A Breakdown of Logistics Benchmarking (12.16.24)

Successful benchmarking relies on hitting key personal and industry targets. How well does your logistics model measure up?

Every business should regularly ask itself two questions: “Am I meeting my own standards?” and “Am I meeting the standards of my competitors?” Between those two answers lies benchmarking, the analysis and, if necessary, refinement of your current operational processes.

A critical look at your own logistics reveals how well or poorly you and your partners are performing. This is crucial information that reveals valuable, actionable insights for streamlining your business strategy and generating savings.

In this blog, you will learn:

• The 3 target areas of successful logistics benchmarking

• How each target breaks down

• Why opportunity costs matter

• How RLG brings benchmarking to you

The 3 target areas of successful logistics benchmarking

Broadly speaking, benchmarking considers many key areas. The processes each business analyzes within these three overarching categories will differ depending on their operations. Some common shared examples are transportation expenses, efficiency of day-to-day administrations, labor costs and vendor management.

In practice, benchmarking zeroes in on three key performance indicators (KPIs): inbound logistics, outbound logistics and finally in-house logistics. Each of these is measured according to how much time and money they are costing your business.

Those figures are then connected with any potential opportunities for profit and/or savings. Once defined, all these factors reveal how well your performance ranks according to your own expectations as well as those of your customers and industry.

How each target breaks down

Inbound logistics covers the transportation, storage and receipt of goods into a business. Inefficiency here or a lack of data transparency can have costly repercussions throughout your entire logistics model, right down to the end customer. The May issues of Inbound Logistics magazine offers 10 solid tips to cut transportation costs (page 14) and their news service is always a good resource for streamlining inbound processes.

Outbound logistics are neatly summarized by MH&L as consisting of 4 key concerns: inventory management, distribution, delivery/level of customer service and foresight and strategic flexibility.

Benchmarking your outbound logistics, therefore, requires knowing precisely what you have, where it is going and how happy your customers are with your current model. The flexibility factor hinges on how effectively your business model can pivot in the face of increased demand or unforeseen circumstances.

In-house logistics is how efficient your people and processes are when measured under their own steam, and by how much they are impacted through exterior factors like vendor performance. The back-office burden of administration is often heavier than it needs to be.

There are likely in-house problems that could benefit from a Transport Management System or other adjustments, or your people may be struggling to carry dead weight from underperforming vendors (in which case, we recommend auditing them).

Why opportunity costs matter

Opportunity costs are losses a business suffers by making a choice. Every business must make choices, of course, and of many different kinds, but it is possible to mitigate or even eliminate opportunity costs. Imagine your business has multiple parties vying for your logistics contract. You must pick one and it must be the most service- and cost-efficient for the long and short term.

Now, imagine you later discover that you picked the least cost-effective partner. You just incurred an opportunity cost by making the wrong choice. Working with the right benchmarking partner helps your business assess every potential logistics partner or vendor across all key metrics, ensuring no important data slips by and results in decisions with unforeseen opportunity costs.

Deep data empowers you at contract time with new or existing partners, providing savings opportunities through awareness that can help secure the most favorable agreements and perks of service.

How RLG brings benchmarking to you

How can your business gather all this data to see where you currently stand against your competitors? The RLG team can benchmark your logistics spend and contracts by mode. We review current transportation pricing alongside your partner agreements, putting our years of experience at your disposal to provide insightful feedback.

The knowledge you gain will clarify not only how efficiently your operation is running, but also how that translates externally to your standing in the industry. We can also help with contracts, assist in annual negotiations and make sure all pricing and language up to date.

By providing access to our world-class TMS and offering transparent analytics, RLG goes the extra mile and puts powerful benchmarking data into your hands.

Do not let operational ignorance give your competition an edge. Take advantage of a free benchmarking analysis with RLG and identify the KPIs driving you forward or holding you back.

Resource Logistics Group provides transportation and logistics advice combined with professional services and state-of-the-art technology. From contract negotiations to easing back office burdens, we are your ally in excellence. Connect with us on our contact page for a free benchmarking analysis.