Benchmarking in logistics

Basics

Benchmarking is a management method that has so far been successfully practiced mainly in the USA. So far, no uniform understanding of the term has emerged in the literature. However, many definitions originate from the definition given by David T. Kearns, Chief Executive Officer of XEROX Corporation:

"Benchmarking is the continuous process of measuring products, services and practices against the strongest competitor or the companies that are seen as industry leaders".

The practical experience that makes this method so interesting comes from the USA. Effective benchmarking is now also part of the “Malcolm Baldrige National Quality Award”, one of the most renowned prizes for exemplary quality assurance in the USA (Lamla 1995, p. 19).
Bisher verfolgte Verbesserungsaktivitäten innerhalb von Unternehmen basieren auf der japanischen Methode des Kaizen und der aus Amerika stammenden Methode des Business reengineering. Diese beiden Ansätze unterscheiden sich dadurch, daß beim Kaizen eine stetige, inkrementale Verbesserung, beim Business Reengineering hingegen eine deutliche Verbesserung in einem „Quantensprung“, wobei traditionelle Abläufe über Bord geworfen werden, angestrebt wird.

The benchmarking method combines the typical features of these management philosophies: If a company does not constantly question and improve internal processes, performance advantages once achieved will dwindle over time, as competitors will use comparable methods to improve their performance as well. In order to be successful in the long term, the search for and implementation of improvement measures should therefore be carried out continuously. The benchmarking method supports this requirement. Understanding benchmarking as a continuous process means, among other things, that a benchmarking team is established over the long term, the company's level of performance is regularly checked and adapted to the dynamics of the market.

On the other hand, the aim of benchmarking is to uncover best practices by comparing them with other companies. If these so-called "best practices" are now adapted by other companies, there are sudden improvements in performance, since in individual cases completely new processes are adopted for the company and implemented in their own company. In this way, benchmarking combines the typical elements of Kaizen, continuous improvement in small steps, with those of business reengineering, the radical new beginning.

method

In benchmarking, it is important to identify promising areas of potential and to show ways in which the performance gap with others can be closed. The continuous benchmarking process runs through the phases of planning, examining, checking and executing the Deming cycle, which is also known in other contexts with quality improvement methods.

The cycle begins with the planning phase, in which, based on the company objectives, the business processes to be analyzed, the measured variables to be determined and the selection takes place. When looking for comparison partners, it is often difficult to get more detailed information about other companies. Statistics, yearbooks, events, publications in specialist journals or databases are possible sources.

Thorough planning can significantly increase the efficiency of the benchmarking study. For companies with no experience of benchmarking in particular, it is advantageous to initially keep the study area of the study as small as possible in order to be able to address problems in a targeted manner. In every benchmarking study, the number of key figures used for the comparison should be reduced to a minimum, since in many cases the effort involved in collecting data should not be neglected.
Subsequently, in the second phase, the business processes of the companies or areas involved in the study are examined. The process flows are documented and suitable parameters for performance comparison are collected. During the survey, it must be ensured that both comparison partners use identical measurement rules in order to obtain comparable data or key figures. The basis for comparable areas of investigation (processes and associated measurement data) should, however, already be created in the planning phase.

In the next step, the collected data are first examined for their comparability. For this purpose, it is advisable to examine the surroundings of the examination area. If necessary, the boundary conditions should be described using characteristic influencing variables. The comparison data are then evaluated, taking the boundary conditions into account, in order to uncover the causes of any performance gaps in the processes of a company.

In the final execution phase, the knowledge gained from the benchmarking study is implemented in the company, whereby realistic targets must be set for the internal business processes. It is important to adapt the causes that justify the exceptional performance of the other companies for your own company. In addition, as with all optimization projects, constant monitoring of one's own performance and the achievement of the goals set is necessary.

Types of benchmarking

Basically, benchmarking studies can be differentiated according to different criteria, for example benchmarking objects or benchmarks. Frequently, however, the benchmarking variants are differentiated according to the criterion of the selection of the comparison partner, since this is one of the most important points for the successful implementation of a benchmarking study:

Internal benchmarking: This type of benchmarking involves company-internal comparisons of company areas. In this case, data collection is very simple and results can be achieved in a relatively short time. Examples of this are the comparison of different divisions or profit centers, individual plants or different distribution warehouses of a company.

Competitive benchmarking: A company known for its services within its own branch, ie usually a direct competitor, is sought as a comparison company. The comparability of the data material is most likely given with this type of comparison, as the structure of the companies examined is mostly similar due to the fact that they are industry-alike. However, significant problems can arise in the exchange of information between competitors.

Functional benchmarking: Functions such as order processing or warehouse management from different companies are compared here. In this case, addressing potential comparison partners is quite easy, as they are usually not direct competitors.

Generic benchmarking: When conducting generic benchmarking studies, a company is not bound by competitive or industry boundaries. The limits are only determined by the ability to develop analog processes and to implement the individual processes across the various industries with the help of the partner's selection criteria.

In any case, it must be ensured that the objects to be compared are actually comparable with one another, that is, have boundary conditions that are as identical as possible. If the boundary conditions do not match, their influence must be taken into account when evaluating the performance to be compared.

Benchmarking in logistics

In the past, prices and product quality were the deciding factors for customers to purchase. However, since comparable products from different manufacturers are becoming more and more similar in terms of usefulness, product quality and appearance, the quality of logistical processes is increasingly coming to the fore.

Nowadays, the additional services perceived by the customer in the logistics processes, such as speed, punctuality or a high degree of readiness for delivery, determine the necessary differentiation from competitors on the market. However, an improvement in the logistical performance must not be bought at great expense, for example through excessive material inventories along the stages of the value chain.

Rather, what is needed are effective and efficient processes that have proven their manageability and reliability while at the same time satisfying customer needs at a low cost.

This problem gives a company on the one hand the question of the achievable logistics quality and on the other hand the question of the procedures or practices that lead to the high quality of the logistical processes.

To answer such questions and to set realistic target values, a comparison with other companies is necessary, which can be realized by means of benchmarking studies. In order to compare performance and to reveal weak points or potential for improvement, meaningful key figures are required to quantify the logistical performance. The evaluation of the logistics processes is based on the company's key figures.

On the other hand, the processes of the comparison partner must also be traced and understood. This is the only way to identify the causes that are responsible for the better performance of the other company. Subsequently, it is necessary not to simply copy the practices recognized as more effective and efficient, but rather to adapt and implement them in a suitable form to the circumstances of one's own company. A benchmarking study can be used to set ambitious goals for the performance of your own logistics that have obviously already been achieved by other companies.

Difficulties and Success Factors

Companies often find it difficult to get started with benchmarking. Addressing possible comparable companies is often difficult because there is a lack of standardized measurement parameters and valid comparative data. Furthermore, conscientiously carried out benchmarking comparisons require a not to be underestimated personnel, financial and time expenditure, whereby many companies are already discouraged from such investigations in advance.

The effort for benchmarking examinations can, however, be reduced through targeted planning, eg a suitable delimitation of the examination area. Further success-promoting prerequisites for benchmarking studies are the involvement of participating employees, the determination of "process owners" and the interdisciplinary cooperation of the team members.

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