Benchmarking

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12/2017. Logistics Performance Measurement. 2. Benchmarking is the process of improving performance by continuously iden
FSJES Agadir_Master MSL - 2nd Year

12/2017

Master Mangement Stratégique et Logistique Level: 2nd year Academic year: 2017-2018

Module: Logistics performance measurement Presentation on:

Supply chain

Benchmarking Prepared by:

Supervised by:

Malika IGUIJI

Pr. Lhoussaine OUABOUCH

Zohra BENAICH

Outline Definition Origin Importance of Benchmarking

Types of benchmarking Benchmarking Methodology Conclusion

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What benchmarking is :

Benchmarking is the process of improving performance by continuously identifying, understanding, and adapting outstanding practices found inside and outside the organization.

Benchmarking is a tool to identify, establish, and achieve standards of excellence.

What benchmarking is not: • Copy... Instead, companies must adapt the information to fit their needs, their culture, and their system. And, if they copy, they can only be as good as their competitor, not better. • Steal... To the contrary, it is an open, honest, legal study of another organization’s business practices. • Stop... Rather, it is a continuous process that requires recalibration.

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Origin The term 'benchmarking' was first adapted to business practices by Xerox in 1979. Xerox’s aim was to evaluate itself, to identify its strengths and weaknesses and adapt to constantly changing market conditions.

Importance of benchmarking Benchmarking gives us the chance of gaining: Better Awareness of Ourselves (Us)  What we are doing ?  How we are doing it?  How well we are doing it? Better Awareness of the Best (Them)  What they are doing?  How they are doing it?  How well they are doing it?

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Importance of benchmarking Benchmarking allows companies to discover the gaps in their performance when compared with others. Benchmarking lets companies to identify the scope and adjust goal for further improvement. Benchmarking is a more efficient way to make improvements. Benchmarking speeds up organization’s ability to make improvements. Benchmarking helps companies to set realistic but ambitious targets. Benchmarking is a good tool to learn from others’ experiences.

Types of benchmarking Benchmarking

Logistics Performance Measurement

Internal benchmarking

External Benchmarking

Competitive benchmarking

Functional benchmarking

Generic benchmarking

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Internal benchmarking

Internal benchmarking is a comparison of a business process to a similar process inside the organization In its simplest form, internal benchmarking compares the results of one department, team or individual within an organization to another. It is then determined which practice or procedure produces the best results. That practice is then adopted by other departments, teams or individuals within the organization with a view to performance improvement. External benchmarking

External benchmarking involves looking at the experiences and achievements of other organizations to find and adopt innovative improvements. External benchmarking involves seeking outside organizations that are known to be best in class, and provides an opportunity to learn from those organizations.

Competitive benchmarking Competitive benchmarking can be defined as the continuous process of comparing a firm’s practices and performance measures with that of its most successful competitors. Competitive benchmarking is the process of comparing a company’s performance to the performance of other companies. Functional benchmarking Functional benchmarking involves comparisons with companies in similar industries but not the same market. This is sometimes referred to as industry benchmarking. For example, a supplier of goods or services in one country might benchmark against a similar company active in a different country. Generic benchmarking Generic benchmarking is often referred to as “best practice / world class” benchmarking. It involves comparisons with companies whose main business may be very different, but who carry out the same specific activities.

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Types of benchmarking Strategic benchmarking

Performance benchmarking

Process benchmarking

Strategic benchmarking Strategic benchmarking examines how companies compete and seeks to identify the winning strategies that have enable high-performing companies to be successful in their marketplaces. Performance benchmarking Performance benchmarking enables managers to assess their competitive positions through product and service comparisons. Performance benchmarking usually focuses on elements of price, technical quality, ancillary product or service features, speed, reliability, and other performance characteristics. Direct product or service comparisons, and analysis of operating statistics are the primary techniques applied during performance benchmarking. Process benchmarking Process benchmarking focuses on discrete work processes and operating systems, such as the customer complaint process, the order-and-fulfillment process, or the strategic planning process. Process benchmarking seeks to identify the most effective operating practices from many companies that perform similar work functions.

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Benchmarking Methodology

Benchmarking Methodology 1. Define critical success factors Before starting to measure and benchmark the supply chain, companies need to first determine in which areas they want the supply chain to be successful. For example if in their industry and to compete against their competitors it’s vital to have a flexible and responsive supply chain (as opposed to low cost) they will need KPIs that can measure such performance. However, in many cases companies don’t have proper KPI to capture the flexibility of their supply chains.

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2. Develop right KPI Once companies know in which areas the supply chain must be competitive, they can select the right KPI to use. As seen earlier, the SCOR methodology can give a good reference. Because the metrics are well-defined and recognized as an industry standard, it allows companies to benchmark themselves against other companies using the same metrics.

3. Measure current performance The next step is to measure the current performance of the company. Companies usually measure their performance on a monthly basis, while for the purpose of benchmarking typically the latest annual data available is used.

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4. Benchmark against competitors In this step company will need to collect benchmark figures from the industry segment. In general there are two types of benchmark data available:  High level figures at industry level (not by specific competitor) that are relatively cheap and easy to get. These are available from trade associations and nonprofit organizations like the Supply Chain Council and a few consulting firms. iCognitive for example runs since the last 10 years a benchmark study for Southeast Asia and China.  Detailed figures, specific by competitor, which are difficult to get and thus are more costly. These are available mainly from specialized consulting firms. iCognitive has run various such benchmarking exercises in different industries across Asia.

5. Identify performance gaps Once the company has its own performance and a set of benchmark figures, it can determine the gaps in performance. This will typically show areas in the supply chain where the company is equal or even better than the competition, areas where it is average and certain areas where its performance is lagging. This will give company a quantitative result for any gaps.

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6. Review business processes However, a quantitative gap versus the performance of competitors is not enough. Companies need also to be able to explain what the root cause is of those gaps. The main root cause of the gap could be due to: Processes • • • •

Not defined Not applied Not adapted Misused

Technology

Best practices

• Not available • Not adapted • Misused

• Not defined • Not applied • Not adapted

Maturity of the organization

7. Develop best practices to address the gaps The next step is then to determine for each gap how the performance of the current business process can be improved in order to close the gap and to be able to improve company performance towards the benchmark target (or even surpass it if the company want to be a leader in the industry). In many cases a gap in performance in a certain part of the supply chain can be closed by implementing a best practice. Different best practices exist to address issues in planning, sourcing, production, order management and logistics. Examples of best practices that can have a large impact are using postponement strategies, implementing Sales and Operations Planning , collaboration with suppliers or customers (VMI, CPFR etc), while other best practices have more limited impact (bar-coding, changing inventory re-order parameters etc).

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8. Implement best practices This step involves implementing one or more best practices and actually making changes to the current supply chain. Only by improving a process, implementing a certain technology or adopting a certain best practice can company performance improve. This step can range from a few weeks to implement some ‘low hanging fruits’ that bring quick benefits to the organization, to longer term improvements that may need nine or 12 months.

9. Monitor performance In order to know if the best practices implemented in the previous step have worked and have improved the performance of the supply chain, companies need to monitor their supply chain performance over time. Using the KPIs, they should measure their performance on a monthly basis and then observe from the trends if performance has consistently gone up after the best practice is implemented. This then closes the cycle because at this stage the company has reached a new level of supply chain performance and closed any gaps with its industry competitors.

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Conclusion

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