How Benchmarking Helps Lower Your Logistics Cost

How Benchmarking Helps Lower Your Logistics Cost
Featured image credit: courtneyk/iStockphoto.com

Whether you are a business owner or a field service manager, you are likely constantly striving to be better than the best. Regardless of how easy it may sound, achieving this target and beating your competitors every time is a hard nut to crack.

Logistics companies need to assess the different aspects of their field operations regularly and effectively use cost reduction techniques in logistics. They should furthermore ensure efficient supply chain management and timely delivery to make their customers happy and stay ahead in the game. This is where benchmarking comes to the rescue.

First adopted by the Xerox Corporation in 1980, benchmarking is now being adopted hugely by logistics companies. According to a survey by the American Productivity and Quality Center (APQC), 61% of the respondents consider benchmarking a vital strategy in supply chain management by their companies, while 68% believe that benchmarking data is applied in targeting growth and improvement.

To make use of the benchmarking strategy, you can take several steps to implement it at your company. You can either use the supply chain operations reference model (SCOR) and hire a benchmarking expert or embrace advanced technology solutions like a route optimizer.

What Is Benchmarking?

Benchmarking means setting a goal for a business in terms of its output level, cost-effective logistics, supply chain costs, revenue earned, or profit margins. It can be set at the best values at each category which is attained by the market value or a certain value, depending on which stage of business or efficiency level you are in and what you aspire to reach.

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Benchmarking can be done in three ways: internal, external, and competitive. Internal benchmarking refers to assessing and setting targets for internal operations, within different branches or facilities of a single company. External benchmarking means setting targets relative to other businesses that are not of the same industry or sector. Finally, competitive benchmarking refers to setting targets as per a competitor company’s performance. All three ways are estimated based on different key performance indicators (KPIs) of the related parameters.

How Does Benchmarking Help Reduce Costs?

In an attempt to lower logistics costs, benchmarking can be used in financial analysis, with an assessment and comparison of processes and performance, with a comparison of output with similar products, in the optimization of a single function, or by comparing performances with competitor companies. Let’s take a look at each of these to understand them better.

  • Financial analysis: While comparing the financial status, total cost of production, revenue, or turnovers with other industry players, benchmarking helps you improve cost efficiency or turnover time by appropriate measures. For example, based on benchmarking, a field service business can implement fuel cards or use a route planner to keep fuel expenses under control.
  • Process assessment: Benchmarking helps a company strategize working processes and performances. Setting benchmarks would help the company judge whether rectifying their processes or outsourcing them will best improve performances. For example, a company might want to assess whether to employ full-time labor or part-time employees to offload trucks and can set benchmarks on labor costs to make the decision.
  • Assessing and optimizing a single function: While assessing a single function, benchmarking helps a company review and make decisions accordingly. For example, delivery companies can become more efficient by benchmarking the time taken for delivery trips. So, suppose a truck is scheduled to deliver shipments in multiple locations. If the drivers go through poor routes and get stuck in traffic, it will delay deliveries and increase fuel costs. Such an assessment would lead to adopting route planners that help plan well-optimized routes to ensure timely and efficient delivery and reduce costs.
  • Strategic benefits: Benchmarking competitors’ performance helps logistics companies review their total operational processes and scale up the market ladder by improving efficiency and financial status.

So, benchmark your targets for steady growth, for better results, and to flourish faster. There is no stopping you!

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Whether you want to slash the time it takes you to plan routes for your drivers, increase the number of stops they can make, or keep your customers satisfied knowing that your drivers show up on time… Route4Me helps you achieve that!