Optimising Supply Chain Performance: The Power of Benchmarks with Trace Consultants

Supply chain benchmarks are vital tools for organisations aiming to optimise their performance across various metrics. By comparing their operations to industry standards, companies can identify areas for improvement and implement strategies to enhance efficiency, reduce costs, and improve service levels. This article delves into key supply chain benchmarks, including warehouse productivity, asset utilisation, transport rates, inventory efficiency, and service responsiveness. It also highlights how Trace Consultants can provide external benchmarks and assess an organisation’s KPIs to drive superior supply chain performance.

The Importance of Supply Chain Benchmarks

Supply chain benchmarks provide a reference point for organisations to measure their performance against industry standards. They offer valuable insights into how well a company is performing compared to its peers and help identify best practices and areas needing improvement. Key benefits of supply chain benchmarks include:

• Performance Measurement: Benchmarks provide objective metrics for assessing the efficiency and effectiveness of supply chain operations.
• Continuous Improvement: By identifying performance gaps, organisations can implement targeted improvement initiatives.
• Strategic Decision-Making: Benchmarks inform strategic decisions, helping companies allocate resources effectively and prioritise initiatives.
• Competitive Advantage: Understanding how to outperform industry standards can provide a significant competitive edge.

Key Supply Chain Benchmarks

Several key benchmarks are critical for evaluating supply chain performance. These benchmarks cover various aspects of supply chain operations, including warehouse productivity, asset utilisation, transport rates, inventory efficiency, product availability, and service responsiveness.

1. Warehouse Productivity

Warehouse productivity benchmarks measure the efficiency of warehouse operations. Key metrics include:

• Order Picking Accuracy: The percentage of orders picked correctly.
• Order Cycle Time: The time taken from order receipt to shipment.
• Labour Productivity: The number of orders picked per hour or per employee.
• Space Utilisation: The percentage of warehouse space used effectively.

Improving warehouse productivity involves optimising workflows, utilising automation, and implementing best practices for inventory management.

2. Asset Utilisation

Asset utilisation benchmarks assess how effectively an organisation uses its assets, such as equipment and facilities. Key metrics include:

• Equipment Utilisation Rate: The percentage of time equipment is in use compared to its total availability.
• Facility Utilisation Rate: The percentage of facility space used compared to its total capacity.
• Downtime: The amount of time equipment is not operational due to maintenance or other issues.

Optimising asset utilisation requires regular maintenance, effective scheduling, and investment in reliable equipment.

3. Transport Rates

Transport rate benchmarks measure the cost and efficiency of transportation operations. Key metrics include:

• Cost per Mile/Kilometre: The transportation cost per mile or kilometre.
• On-Time Delivery Rate: The percentage of deliveries made on time.
• Load Utilisation: The percentage of transport capacity used effectively.
• Fuel Efficiency: The amount of fuel used per mile or kilometre.

Enhancing transport rates involves optimising routes, consolidating shipments, and leveraging technology for better tracking and management.

4. Inventory and Working Capital Efficiency

Inventory efficiency benchmarks evaluate how well an organisation manages its inventory and working capital. Key metrics include:

• Inventory Turnover: The number of times inventory is sold and replaced over a period.
• Days of Inventory on Hand (DOH): The average number of days inventory is held before it is sold.
• Stockout Rate: The frequency of inventory shortages.
• Working Capital Ratio: The ratio of current assets to current liabilities.

Improving inventory efficiency involves demand forecasting, just-in-time inventory practices, and effective inventory control systems.

5. Inventory Turns and Loss

Inventory turn benchmarks measure how quickly inventory is cycled through. Key metrics include:

• Inventory Turnover Ratio: The rate at which inventory is sold and replaced.
• Shrinkage Rate: The percentage of inventory lost due to damage, theft, or obsolescence.

Reducing inventory loss requires stringent inventory management practices, regular audits, and robust security measures.

