Why Automotive Supplier Benchmarking Matters: Understanding Its Significance | SpendEdge
- The automotive sector recently introduced a variety of significant, transformative trends, including electric vehicles, automation, and highly cyber-oriented systems. This has led to a highly competitive, challenging, and tumultuous market for automotive suppliers, and caused industry leaders to utilize supply market intelligence and supplier benchmarking to succeed.
- Choosing the right supplier can determine the success, failure, and growth of a company, and the automotive sector has become increasingly aware of this over the recent decades.
- Overcoming the impact of the various internal and external factors impacting the automotive industry, such as environmentalism, rising petroleum costs, higher consumer demand, changing preferences, and government intervention due to carbon emissions, has led companies to leverage robust partnerships.
- With their best fit suppliers, businesses can increase efficiency, improve profitability and productivity, reduce costs and expenses, and stay a step ahead of major risks.
- With supplier benchmarking, automotive companies can choose their ideal strategic partners, develop sustainable relationships, and ensure high-quality, fair-price services or products for their business.
What are the Five Stages of the Supplier Benchmarking Process?
Planning: The first stage of the supplier benchmarking process requires a comprehensive understanding of the needs, goals, and requirements of the company. Mapping out major expectations, requirements, and combined targets to be achieved by the partners, can help identify and engage the right suppliers. Since the automotive industry is vast and complex, being certain about the business’ needs mitigates the chance of uncertain or ineffectual partnerships. This step also involves conducting in-depth research of the market, and identifying the optimal prices, quality of offerings, and partnership that the organization expects from a potential partner.
Collection of Data: Finding, engaging, and hiring suppliers is a complicated and time-consuming task that requires significant research, and procurement of large volumes of data. This data includes information regarding the metrics determined in the previous stage of the supplier benchmarking process. Assessing potential partners’ performance, prices, compliance rates, technological base, and business ethics is crucial to shortlisting and engaging the right suppliers. For this stage, it is also important for companies to research previous clients’ reviews, and interact with the supplier to gain a clearer perspective. The compilation of this data can help companies move forward to the next step and make data-driven, well-informed decisions.
Analysis: This stage of the process involves evaluating, understanding, and implementing the insights procured form the data compiled in the previous step. Analyzing data regarding the performance, metrics, and capabilities of a select number of partners, can help the company determine the ideal choice, and select the best fit supplier. This includes interviewing the short-listed vendors, discussing expectations of both parties, and further utilizing the data to gain insight into the ideal step forward. Having a pre-determined standard, and understanding the market helps ensure that the potential suppliers meet the company benchmark and can provide the offerings expected by the business.
Implementation: With insights into the industry benchmark, expectations, and potential partners, the most important step involves negotiations. This stage involves the planning, data, and analysis of the previous stages, and includes implementing all insights and strategies to come to a mutually beneficial agreement. The supplier selected has been chosen as per various crucial metrics, and an established benchmark, and negotiations must account for these factors. Research regarding industry standards, suppliers’ market dynamics, significant industry developments, and accepted prices, performance metrics, and offerings enables robust data-driven negotiations. Once negotiations are completed, and contract terms have been agreed on and signed, the partnership is in place, and must meet all established benchmarks.
Monitoring: Supplier benchmarking is a continuous process, and selecting suppliers is a major segment of it, but not the only focus. Once a supplier is selected, companies can use supplier benchmarking and research to continue to track, monitor, and evaluate the changing dynamics, deals, and performance metrics in the market, and continually ensure that current partnerships are meeting stipulated expectations, and changing industry standards. This involves clear communication, revisiting the contracts, or re-negotiating certain aspects to maintain high-quality services and products, and an efficient partnership. It also enables collaborative, robust, and mutually beneficial strategic relationships, helping both parties grow.
Types of Supplier Benchmarking
Cost benchmarking:
Cost benchmarking is a strategic process used by organizations to compare their costs and cost-related practices with those of other companies, industry peers, or best-in-class performers. The goal of cost benchmarking is to identify areas where costs can be reduced, efficiencies can be improved, and best practices can be adopted in order to enhance overall competitiveness and financial performance. This process helps organizations gain insights into how their costs compare to others and where opportunities for cost optimization lie.
Quality benchmarking:
Quality benchmarking involves comparing an organization’s quality practices, standards, and performance with those of industry peers or best-in-class companies. The goal is to identify areas for improvement, enhance product/service quality, and adopt best practices to achieve superior quality standards and customer satisfaction. It encompasses evaluating various aspects of quality management, including product/service specifications, quality control methods, process efficiency, and customer satisfaction levels.
Delivery benchmarking:
Delivery benchmarking is a strategic process where organizations assess their delivery performance against industry peers or leaders. It involves analyzing factors like delivery times, accuracy, and reliability. By comparing these metrics, businesses can identify inefficiencies, streamline logistics, and enhance their supply chain management. The insights gained from delivery benchmarking enable organizations to optimize processes, reduce delays, and meet customer expectations more effectively, ultimately improving overall operational efficiency and customer satisfaction.
Service benchmarking:
Service benchmarking is a strategic practice where organizations evaluate their customer service performance against competitors or industry leaders. By comparing aspects like response times, resolution rates, and customer satisfaction, businesses can identify areas for improvement. Service benchmarking helps in enhancing service quality, training, and customer experience. It enables organizations to adopt best practices, innovate, and stay aligned with customer expectations, ultimately leading to improved customer loyalty and competitive advantage.
Success Story
As the automotive industry prepares for significantly rising demand in the electric vehicles sector, and increasing government intervention regarding carbon emissions, companies struggle to identify and engage with partners that can help efficiently approach potential challenges and trends. An automotive parts manufacturer based in Southern Europe aimed to understand and keep pace with the changing market dynamics, and struggled to do so without the right strategic partnership in place. Unsure of the ideal route to identifying, engaging, and partnering with the right supplier, the manufacturer chose to collaborate with SpendEdge to understand and implement our supplier benchmarking solutions. Utilizing our solution, the automotive parts manufacturer successfully identified their expectations, the industry standard, and the ideal benchmark for their strategic partnerships. By following the benchmarking process, and closely comparing, evaluating, and selecting the best fit supplier, the company was able to finalize a contract with a robust, collaborative, and supportive partner, who enabled sustainable growth. The supplier also helped the company gain insights into upcoming technological trends, kept updated equipment and offerings, and shared similar business targets and goals as the manufacturer, creating a mutually beneficial, positive, and strong partnership.
