There are few objective ways a shipper can really know how well their logistics operations is doing on its own. Since every company’s products and distribution requirements are unique, there’s no standard scorecard that says if your logistics costs are under $X, then you are doing a good job – or your delivery performance is less than Y%, so that’s bad.
This reality makes it hard not just for logistics professionals in the business, but also for the senior leaders managing the function who are not part of the day to day. Managing without a point a reference to track performance is impossible. This is the value of benchmarking.
Setting logistics benchmarks requires a shipper to look inward but also outwardly as well. This means some important benchmarks are things best measured against yourself. Examples could be if you are looking to increase your equipment utilization, or avg. weight per truckload. In these cases, it’s best to start by measuring your current operations and measuring future performance against that – as opposed to finding a generic national average on a random website and expecting to measure up to that.
Other benchmarks, however, are best measured by looking outside of your operation. The most obvious example is freight rates – in addition to actual transportation spend, what about cost per hundred weight or spend per pound. Freight rates also need to be benchmarked on a lane basis and consider (at minimum) your Origin/Destination pairs, what you are shipping, and mode.
Effective benchmarking is not just about rates either. Gaining new perspectives on what other shippers are doing in terms of the technology they use and other management techniques (like KPIs) is vital. These are direct ways to understand how well your operation is running and learn about new ideas for making improvements.
The old saying “you can’t manage what you don’t measure” has special meaning for logistics. Knowing how to find the right benchmarks is the most important step towards making your operation the best it can be.
2017 is just around the corner. Are you ready? Interested to see how your logistics operation compares to other businesses like yours? If you would like a 2nd opinion, learn more about our ROL Assessment™ CLICK HERE.