6. Product Availability and Service Responsiveness

Product availability and service responsiveness benchmarks assess how well an organisation meets customer demand and responds to service issues. Key metrics include:

• Fill Rate: The percentage of customer orders fulfilled from available stock.
• Order Lead Time: The time taken from order placement to delivery.
• Customer Satisfaction Score: A measure of customer satisfaction with the service provided.
• Service Level Agreements (SLAs): The percentage of SLAs met or exceeded.

Enhancing product availability and service responsiveness involves improving inventory management, streamlining order processing, and enhancing customer service.

How Trace Consultants Can Help

Trace Consultants specialise in helping organisations optimise their supply chain performance through comprehensive benchmarking and KPI assessment services. Here’s how Trace Consultants can assist:

1. Providing External Benchmarks

Trace Consultants offer access to industry-specific benchmarks, enabling organisations to compare their performance with peers and industry standards. This external perspective helps identify performance gaps and areas for improvement.

2. Assessing Organisational KPIs

Trace Consultants conduct thorough assessments of an organisation’s KPIs, providing insights into current performance and areas needing enhancement. They utilise advanced tools and methodologies to ensure accurate and reliable assessments.

3. Implementing Best Practices

With extensive industry experience, Trace Consultants provide guidance on best practices for supply chain management. They help organisations implement strategies to improve efficiency, reduce costs, and enhance service levels.

4. Leveraging Technology

Trace Consultants leverage cutting-edge technology, including low-code/no-code solutions like Microsoft Power Apps and Power BI, to enhance supply chain management. These technologies enable the creation of customised dashboards and automated reports, providing real-time insights and facilitating data-driven decision-making.

• Microsoft Power BI: Offers robust data visualisation capabilities, enabling the creation of interactive and dynamic dashboards. Power BI can integrate data from multiple systems, providing a holistic view of supply chain performance.
• Microsoft Power Apps: Allows for the development of custom applications with minimal coding. Power Apps can be used to streamline workflows, automate data collection, and enhance collaboration among supply chain teams.

5. Continuous Improvement and Support

Trace Consultants offer ongoing support and continuous improvement services to ensure that supply chain operations remain aligned with industry standards and evolving business needs. They conduct regular reviews, provide feedback, and recommend enhancements to optimise performance.

Supply chain benchmarks are essential tools for organisations seeking to optimise their performance across various metrics. By leveraging benchmarks for warehouse productivity, asset utilisation, transport rates, inventory efficiency, and service responsiveness, companies can identify areas for improvement and implement strategies to enhance efficiency and competitiveness.

Trace Consultants provide valuable support in this endeavour, offering external benchmarks, KPI assessments, best practice guidance, and advanced technology solutions. By partnering with Trace Consultants, organisations can achieve superior supply chain performance, driving significant benefits and contributing to overall business success.

For companies looking to enhance their supply chain operations, Trace Consultants offer the expertise and resources needed to achieve operational excellence and strategic alignment. Embrace supply chain benchmarking and transform your operations for a more efficient and competitive future.

‍

Supply Chain Efficiency and Operational Excellence Amidst a Weakening Economy

As the global economic landscape continues to demonstrate volatility, businesses, especially those within Australia, face increased pressure to adapt and thrive amidst weakening economic conditions and dwindling consumer sentiment. These challenges underscore the need for one crucial aspect that often determines the fine line between success and failure: Supply Chain Efficiency and Operational Excellence.

The connection between supply chain efficiency, operational excellence and overall business success is significant. With every component of the supply chain—from sourcing and manufacturing to distribution and customer service—playing a critical role in the customer experience, the importance of an optimised, well-orchestrated supply chain cannot be overstated.

The Power of Supply Chain Planning

Supply chain planning is your crystal ball into the future. By integrating and synchronising all supply and demand plans with the business strategy, companies can align their operational goals with market demand. This not only facilitates a smooth flow of goods and services but also helps identify potential issues before they escalate, ensuring a robust response to the fluctuating economic conditions and consumer sentiment.

