What is benchmarking ?

Benchmarking is the process of identifying the highest standards of excellence for products, services or processes and then making the improvements that are necessary to reach those standards commonly called ‘best practices’. Benchmarking in logistics organisations helps the company to constantly monitor and assess its performance and operating techniques against other logistics practices both within a specific industry (retail, wholesale, etc.) and against best of class companies. The process is important to the continuous improvement in an organisation’s service and expense levels. Benefits from benchmarking for logistics organisations include:

• improved productivity in operations

• identification of new material handling systems that will enhance and improve throughput and lower expense

• improved information flow between departments

• improved customer service and quality control

• reduced logistics expenses

• improved team spirit and morale

Implementing benchmarking in a logistics operation involves the following steps .The following steps describe the implementation process of logistics benchmarking:

• First, choose which process or processes to benchmark. The choice can be based upon which function in the logistics organisation is the most expensive to perform, causes the most trouble or has the greatest impact on customer service.

•Identify the key performance variables for the selected functions. These items can include efficiency (timing, cost, productivity, etc.) quality (errors, customer service parameters, etc.) or cost (cost of outbound transportation as a percentage of company sales, cost per unit shipped, etcDocument the current processes, steps required and operations flow observing all physical activities and supporting information system interactions.

•Identify competitors and best-in-class companies with whom to compare

benchmarks. Best-in-class information is relatively easy to obtain.

•Decide which competitor or non-industry practices or measures would be the most beneficial to a company. Choices should be based upon strategic quality and/or customer service and not just for cost cutting. When choosing other company practices to review, do not just copy a practice but modify it to suit the practice and procedures of the benchmarked company.In order to evaluate the importance of the critical success factors and to analyse the performance of the companies to be benchmarked, the success factors are structured into a form of a hierarchy.The goal for the benchmarking analysis is located on the highest level of the hierarchy and the logistic critical success factors on the second level. Each logistics critical success factor has been classified based on its utility. For example, reliability is measured with the following numerical scale: over 99%, 97–99%, 95–97%, 93–95% or less than 93% of the orders are delivered according to the

target schedule, in right quantities and without damage. Correspondingly, compatibility is evaluated using a qualitative ratings scale, i.e., outstanding, above average, average, below average or unsatisfactory. The use of ratings enables DMs to analyse each LSP individually with respect to each success factor for their subsequent ranking relative to each other.In the increasingly competitive global market, logistics strategic management has become vital for achieving competitive advantage in order to capture market share. The use of benchmarking is used in a larger sense in order to support strategic management for survival. FAHP may be employed to reduce the vagueness and impreciseness while making judgemental decision to support logistics benchmarking process. In the present research FAHP has been successfully applied to prioritise the critical success factors and for their subsequent ranking. The various 3PL services providers have been evaluated with reference to the identified critical success factors for the necessary benchmarking. Thus the benchmarking using FAHP has been in use to achieve the desired performance standard. The benchmarking process helps both shippers and LSP. LSPs may improve upon their weak area of performance while the shippers may use the benchmarking process to identify the potential 3PL services providers and to optimise their requirements.

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