There are many benefits of benchmarking, especially if it is done well – but there are also viable alternatives to understanding your business, says Chris Irish
It’s human nature to compare yourself with others. From an early age, we instinctively look to and mimic the behaviour of those around us. As we get older, we continue to look at the behaviour and achievements of others, although our motivations can shift from an innate thirst for learning to a means of sating our insecurities. You only have to look at studies into the impact of social media to realise that endless external comparison can be as damaging as it is enlightening. This can also be the case with benchmarking for businesses, and particularly for supply chains.
Supply chain strategies and successes have traditionally stayed in the shadows. The only way to get context for performance has been to participate in benchmarking programmes. Although supply chains are becoming more open as they play a greater role in shaping business strategy, data on many metrics is still elusive and companies pursue benchmarking for the purposes of:
Understanding how your customers or suppliers view you helps you appreciate your standing in the industry. This can shape your strategies for engagement, negotiation, collaboration and partnerships.
To invest in the right areas and focus your efforts where you will get the most value requires a realistic view of your strengths and weaknesses, as well as what your customers value.
Boosting business cases
Getting sign-off for your own internal initiatives usually requires a quantifiable business case; benchmark comparators can be a persuasive justification.
Running internal trials to measure the benefits of a change gives a narrow view of the overall impact on your business. Benchmarking gives visibility of how the rest of the industry is performing and how their improvements compare with your own.
Benchmarking becomes more powerful as more businesses take part. Not only do benchmarks become more statistically robust but they allow more levels of segmentation so performance can be accurately matched for each business. So, what holds back many businesses from participating? Our research has found several barriers exist:
The value equation
Benchmarking programmes often have charges yet many businesses don’t have effective plans in place to use the insight generated. In addition to any programme fees, there is also the resource required to pull together the numbers, and justifying the value can be challenging.
Sensitivities around sharing
Although data is usually anonymised, a cultural reticence to share commercially sensitive information still exists. However, with most programmes using a ‘give to get’ model, this mindset can hold companies back from the benefits.
Context is king
If the point of benchmarking is to put your performance into context then it’s essential that the context is the right one for you. This means understanding who you are being compared with. What needs to be clear is the markets, channels, categories, and types of businesses you are pooled with.
Insight for action
One of the biggest objections to benchmarking is that it doesn’t provide enough insight to drive targeted actions. Knowing where to target efforts doesn’t tell you what to do. That’s where best practice sharing sessions have proved valuable additions in driving action from benchmarking insight.
So, is there an alternative approach to benchmarking that can deliver the benefits while overcoming the barriers? By focusing on the underlying set-up of a supply chain across a breadth of areas, rather than the ‘output’ KPIs, you can get a better sense of the maturity and sustainability of your approach as well as understanding the next steps in your journey towards leading the industry.
One final consideration. Fixating on your competitors can distract from where your focus should be – on your customers. While benchmarking can help you to be the best at something, it doesn’t follow that it’s in an area your customers care about. Benchmarking can help you shape your strategy but it’s customers who should be helping you create it.