Unilever, a multinational consumer goods company, provides a sterling example of the value of advanced supply chain planning. In the face of growing consumer demand and increasing competition, the company implemented an AI-powered forecasting system. This system uses machine learning algorithms to analyse historical sales data and market trends, significantly improving the accuracy of their forecasts. As a result, Unilever was able to reduce excess inventory, lower operating costs, and increase product availability. Despite the challenging economic conditions, the company reported an improvement in service levels and an overall reduction in carbon emissions due to less excess production.

Leveraging Network Design for Greater Resilience

Another critical aspect of supply chain efficiency is network design. In the context of today's uncertain economic climate, businesses need to reassess their network design to ensure resilience and agility. This entails strategic placement of production facilities, distribution centres, and warehouses to reduce lead times and costs. It's about balancing the trade-off between the cost to serve and service levels.

When it comes to leveraging network design for greater resilience, Amazon stands out. The e-commerce giant's network design is a blend of fulfilment centres, sortation centres, and delivery stations strategically located to ensure quick delivery times. This configuration allows Amazon to control costs while meeting consumer demand for fast and reliable service. By continuously evaluating and tweaking their network design, Amazon has managed to remain resilient, maintain operational efficiency, and continue to deliver exceptional customer service in the face of fluctuating economic conditions.

The Rise of Warehouse Automation

In the warehouse, automation is no longer a luxury—it’s a necessity. As labour costs rise and consumer demands for faster, more accurate order fulfilment intensify, investing in warehouse automation technology has become an imperative strategy. Automated storage and retrieval systems (AS/RS), robotics, and intelligent conveyor systems can dramatically increase productivity, accuracy, and speed.

Ocado, a British online supermarket, has revolutionised its operation through warehouse automation. Using advanced robotics and intelligent conveyor systems, the company can process a 50-item order within just five minutes—a task that previously took about two hours. Ocado's automated warehouse system has drastically improved efficiency, accuracy, and speed, allowing the company to scale and meet increasing customer demand. Despite the tough economic environment, Ocado's investment in warehouse automation has enabled it to remain competitive and deliver a high level of customer service.

Transport Management: An Essential Cog in the Supply Chain Wheel

Finally, transport management plays a significant role in supply chain efficiency. By optimising routing, load building, and carrier selection, businesses can significantly reduce transport costs, improve delivery performance, and increase customer satisfaction.

DHL, a global leader in logistics, offers a prime example of effective transport management. The company utilises a sophisticated Transport Management System (TMS) that offers real-time visibility into its entire transportation process. This system helps DHL optimise routing and load building, significantly reducing transport costs and improving delivery performance.

DHL's TMS also allows for contingency planning and quick decision-making, enabling the company to maintain operational efficiency and continue providing excellent service, regardless of the economic conditions. The result has been an improved ability to navigate logistical disruptions and meet customer expectations, solidifying their position as a leader in the industry.

As the economic landscape continues to evolve, it's evident that supply chain efficiency and operational excellence have become essential strategies for survival and success. By investing in supply chain planning, network design, warehouse automation, and transport management, businesses can not only navigate the storm of weakening economic conditions and dwindling consumer sentiment but also emerge stronger and more resilient.

These examples of Unilever, Amazon, Ocado, and DHL demonstrate that with the right strategy and investments, businesses can navigate economic uncertainty, maintain operational excellence, and satisfy ever-evolving consumer expectations. Despite the headwinds, these companies have harnessed the power of supply chain efficiency to ensure their continued growth and success. Their stories serve as a potent reminder of the transformative power of an optimised, well-orchestrated supply chain and the far-reaching impact it can have on a business's overall performance.

‍

Contact us today, trace. your supply chain consulting partner.

Leveraging Your Supply to Improve Cost & Working Capital

With a backdrop of rising interest rates, persistant inflation and declining consumer sentiment organisations today face increasing pressure to reduce costs and optimise working capital. One of the most effective ways for management to achieve this is to invest in the supply chain.

