Benchmarking is the act of comparing ones business, its performance and its processes, with others either within the same company (depending on its size), the same industry or in a different industry. It’s typically used to identify and absorb best practice.
Benchmarking can be carried out on most if not all company activities including the supply chain. Whilst its successes are heavily dependant on its planning and execution, benchmarking, through looking outside the company, can facilitate innovation and market knowledge. The best elements from within the industry (or outside it) can be merged forming new more efficient processes delivering increased value.
The supply chain benchmark process
Benchmarking is all about understanding and comparing. Supply chain activities can be many from planning, sourcing, procuring, forecasting to managing assets. Given these spread of activities it’s important to understand:
• Which processes you intend to benchmark
• What performance criteria/ measures/data you will compare
For benchmarking to be successful it must not be subjective – using data and KPI’s ensures a relatively level playing field when comparing peers. For example I may wish to review the performance of my suppliers so may focus on benchmarking my Delivery schedule adherence with a view to understanding the key processes peers use to drive and sustain higher results than mine.
What aspects of my supply chain should I review?
The key is understanding what processes are utilized– a good start is to firstly carry out a diagnostic of your own organization.
1/ Analyze the performance that is delivered to your customer
2/ Analyze the performance that is delivered through your supply chain
3/ Analyze the cost
4/ Analyze the processes and policies that are used to deliver the services that you provide.
Once you have a level of understanding regarding your own performance you can then understand areas of weakness or areas where you suspect improvement would deliver the desired objective (i.e. greater customer satisfaction).
The success rate of your benchmarking activity will vary – preparation is key – when benchmarking ensure that:
• Analysis is relevant to ensure that the results are relevant
• Analysis is sufficiently detailed (it’s as important to know how peers obtain their results as just knowing the results).
• Consider your peer selection carefully – consider what you are trying to achieve and whether the candidates you have selected can deliver on that.
Benchmarking partners
Finding appropriate and willing benchmarking partners can be a key barrier. Where industries are highly competitive peers are less likely to wish to participate – trade associations may help but in some cases the granularity of data being shared may not be sufficient and certainly where processes contribute to competitiveness they are less likely to be open. Careful understanding and resolution of these issues must be considered prior to carrying out your benchmarking activity.
One consideration (and one which to some extent mitigates peer resistance) is to consider outsourcing your benchmarking activity. There are numerous consultancy companies and associations that specialize in supply chain benchmarking, many with proven track records and with access to large peer groups.
Summary
Benchmarking undoubtedly has a role to play in both understanding and improving your supply chain. It can be a difficult thing to get right and there are some key barriers. Done correctly it will provide an opportunity to ascertain where your organization stands whilst receiving leading edge information on what best practices are in use and understanding how these can be utilized to improve your business.
Collaboration between peers was not a concept that entered the minds of many in years gone by. Collaboration was instead seen as being something that was to be avoided at all costs; after all if competitors are going to be able to gain access to internal information, then that will give them a head start and profits will suffer. So instead each company worked in isolation and defended all its information with the utmost secrecy. There was no joint working and certainly no collaboration!
Yet now collaboration between peer companies has reached such an advanced level that BMW and Daimler are now working together in partnership, because they estimate that by the year 2012, this will result in them saving over £82 million each year. So how has this come about and how can they save money?
Joint Procurement Initiatives
BMW and Daimler have spent the last 2 years working together, albeit not as closely as they now work, but still very much in some kind of partnership. They started this when the motor industry generally was going through a very difficult time and the concept was simple; could they buy some components together which would help them have more ‘buying power’? The answer was obviously Yes, more buying power meant that they are able to negotiate lower prices, simply because they were ordering more.
In simple terms, buying items together meant that they could increase their leverage and control on the supply chain. The two companies now aim to actually buy 10% of the components they use, on a joint basis, making procurements streamlined and more cost effective.
Future For Collaboration
It is extremely likely that collaboration will be seen to emerge within other markets also. We have to accept that we now live in a global community and a global economy and companies will definitely be under ever increasing pressure to start working together if they are to survive. The one lesson that companies have learned from the recession is that things can suddenly look very, very bleak even for companies who thought that they were in a strong position. So companies have no choice but to try and equip themselves to ride out any financial or economic downturn; they will have to be strong to survive! In fact, for collaboration to be really successful there may have to be some re-thinking of supply chains and key sourcing decisions.