By Jim Tompkins, President, Tompkins Associates and John Traendly, President, The Soleus Group
Every supply chain manager itches to know how his or her company stacks up against its competitors. As a supply chain manager some of the questions you would like answered are:
Finding the answers isn’t easy. You can’t just call your counterpart at Brand X and ask prying questions about inventory levels, transportation costs or other intimate details of their supply chain. So, how do you answer these questions in the context of your place in the market alongside your competitors?
One approach that gained momentum in the 1990s is benchmarking. Benchmarking is defined as the search for the best practices that will lead to superior performance of a company and that will allow a manager to compare his or her function’s performance to the performance of the same function in other companies. Most companies have participated in benchmarking surveys at one time or another, but usually with limited satisfaction. The typical survey is sponsored by an individual company paying a consultant to study a few competitors to “search for the best practices” and determine how the sponsor compares. Or, the surveys are sponsored and conducted by trade journals, trade associations or vendors with very narrow focuses, little depth, and sometimes ulterior motives, and provide very little value beyond quotes for a magazine article, conference presentation or sales pitch. These typical mainstream benchmarking surveys have the following specific shortcomings:
Content – Typical benchmarking exercises tend to be narrow in scope and limited to the issues the sponsor feels might be important. The questions included in these surveys are most often determined by the enterprise or individuals asking the questions, not the ones answering the questions. Survey participants are not the “customers” and are not the primary beneficiaries of the process.
Lack of detail – Internally sponsored benchmarking efforts tend to be limited in scope due to cost and time constraints. The questions asked in surveys tend to be abstract, high level or limited to narrow issues. The resulting answers are difficult to put into a meaningful context or are too general to be actionable.
Limited participation – Benchmarking efforts sponsored by individual companies tend to be limited to a few comparison companies. It becomes impractical or cost prohibitive for an individual company to go beyond that. Competitors and true peers are not likely to participate for fear of giving away the edge they have. Surveys sponsored by others (trade journals, trade associations, vendors, etc.) are more general, but participation rates of two to three percent are typical.
As a result of these shortcomings, it is not uncommon to get reactions like the following from supply chain managers who have participated in such superficial benchmarking surveys:
So, given that benchmarking as it has typically been practiced is insufficient to the task, how then do supply chain managers get the answers they want? The solution remains benchmarking—but benchmarking that is done the right way. Let’s first examine what defines benchmarking “done the right way”, and then we can look at how you can reasonably put it into practice.
Benchmarking done right must resolve the traditional shortcomings of such efforts defined above:
Content must be relevant — First, the best supply chain benchmarking reviews ensure that the data gathered is from companies “like you”. This requires that the reviews be industry focused, maybe even on industry segments. Comparing apples to oranges won’t work. You want to know how your apple compares to other apples. Second, the participants in the review should drive the content by actively defining the issues and questions to be addressed. If a review is not industry focused, or if the content is not participant driven, then your best bet is to look elsewhere.
Content must be detailed — Your primary objective should be to get factual information that is actionable. Just getting the “performance metrics” is not enough—what you really want to know is what companies are doing to achieve the metrics they are realizing. The review must focus on best practices. Every company has fundamental processes, organizations and technologies that influence the results they achieve and around which benchmarks can provide invaluable insights. The questions to be answered in a benchmarking review must be detailed enough to drill down to the practices used to generate the performance. This requires the review to have a relatively narrow focus, sometimes with hundreds of questions.
Participation must be high – Even within a given industry, supply chain practices are highly variable from company to company. Participation must be high enough that the data can be segmented by company size and market niche to get that “apples to apples” perspective. The key to getting participation lies in accomplishing the previous two objectives. Benchmarking reviews that promise relevancy and actionable results will attract participation. Another key ingredient is confidentiality. Responses of individual participants must be kept absolutely confidential. Only information aggregated across many companies should be shared with participants. Achieving confidentiality typically requires a third-party review administrator who collects and summarizes the data.
A benchmarking review that has the above three characteristics offers significant benefits:
As you can see, the benefits of benchmarking done the right way are significant. Likely, every company would love to participate in such a review. The problem, you say, is that you’ve never seen such a review, so where do you go from here? That will be the topic of our next edition of Supply Chain Edge, when we will introduce you to a resource that is already doing industry benchmarking the right way. Stay tuned…
(If you can’t wait, get a preview at http://www.tompkinsinc.com/operations/benchmarking.asp.)Home | Contact Us | Links | Privacy Policy
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