Benchmarking - How to Identify the Gaps Preventing Your Success
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Benchmarking - How to Identify the Gaps Preventing Your Success

Derinda Ehrlich, VP, Corporate and Channel Services, APICS
Derinda Ehrlich, VP, Corporate and Channel Services, APICS

Derinda Ehrlich, VP, Corporate and Channel Services, APICS

There is an unimaginable amount of data available to businesses today. Minute details–down-to-the-second production times, fulfillment data, customer responses and return times – are all collected so that it can be analyzed and stored for future reference. For many business executives, employing the correct tactics to sift through this information, let alone understand it, is too large of an undertaking. Internal metrics, while helpful, do not provide a full picture as to how a company can realize its potential. How can a company know the performance metrics they gather are below par, good enough or best in class? Benchmarking can be the key but how can you find the data that compares on a like-for-like basis?

“The key to successful benchmarking is maintaining a cyclical process of measurement, comparison, value calculation and implementation – all directed by supply chain specific goals”

What is Benchmarking?

Benchmarking is the assessment process that allows you to analyze the performance of your business by considering quantity, value and time and comparing them to an industry standard. It allows business executives to whittle down the big picture and build your business back up, looking at the functions of each component and how they contribute to the overall operation. By comparing and contrasting the processes of your business to those around you, you can set internal standards that have tangible goals, rather than learning from trial and error.

Take supply chain for example. In supply chain management, benchmarking provides the tools that a company needs to drive process improvement efforts. By identifying the gaps where a supply chain is currently performing and where it could, or should be operating, a company can implement a clearly defined strategy with desired performance objectives in mind. Benchmarking can essentially be the starting point for a much needed transformation.

Additionally, most companies have multiple supply chains within their organization. These supply chains should be measured and optimized in line with their unique purpose. Benchmarking is never a one-size-fits-all recipe for guaranteed success. After a company understands each of its supply chains and their unique objectives, it can decide which performance attributes need to be optimized and those that don’t. Following that analysis, benchmarking can provide comparative data to identify where the supply chain has performance gaps, where it may be working decently, or even where it may be best in class. The identification of the gaps allows improvements to be made in a pinpointed fashion rather than applying them in a broad-brush manner that is often costly and ineffective.

So Why Benchmark?

The benchmarking process can help to feed important data into predictive analytics. It provides a set of tools that can help to clarify, standardize and focus the collection and analysis of performance data so that it aligns with the defined benchmark standards. It can help crystallize and drive process improvements, and better processes are key to better system implementations.

It also can help an organization or an internal department to select and define their key performance indicators and apply consistent data collection across the enterprise. It asks the organization or the IT department to prioritize customer and internal performance attributes based on competitive requirements – to establish what the target is. By beginning with the end – your aspirations and goals – you can determine what you need to achieve these goals. After all, you can’t become one of the best if you don’t know what the best is.

In supply chain management, best in class means providing a level of service that your customers recognize as the best and making constant adjustments to maintain that level of service.

Countless findings have proven that the best companies in every industry sector operate at a significantly less cost basis than that of their peers. Likewise, industry leaders operate at a better level of service – resulting in companies getting it right the first time and thereby improving operationally driven revenue growth.

Finally, a common phrase, “you can’t improve what you don’t measure,” sums up the need for measurement quite well. Measurement means identifying performance gaps and taking action that can close the most critical gaps.

How to Benchmark

If every business is measuring different things, how can you compare your results? If you ask 10 people how to measure on-time delivery, you’ll often get 12 different answers. Standardized metrics with standard operational definitions allow companies to measure their operations consistently. Then benchmarking can be performed against industry standard measures. By having standardized definitions, companies have something to compare their operations to and an overarching measure of success guided by benchmarks.

That is why many industries utilize associations like the APICS Supply Chain Council (APICS SCC). Such associations not only allow companies a chance for collaboration and knowledge sharing across industries but also provide access to important information to analyze performance within the organization as well. As an impartial third party, the association can provide research, benchmarking tools, standards and best practice reports in a collaborative exchange.

Specific to supply chain, the APICS SCC facilitates a SCORmark benchmark assessment that helps companies assess five balanced supply chain performance attributes, including customer facing attributes for reliability, responsiveness, agility, and internally facing attributes for supply chain management cost and asset management efficiency. SCORmark includes comparatives on supply chain complexity and process maturity and applies a supply chain process model based on the SCOR framework of plan, source, make, deliver and return.

By drawing from a wealth of industry knowledge, rich benchmark data and outside expertise, industry associations can provide a company with the tools to measure their actual performance and compare themselves to best-in-class industry leaders. By identifying opportunity gaps, organizations are in a better position to execute targeted actions to increase speed, improve predictability, increase sales, reduce costs optimize inventory or mitigate risk to name a few.

Identifying opportunity gaps is however only half the battle. No two companies are the same and the strategies needed to implement any improvements will vary greatly between supply chains inside a company and across industries and sectors as well. Additionally, the costs and changes necessary to execute these tactics may be beyond what a company is capable of achieving. It is important to remember that while benchmarking can highlight areas for improvement, implementing the changes and reaping the value of improvement is an important step to executing a successful strategy.

Benchmarking is a vital tool to maintain best-in-class processes across an organization. As well as improving operational efficiencies, it can have massive potential for developing learning and innovation goals across staff members. The key to successful benchmarking is maintaining a cyclical process of measurement, comparison, value calculation and implementation – all directed by supply chain specific goals. Without specific and targeted goals, consistency in measurement and clarity in identifying and closing the right gaps, it is difficult to match the pace of a fast growing industry, let alone surpass it.

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