Best-practice Benchmarking for Logistics Directors: Avoiding the banana skin by comparing Apples with Apples®

Posted by Jonathan Kittow on 30/03/17 08:56

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Being responsible for the cost of running your transport, means that you’re likely to be asked the following questions regularly :
  • Am I getting good value for money?
  • How can I save money without affecting service?
  • Should I tender or just renew with my current contractor?

Unfortunately, due to the complexity of the task, trying to understand what the right cost ought to be is difficult. After all, each day companies deliver different sizes of consignments to a number of their customers, and each customer is a different number of miles from the warehouse.

Historically, logistics costs have often been measured as a percentage of sales for comparison purposes. Despite the fact that this default measurement is often readily accepted, right-thinking logisticians know that this number is misleading.

For bottled water or soft drinks means distribution costs could be up to 23% of sales, due to the weight of product and relatively low sales value. But if you’re selling saffron – or even cosmetics – it could be well below 5% of sales. So avoiding the trap of comparing apples with pears mean an alternative approach is necessary.
Until recently, there has simply been no reference point that measures how cost-effective your transport is, when compared with your peers and competitors, nor a guide to what you OUGHT to be paying for your logistics requirement.


BUYING LOGISTICS IS NOT THE SAME AS BUYING COMMODITIES OR DIRECT SERVICES!

Running a transport operation means that buying transport services is not just as straightforward as buying paper clips, packaging or commodities. The cost of the service you’re buying reflects a myriad of variables which are unique to your business, including:

• Delivery frequency and drop size
• How far away your customers are from your distribution centre (DC)
• How readily you can combine your product with others' to increase outbound load fill.
• What traffic flows coming in the reverse direction enable you to find a cost-effective return trip.
• The quality of your service requirement (Targeted performance).

Unless you can find a consistent way to compare all of these variables, you won't  know whether you’re getting good value from your transport solution or not.


BENCHMARKING

The value of benchmarking has increased in many areas of logistics but, until now its relevance within the transport sector has been limited by the complexities and variables detailed above.

The availability of a tried and tested tool to allows you to assess the competitiveness of your transport solution using your own data. By comparing your activity profile against a standard, we can compare your company, anonymously, against your peers or other 3PL solutions ensuring a like-for-like comparison.

The Gold Standard Index (GSI™) benchmark allows logistics directors of FMCG companies to do three things:

• Answer the question, ‘Am I getting good value for money?’
• Identify how you compare with your peers
• Open the discussion with your providers to help you secure a more competitive service.

The Gold Standard Industry (GSI™) benchmark has saved suppliers millions of pounds, to date. Over the last 100 benchmarks done by Simply Supply Chain, two thirds of consumer goods companies who have used the GSI™ have reduced their costs by at least15%.

Contact us, and we’ll advise on how to generate somewhere between 20 and 100 times return on investment, as a result of the benchmark and going to tender. 

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Topics: Benchmarking

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