Regardless of industry or operating model, most executives agree that engaging in some form of “benchmarking” is important to the competitive viability of an organization. Although a well-known activity in the business world, the irony about benchmarking is that its definition can vary by country, sector, company and even by departments within the same firm.
In order to “level set” what is an important topic for logistics professionals, let’s begin this blog by sharing the Oxford English Dictionary definition of benchmarking as, “a standard against which things can be compared”. For additional context, the Oxford Thesaurus offers several like-meaning words that include “yardstick” and “barometer”. Basically, benchmarking comes down to comparing performance in specific areas with a predetermined reference point, goal or accepted best practice.
For businesses, benchmarking is categorized in three areas: internal, competitive and non-competitive. With internal benchmarking, companies gauge performance against established standards created by them. Conversely, competitive benchmarking determines how a company stacks up against rival organizations on factors like product quality, price and service. Finally, non-competitive benchmarking is helpful as companies try to adapt best practices from unrelated industries to their own business model.
Benchmarking in logistics and its application to Full Truck Load shipping programs
Given the importance of the logistics function to product-driven companies, benchmarking offers opportunities for continuous improvement across an entire shipping network. Equally applicable to domestic and international models, areas to benchmark abound in air and ocean freight shipping, FTL and LTL trucking, warehousing, order fulfillment and reverse logistics.
Not unlike other business functions, logistics benchmarking is about deciding what’s important to customers, suppliers and internal operations, and then determining whether benchmarks will be carried out internally, externally with competitors, or with companies in non-competing industries. From there, shippers can start to gauge performance in areas as diverse as On Time, In Full (OTIF) order fulfillment, carbon footprint reductions and target costs.
Given the pervasive role of Full Truck Load shipping in the logistics space, shippers that utilize FTL services would be well-served by engaging in some iteration of benchmarking. Of course, the aspects of an FTL program that a company benchmarks will be a function of industry, product type, company size, network complexity and volumes. By taking these factors into consideration, shippers can develop standards for operations that cover costs, lead time, customer satisfaction, SLA compliance and safety.
While recognizing the significance of the above factors to benchmarking, shippers also need to decide where their comparative data will come from. After all, it will be hard to compare performance against a benchmark without first identifying relevant sources of information. An important strategic consideration, this blog contends that companies will achieve the best results when the majority of benchmarking data comes from external parties. Here are three reasons why this statement rings true:
Three reasons why FTL shippers should seek benchmarking data from external sources
- Internal FTL data is just that; it comes from inside the company. While it’s important to have internal benchmarks, the exclusive use of data emanating from within an organization creates a one-dimensional view of performance. Based mainly on benchmarks that are nothing more than historical comparisons, the shipper’s frame of reference is limited to how well they measure up against themselves, without any perspective on the outside world.
By definition, internal FTL benchmarking limits a shipper’s access to information because the data pool is constrained by the size of the network and the number of carriers they work with. Ideally, internal benchmarking data is used to establish a baseline of performance, with external data brought in to measure performance relative to other companies.
- Benchmarking is about “measuring up” to the competition. Based on the official definition of benchmarking, it should be clear that this activity isn’t just about how a company is doing relative to its own standards. Of greater importance, benchmarking should be considered a tool that lets shippers know how they measure up against their competition.
For shippers to compare themselves to their competitors, data sources must come from outside of the organization. Whether those sources are born of competitive analysis, access to publicly available information, membership in trade associations or otherwise, shippers need that external perspective to truly appreciate what goes on in an open market environment. Without it, there’s just no way to benchmark in a way that leads to continuous improvement and competitive advantage.
- External data sources broaden the FTL shipper’s perspective. In addition to benchmarking internally and against competitors, shippers can learn a lot by comparing performance to firms in unrelated industries. Especially helpful when dealing with topics that are of interest to all FTL shippers, most companies are pleasantly surprised upon seeing how much they have in common with business models that are unrelated to theirs. Whether about subjects like carbon footprint reduction or levels of diversity spend, non-competing companies offer great benchmarking opportunities.
In the end, benchmarking is an ongoing process through which a company compares performance in specific areas of a business to predetermined standards. The broader the perspective an FTL shipper has with regards to those standards, the greater their chance of using benchmark results to the betterment of their company.
Upon acknowledging that benchmarking must be made up of internal, competitor and non-competitor sources, shippers can shift their focus to identifying the data sources that they’ll use. While the compilation of internal data has its own set of challenges, getting one’s hands on external information can be particularly troublesome.
These days, it would be difficult to find a shipper that doesn’t see value in benchmarking. In such uncertain and tumultuous times. There’s just no denying that access to comparative data can serve as a source of goal setting and in the end, achieving competitive advantage. Unfortunately, FTL shippers have historically had limited access to the external data required to determine where they stand relative to their competitors.
Whereas shippers should always seek multiple sources of internal, competitor and non-competitor benchmarking data, the Emerge Freight Procurement Platform offers several tools that create a whole new level of access to external data. By taking advantage of Dynamic RFP, Emerge Benchmarking and spot quoting, it is now infinitely easier for FTL shippers to see where they stand both internally against their own standards, and externally against competitors.