Retail benchmarking is a critical, often misunderstood, tool to aid the assessment of supply chain performance and support decision making for strategic planning and tactical execution. Ask a retail supply chain executive what comes to mind when they think of benchmarking and individual metrics such as the following are common: What is industry average on-shelf availability in FMCG retail? What are top quartile fashion retailers achieving in terms of e-commerce fill-rate? What are typical retail industry costs to fulfill online orders? What is the average days of supply for a department store?
These individual metrics are necessary, yet form only a small piece of the overall retail supply chain benchmarking puzzle. A broader end-to-end supply chain view is necessary that once taken raises further questions such as: Why have existing benchmarks been implemented and focused on? What metrics should be prioritized? Are there too many in place? How aligned are metrics across the entire supply chain? Is the data being used relevant and reliable?
For benchmarking to be effective, it is critical that it is aligned with corporate objectives. It needs to be embraced by tactical and strategic decision makers, with clear and concise definitions to ensure consistent measurement and usage across the organization. The fundamental goal of benchmarking should be to effectively support strategy, execution and decision making.
Leading retail supply chains derive optimal value from benchmarking by looking beyond siloed, individual metrics and focusing on the end-to-end supply chain with an approach that is succinct, reliable and repeatable. It is crucial not to simply use a benchmark as a targeted performance level, but rather as a guide that implies what "good" looks like in other organizations. This allows for interdependencies and trade-offs to be identified, helping build trust in the numbers over time and informing tactical and strategic decision making. Understanding these linkages allows supply chain performance to be assessed through a more holistic lens, supporting cross-functional alignment with the organization's strategic and financial goals.
Assemble a Project Team That Understands The Importance of Aligning End-to-End Supply Chain Benchmarking With Corporate Objectives
Implementing a successful retail supply chain benchmarking initiative is not as simple as identifying and collecting data points then reporting your findings. Prior to implementation, it requires an end-to-end supply chain approach built with the right set of personnel that understands the full picture as to why the initiative is being undertaken and is capable of driving and embedding it into ongoing business processes.
This starts with the project initiator. Typically, this individual is a senior member of the supply chain team, often with the responsibility for planning or operations, who has strong cross-functional connections and an end-to-end view of the supply chain. The project initiator’s role is to understand the up-front drivers of the project, which often involves understanding and navigating a complex web of publicly stated and privately acknowledged factors.
Next, a sponsor must be identified. Typically the head of supply chain, it is their role to smooth the path for the benchmarking initiative, ensuring that executive leadership and cross-functional teams are onboard with the need for it and agree with the devised approach.
A clear day-to-day project lead is also necessary to manage both implementation and ongoing processes. This is a complex and often underappreciated role that requires strong people and management skills. The individual must be a capable diplomat and possess comfort working cross-functionally with teams ranging from merchandising and retail operations through to Finance and IT. They will need to drive the definition of the metrics, their scope and identify the appropriate comparison group.
To ensure the benchmarking initiative is sustainable the project lead will look to identify a cross-functional strategic decision-making process that it can inform on a regular basis, such as merchandise, inventory and operations execution (MIOE) or sales and operations planning (S&OP) reviews. Embedding benchmarking into these and other regular processes ensures repeatability of benchmark calculations. It gives visibility to the metrics and reinforces the trade-offs that are being made. It also increases the chances of longevity through supply chain organizational or leadership changes, as it is not only a supply chain leader that is championing the benchmarking initiative, but all of the stakeholders that consistently use its metrics.
Gartner has developed robust capabilities to help companies on their retail supply chain benchmarking journey. For more information, please contact:
Jim Romano, Senior Program Manager
Phone: +1 617 574 5144
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