The supply chain: benchmarking for success.

Author:Cusack, Jack

Why Benchmark

Highly effective Supply Chain management will have a direct and substantial impact on your cost of doing business. Every dollar of savings achieved by your purchasing organization goes directly to the bottom line in lower costs for your members. Effective Supply Chain processes also allow operating organizations and other internal clients to concentrate on their core businesses by providing materials and services when needed at the lowest total cost. The Supply Chain organization is also a key contributor to two initiatives common to Senior Management:

Sustainability--through products purchased, packaging and recycling, and

Diversity--by providing business opportunities across the spectrum of suppliers.

Benchmarking is the window that enables organizations to improve Supply Chain performance through comparison to their peers. The purpose of this article is to help you open the window.

Most companies participate in benchmarking studies as a way to stay competitive. The purpose of benchmarking is to improve business processes by assessing performance relative to other organizations using a common set of metrics, identifying top performing companies and adopting best practices. Really great companies that benchmark are almost religious in their belief that it is important to know who is best at something and to find out what "best practices" they employ to help them achieve their success. They also believe that benchmarking is an ongoing process designed to improve performance through continuous improvement efforts.

The utility industry continues to go through enormous change at a pace unsurpassed in its storied history. Pressure to reduce cost while at the same time promoting energy conservation and environmental responsibility has never been greater. Mergers and acquisitions have dramatically changed the industry landscape. Each is driven by expectations of savings and lower costs that can be achieved through economies of scale that may or may not be achievable. Organizations change, people change positions, and processes change all in the name of cost savings and synergies. But how does an organization know, before its too late, that it is meeting expectations? Now more than ever before it is absolutely vital for organizations to know what is important to measure, how they have performed against those measures in the past and what the goals are for measuring performance in the future. Benchmarking is the best way to get this information. Being too busy to benchmark is not an excuse because in today's highly competitive business environment "ignorance is not bliss." Organizations must know how they stack up against their peers or competitors in order to continue to meet stakeholders' expectations.

Make no mistake, best-in-class companies benchmark as an ongoing process designed to improve performance and achieve continuous improvement. Done properly, benchmarking can produce several valuable benefits, not the least of which are:

* Providing a company/industry snapshot for comparison of performance

* Identifying best practices

* Identifying key performance indicators (KPIs)

* Setting organizational goals

* Setting employee goals and objectives

* Developing support for business cases and regulatory oversight, and

* Assessing progress/improvement over time

How To Select The Right Benchmarking Study

Selecting the right benchmarking study and benchmarking partners can be difficult. Keep in mind that participating in a study should drive your company down the road to creating better business practices, streamlining processes and building a more competitive organization. There are several questions to consider when selecting a study, such as:

  1. Does the study address all the areas of importance to your company?

    Unless you are starting a new study where you and your partners can agree on every metric, you will likely join a study where there are some sections that are not important to you. That should not prevent you from joining as long as the business areas that are important to you are included.

  2. Do the metrics included in the study address your specific needs?

    It is very unlikely that you will find a pre-existing study that contains every metric defined exactly as yours...

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