The Process Of
Benchmarking Supply Chain
& Ocean Freight Rates

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Benchmarking is “a
measurement of the quality
of an organization's policies,
products, programs,
strategies, etc., and their
comparison with standard
measurements, or similar
measurements of its peers.”

Benchmarking as a Process

Benchmarking as a process is thought to have originated with
Xerox in 1979. The document company used benchmarking to
take a look at unit production costs in manufacturing.
Xerox management compared their unit costs with certain
competitors in Japan who were selling copiers at extremely low
prices.
Staff discovered that indeed, the competitors’ production costs
were much lower. This allowed the Japanese competitors to offer
their customers such low-priced items.

Such an awareness
led US
manufacturing
executives at Xerox
to re-adjust their
targets in keeping
with Japanese
costs. They made
changes to their
manufacturing
process to meet
those targets.

The results were so phenomenal that a
“benchmarking movement” sprung up
in business process management
circles. The benchmarking approach
and process became “an essential
element of the business performance
management (BPM) toolkit and a key
input to financial and business
improvement efforts”.

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Benchmarking Process Steps in
Your Supply Chain

Volatility in ocean freight rates is an important factor to consider
in ocean freight negotiation. A customer should ignore the
importance of market volatility at their own peril.

In general, the steps of the
benchmarking process are as follows
(with some variation in benchmarking
process steps as companies adapt
their own methodologies to meet their
corporate needs).

1. Choose an area to improve.
2. Define the benchmarking process/scope that
will be undertaken.
3. Isolate potential partners for comparison
4. Identify possible data sources -where you will
get your information.
5. Identify possible data sources -where you will
get your information.

6. Choose an area to improve.
7. Define the benchmarking process/scope that
will be undertaken.
8. Isolate potential partners for comparison
9. Identify possible data sources -where you will
get your information.
10. Identify possible data sources -where you will
get your information.

Shipping Needs Benchmarking
for Efficiency & Optimization

Many companies in the shipping industry involved with
benchmarking process steps have had to sidestep one significant
area in their cost analyses. Market transparency. A frustratingly
murky area.
Whether for companies directly inside the shipping/freight
industry or those companies simply relying on shipping/freight
for their operations, market transparency has been sorely lacking.
Without knowledge of the costs, it has been challenging to
engage in benchmarking the logistics process properly.

Freight cost control
is a critical element
in evaluating and
seeking
improvement for
many companies, big
or small. For
example,close to
10% of logistics
costs for home
appliance giant
Electrolux is
container shipping
costs.

Market conditions were too volatile, the
data was too opaque/fragmented, and
too many vested interests existed in
not making this information
transparent.
Who would have thought that
crowdsourcing contracted price data
would be the “disrupting” answer?

A New Era for Benchmarking,
Ocean Freight and Performance

Understanding benchmarked freight
rates assists you in negotiating better
rates from your supplier. It can also
underscore standards that you need
to maintain for your customers in
order to stay competitive in today’s
fast-changing world.

The benefits of benchmarking can
expand from comparative costs to
expense-to-revenue ratios, service
calls, levels of customer satisfaction
and other metrics that need to be
improved.