Why Should I Benchmark?

How good is ‘good’?

Are you best-in-class or major opportunity in your industry? Do you have a bad warehouse? Not sure how you stack up against your competitors?

One of the best ways to answer these questions is to begin the process of benchmarking. Merriam-Webster defines benchmarking as “the study of a competitor’s product or business practices in order to improve the performance of one’s own company.” Basically, benchmarking helps determine how good ‘good’ is, and how they are making the standard.

The Warehousing Education and Research Council’s Warehouse Manager’s Guide for Benchmarking states that warehouses who benchmark well, better their performance by:

• Learning how excellence is achieved in similar fields;
• Sharing knowledge about common problems;
• Setting appropriate performance measures and targets for improvement;
• Enabling and empowering employees in making change happen;
• Extending a culture of continuous improvement.

But, Why Benchmark?

Let’s look at the most recent benchmarking survey from WERC, DC Measures 2009. Best-in-Class warehouses are achieving considerably better results than typical warehouses across several performance measures.

Let's look at one of my favorite metrics, Perfect Order Index (POI). Best-in-Class warehouses POI is greater than or equal to 98.7 percent while Typical (or Average) warehouses have a POI between 92.2 and 96 percent.

Metric	Major Opportunity	Disadvantage	Typical	Advantage	Best in Class	Median
Perfect Order Index	Less than 83%	>= 83% and < 92.2%	>= 92.2% and < 96%	>= 96% and < 98.7%	>= 98.7%	94.9%

Benchmarking helps your company to compare how well you are performing against others and identifies whether your company is at a disadvantage. Whether you are benchmarking to increase productivity or reduce operating expenses, driving best-in-class performance may increase efficiencies, profitability, and improve customer service. 

There are several resources to help you get started with benchmarking. I recommend the following:

• Warehouse Manager’s Guide for Benchmarking available through the WERC Online Store.
• Attend a seminar similar to WERC’s Benchmark NOW!
• Start tracking your stats or performance measures and understand what the numbers are telling you. For WERC members, there is the WERC Interactive Benchmarking Tool.
• Participate in a benchmarking study or survey, especially one that provides you with the results of the study or survey.

Benchmarking is not hard. It just takes practice and a clear understanding of your desired outcomes. If you have an interesting benchmarking story to share with us or a particular question you would like us to answer about benchmarking or metrics, send the details or question to kmanrodt@georgiasouthern.edu.

Cheers!

Karl

All Who Wander Are Not Lost

Whether you are just beginning your journey to process excellence or have made significant strides in that direction, having a road map to your destination is always important. For those of us who may wander and lose our way having a backup plan in place is paramount to success.

With that in mind, I would like to invite you to embark on a journey with me every two weeks discussing a benchmarking road map to help you drive Best-in-Channel (or Market or Class) performance.

To begin our journey, first we must understand our location. We must define our Point A. The best possible way to discover your Point A is to assemble your data and participate in a survey. I would encourage you to participate in DC Velocity and the Warehousing Education and Research Council's Annual DC Measures Survey. To participate, click here.

By participating in this survey, you will receive a complimentary copy of the results. The results will allow you to define your Point A. Depending on your performance data you could be a Major Opportunity warehouse or a Best-in-Class warehouse.

Below is a snap shot of the performance benchmarks presented in the Annual Metrics Study. For example, if your performance for On Time Shipments is 98.3%, then you would be classified as a Typical warehouse. To zoom in, click on the image.

The Annual DC Measures Survey asks for performance data on 50 different metrics. The 50 metrics have been identified as key measures of performance by the Distribution and Warehousing industry in the first two surveys, which were conducted in 2004 and 2005. In addition to the metrics, there are questions to determine your picking operations, strategy, industry you primarily serve and annual revenues. These questions are designed to help segment the data so you can better define your competitors. For example, you can define your competitors as those with similar revenues, strategy, industry, or operations.

But what if I lost my way?!?

No problem, especially if you are a DC Velocity reader or WERC member. We have tools readily available for you. And you really haven't lost your way, you're just disoriented for the moment.

One tool I recommend allows you to continuously Track Your Stats. If you aren’t able to participate in the survey, you can use this tool to see how you stack up against respondents who answered the survey. Then every month, or quarter, go in and update your performance. Now you are able to track your performance either monthly, quarterly, or yearly. The frequency at which you update your numbers is up to you.

Benchmarking is not hard. It just takes practice and a clear understanding of your desired outcomes. If you have an interesting benchmarking story to share with us or a particular question you would like us to answer about benchmarking or metrics, send the details or question to me kmanrodt@georgiasouthern.edu.

Happy Trails!

Karl