In this article, we breakdown 3 supply chain investment options that can drive lower operating costs and improve working capital efficiency. These are (1) Supplier Collaboration, (2) Demand Planning & Replenishment and (3) Network Design. We will discuss these three approaches and offer practical steps to drive cost and working capital improvement in your organisation, along with the potential improvements and timeframes to expect.

‍

Supplier Collaboration

Building strong relationships with suppliers can lead to significant cost savings and working capital improvements. Research by McKinsey & Company found that companies that actively collaborate with suppliers can reduce supply chain costs by up to 20% and compress lead times by 50% within 12 to 18 months. Here are some key strategies to foster effective collaboration:

A. Transparency and Open Communication: Establishing an open line of communication with your suppliers can help identify opportunities for cost reductions, process improvements, and risk mitigation. Share information on sales forecasts, inventory levels, and production plans to facilitate better decision-making for both parties.

B. Joint Cost Reduction Initiatives: Engage suppliers in joint cost reduction initiatives by identifying areas where both parties can save money, such as through bulk purchasing, improved packaging, or reduced lead times.

C. Supplier Performance Management: Develop a supplier performance management system to track key performance indicators (KPIs) such as delivery times, quality, and cost. Regularly review supplier performance and collaborate to identify areas for improvement.

‍

Demand Planning & Replenishment

Investing in advanced demand planning and replenishment methodologies enables organisations to reduce costs and optimise working capital by better aligning supply with demand. According to an APICS study, organisations that optimise their demand planning processes can experience a 15% reduction in inventory levels and a 17% improvement in order fill rates within 6 to 12 months. Some key strategies include:

A. Implementing a Sales and Operations Planning (S&OP) Process: An effective S&OP process aligns production, inventory, and procurement plans with sales forecasts, helping to minimise stockouts and overstocks, reduce lead times, and improve customer service levels.

B. Adopting Demand-Driven Replenishment: Demand-driven replenishment focuses on replenishing inventory based on actual customer demand rather than relying on historical trends or forecasts. This approach can reduce inventory holding costs, improve cash flow, and increase order fill rates.

C. Leveraging Advanced Forecasting Techniques: Utilising advanced forecasting techniques such as machine learning and artificial intelligence can significantly improve demand planning accuracy, helping organisations to optimise inventory levels, reduce stockouts, and minimise excess inventory.

‍

Network Design

Optimising your supply chain network design can lead to substantial cost savings and working capital improvements. A study by Boston Consulting Group revealed that companies that undertake network optimisation initiatives can achieve transportation cost reductions of up to 25%, inventory cost reductions of up to 30%, and overall supply chain cost reductions of up to 15% within 12 to 24 months. Consider the following strategies:

A. Assess Current Network Performance: Conduct a comprehensive analysis of your current supply chain network to identify inefficiencies, bottlenecks, and areas for improvement. This may involve evaluating transportation costs, lead times, inventory levels, and service levels.

B. Optimise Facility Locations and Capacities: Analyse the location and capacity of distribution centers, warehouses, and manufacturing facilities to optimise the network design. This can help reduce transportation costs, minimise inventory holding costs, and improve customer service levels.

C. Implement Supply Chain Risk Management: A robust supply chain risk management strategy can help mitigate potential disruptions, ensuring a more resilient and cost-effective network. This may involve diversifying suppliers, investing in contingency plans, and implementing advanced technologies to monitor and predict risks.

‍

‍

By collaborating closely with suppliers, investing in mature demand planning and replenishment methodologies, and improving network design, organisations can drive cost and working capital improvements, ultimately enhancing profitability and competitiveness. Implementing these strategies can help businesses adapt to changing market conditions, reduce risks, and stay ahead in the increasingly complex world of supply chain management. The improvements and timeframes presented are based on industry studies, but the actual results may vary depending on the organisation's unique circumstances and commitment to the initiatives.

‍