was developed by examining the organizational functions of more than 50 companies in the U.S. that were actively using the process. This composite definition reads: "A continuous, systematic process for evaluating the products, services, and work processes of organizations that are recognized as representing best practices for the purpose of promoting organizational improvement."

3.0 Why Benchmark Supply Chains? There is an increasing realization among organizations that the competition is not only between products and services but also between competitive business models in supply chain, process maturity, flexibility and agility. There are significant implications of this competition on the supply as represented in the schematic below (Figure-1).

Market (Financial Instability, Credit Crunch, Economic challenges )

Environment (Stringent Regulaltory Norms, Trade Compliance, Demand for High Quality and mass customization)

Implications Pressure to enhance shareholder value with least spend, War on waste, Need to prioritize for next gen mfg and service, Demand for visbility and flexibility

Supply Chain (LCC Sourcing, Larger Global Chains, Delivery and Security concerns over expansions)

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4.0 Benefits Of Supply Chain Benchmarking Benchmarking the supply chain process helps to uncover opportunities for improvements and derive tangible gains. Some sample business benefits are shared (Figure-2)

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Schedule

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Quality

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Customer Satisfaction

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30% reduction in inventory in just 3 warehouses with > 25,000 USD in a quarter (Global Paints Major’s Indian Operations) Inventory reduction by $8Mn per year ( Power generation equipment manufacturer) Improved capacity utilization by 8% (A leading machine tool manufacturer) Reducing the cash to cash cycle time by 10 days (Global Paints Major’s Indian Operations) FG productivity improvement by 19% (A leading machine tool manufacturer)

Lead time reduction from 74 days to