Do you know how efficient your warehouse operations are? Do you know how they compare against expectations or goals? Do you know how they compare to those at other warehouses and distribution centers?

This tough-love self-assessment known as benchmarking is one of the most powerful tools available to raise your operations to the next level. After all, you can't fix what you haven't measured.

But measuring performance is only one aspect of benchmarking. When we talked to experts, they identified six keys to success. They also offered some thoughts on how you can hinder a benchmarking program if not outright condemn it.

Before you measure anything, determine the goals of your benchmarking effort. There are four typical steps, says Don Derewecki, executive vice president at Gross and Associates (732-636-2666):

• Gather information so you know where you stand
• Establish a base to measure changing performance levels
• Determine the level of improvement possible by adding new equipment and systems
• Reach the leading edge in your industry.

The best goal for your operations is determined by various factors, says Derewecki. To begin, the level of resources—people, time and money— that can be committed to benchmarking will have an influence. Don't try to implement a $10 million program if $1 million is all that's available, he says. In addition, your company's commitment to change will affect the outcome of a benchmarking program.

One mistake people make is to automatically imitate the winners of business awards, like the Malcolm Baldridge National Quality Award (301-975-2036), says Leon McGinnis, a professor in the School of Industrial and Systems Engineering at Georgia Tech (404-894-2300), and associate director of the school's Manufacturing Research Center. The danger is that their business goals could be quite different from yours; be careful to match your methods to your specific place in the industry and to your own customers' demands.

"You need to first understand where you are," says Lou Cerny, vice president at Sedlak (330-908-2100). "Step back and look at everything that goes on within the four walls of your facility, and make a flow chart of everything that happens from receiving to shipping. Question everything; just because you've been doing it for 20 years, is it still the right way? That forms your foundation."

The first step is choosing which variables to track. You have to ask "what are the best practices for my operation?" says Derewecki. Methods would be completely different if you're handling wholesale drugs or retail food, or broken or whole cases.

Cerny agrees. "Not every industry needs to measure the same things. Ask yourself, if I could only measure five things, what would they be?" he says. "Identify the key performance indicators for you and your customers." These could include measures such as same-day shipments, and order accuracy and completeness.

And always remember one thing: "Success or failure is not measured by how good you think you are, but how good your customers think you are," Cerny adds.

"If they're willing, ask your customers to identify the best-in-class supplier in your industry to learn the expectations of the marketplace," says Cerny. An even better way to do this is to visit your customers' operations and facilities, so you can learn why they're asking you to do things.

Likewise, talk to your vendors, asking them "How do other people handle this challenge?" says Derewecki. "That way, you'll know if your process is low end, middle of the road or top shelf."

If you compare yourself only to competitors, you can miss a lot, since they're apt to be just as myopic as you are. But customers and vendors survive in business by looking at a wider range of industries.

Next, you can collect information from outside your company, and compare yourself.

But here you must be careful, warns Cerny. If you're looking at a benchmark published by another company, you must first understand what it's based on—"They may say how many pieces per hour they're picking, but is it tires or bolts?"

If you try to compare yourself to a warehouse that's exactly like yours, they will usually be a competitor, and may not want to share such sensitive data, says McGinnis. "So the conventional wisdom is to find someone in another industry who does similar work. But remember that different segments have different requirements, so it would be worthless to compare apparel and grocery," adds McGinnis.

Derewecki agrees. "One of the things we encourage people to do is to look outside their business segment. If you're in auto parts repair and distribution, look at a piece picking and sortation operation in another business. As long as your operating requirements are the same, you can learn from them," he says.

Another place to look for comparisons is through professional organizations like WERC (Warehousing Education and Research Council, 630-990-0001), CLM (Council of Logistics Management, 630-574-0985), NCOF (National Council on Operations and Fulfillment, 800-927-5007), and APICS (The Educational Society for Resource Management, 800-444-2742).

They allow you easy access to contacts and networking to arrange benchmarking comparisons. Several of these groups run tours of members' warehouses during their regular meetings. "You can also read the literature, case studies and magazines; you can do a lot of it without ever leaving your desk," Derewecki says.

Finally, another source could be IDEAS, the Internet-based data system for self-assessment of warehouse operations founded last year by McGinnis at Georgia Tech. You can input your data online and the system will compare your performance levels to those of the 150-200 warehouses already in the database.

The experts all agree that you have to believe in the results of your benchmarking project, even if it's not the news you were looking for. "You may find that you're three-quarters of the way to the leading edge, or that you're barely above the bottom feeders. But it's always better to know than not to know," says Derewecki.

"Be careful what you ask, you just might find it out," agrees Cerny. "Most people when they go into it expect they'll come out looking like a shining star. But ignorance is not bliss."

And when you've finally compiled your results and moved on to the stage of drawing conclusions and implementing changes, you're still not finished. The next step is to return to point one and start over. "It has to be an ongoing effort; it can't be thought of as a one-time project," says Derewecki.