How to Utilize Industry Best Practices for Benchmarking_
Benchmarking analysis is a powerful tool for distributors to understand and improve their performance. One of the key benefits of benchmarking is that, if done in the right manner, it can enable businesses to learn from each other and make smarter decisions. Comparing the organization’s performance to other distributors in the market will help learn from their successes and mistakes. Furthermore, this also helps distributors adopt industry best practices into their distribution strategy. However, mistakes in benchmarking could have adverse effects on the company’s distribution strategy. Here are some of the common benchmarking mistakes that distributors must stay clear of:
Lack of focus
The scope of a benchmarking analysis should be tied to what the company is trying to accomplish in their distribution strategy. Without focus, distributors often fail to benchmark to their situation. The organization’s culture and/or circumstances might be different from that of the benchmark organization. Hence it is important to have a clear focus on the parameters that need to be benchmarked against and used for measuring the performance.
Benchmarking in healthcare has been a common practice since 1985. It involves comparing an organization’s performance metrics to a standard developed using data from other similar organizations. Benchmarking in healthcare is used as a tactic to understand where an organization’s performance stands in comparison with its peers, and the scope for improvement. Forward-thinking strategy leaders look to industry benchmark data in order to map out where they want to take their service line, practice or institution in the future. By applying the multitude of data to the organization’s strategic plan for success, the employees will be more willing to commit to execution and it will be easier to track the results. This blog drills down the four common types of benchmarking in healthcare and the benefits of each.
Types of Benchmarking in Healthcare
It is done between departments, divisions, or offices within the same healthcare organization. This is particularly important because several healthcare companies have their branches in multiple locations and might want to examine a particular set of measures across those locations. For instance, a hospital administrator might want to know which of their facilities score a higher rating for overall patient satisfaction. Monitoring such parameters across branches of the organization will help shed light on issues that need to be addressed and also prompt specific branches to improve their processes or practices.
Comparing the organization’s performance with that of the competitors or other peers in the industry is referred to as competitive benchmarking. This is one of the common types of benchmarking in healthcare, where it is essential for organizations to examine their performance metrics against hospitals and clinics serving in the same geographic area. It might also prove beneficial to look at hospitals and clinics that serve a different market or are in a different geographic location. Healthcare organizations can use this data to learn from one another and further improve their processes.
Functional benchmarking is one of the modern types of benchmarking in healthcare where the organization’s performance is compared to those in a different industry that may have a similar metric or process that healthcare companies can learn from. Functional benchmarking in healthcare is a useful tool for examining operational data. (more…)
The benchmarking process helps a company to gain a competitive edge by comparing its practices and performance against one or more similar companies. The benefits of benchmarking lie in its main objective, which is to identify and analyze best practices that will help in improving the overall performance of the business. Such assessments help the company to become more competitive. But before proceeding further, let’s pause and understand the benchmarking process in simple terms.
What is benchmarking process?
A benchmarking process is a structured approach that requires the collection of data (via a questionnaire), analysis, and reporting. Some of the benefits of benchmarking include the identification of internal opportunities for improvement and the growth of the organization. The benchmarking process generates a report through a detailed analysis, which helps in breaking down the mechanism that makes any superior performance possible. This can further help in tweaking the product’s features to match more closely to competitor’s product and altering customer relationship management to establish more personalized communications with them. The benchmarking process facilitates the examination of things like the amount of production, revenue, employee productivity, expenses, and so on. There are several benefits of benchmarking, but the process needs to be followed perfectly. Following are a few steps that will help you understand the benefits of benchmarking:
Benchmarking Process Steps
#1. Identify the components to benchmark
The first step of every benchmarking process starts with identifying components that have to be benchmarked. This can be a product or a commodity, quantities of a shipped commodity, or an amount of economic output. Once the identification is done, it becomes easy to collect relevant data and then contribute to the desired set of output.
#2. Analyze the components
This step involves data collection and its analysis. This step of the benchmarking process helps in understanding the best practices adopted by the competitors and analyzing the performance gap between the two competitive organizations. Additionally, it is the most effective way to address the discrepancy in performance.
#3. Integrate operational goals
This is one of the important steps of the benchmarking process that involves establishing the goals of operations for organizational transformation. In this step, it is required to communicate benchmarking findings in the organizational structure and develop the plan of actions accordingly.
#4. Formulate an action plan
Now, the next step of benchmarking process involves the development of a plan of action. This requires the construction of specific strategies and tactical decisions that can help to implement new practices. Apart from this, the most important thing that must be done in this step is identifying the factors of barriers to successful implementation of a strategy that is very essential to leverage the benefits of benchmarking.
#5. Incorporate the best practices
At this step of the benchmarking process, benchmarking becomes fully institutionalized. Here the strategies that are being planned to be implemented are realized to bring the change. This step requires the adoption of best practices identified via benchmarking process to eliminate negative gaps of performance. The potential of the benchmarking process is realized only when it is incorporated fully along all the verticals of an organization.
Benefits of Benchmarking
Improve the quality of the product
This is one of the key benefits of benchmarking. By analyzing competitors’ product or service through the benchmarking process, an organization can definitely improve the quality of its own product. Competitors’ products or services can be studied and improvements can be made accordingly.
Monitor organization’s performance effectively
This is one of the noteworthy benefits of benchmarking. Benchmarking helps an organization to calculate and analyze its own loopholes as compared to its competitors and then bring about changes in the strategy and planning.
Maximize sales and profits
A company that uses a benchmarking process improves its operations, functions, services, and products. This helps in increasing the sales and profits of the organization. Customers are also most likely to notice these improvements. This is again one of the benefits of benchmarking that is important for the growth of the business. The benchmarking organization may also promote its improvements through its magazines and company brochures and television ads. These efforts contribute towards increasing sales and maximizing profits.
To Know more about the benefits of benchmarking
The best way to evaluate your business’ performance is to compare it with that of other players in the market. This is where the role of strategic benchmarking comes into the picture. When companies incorporate strategic benchmarking in their planning process, they can compare the improvements in strategic performance to that of performance leaders in a particular field of activity in addition to comparing them to the past performance of their own business. Once implemented, strategic benchmarking can be used to develop a system of best practices within the company. Examining the best-performing companies with similar operations, evaluating the consistency of their strategic orientations, and how well they reach their strategic targets lets you compare your company’s performance with theirs.
Types of benchmarking
Primarily, there are three types of benchmarking:
- Process benchmarking
- Performance metrics
- Strategic benchmarking
Process benchmarking: This is one of the types of benchmarking that is concerned with comparing the organization’s internal processes against those of other companies engaging in similar operations, particularly the successful ones with a long-running streak of positive results. One of the key challenges involved in such types of benchmarking is the lack of publicly available information about another business’ processes. This requires companies to carefully choose their sources and ensure that the data sources are accurate.
Performance metrics: This type of strategic benchmarking is similar to process benchmarking. Performance metrics concerns the specifications of different processes occurring in your organization. The difference here is that the pre-existing, known data sets are compared instead of measuring against the competition. This is one of the easiest types of benchmarking as the required information is readily available.
Strategic benchmarking: If there is a smooth flow of operations in an organization on a micro-level, this does not mean that the company will work evenly from a long-term perspective. It’s important for companies to gather information on what other companies in the market are doing in this regard and what their strategy is. Compare their goals to your own and see the goals can be adapted to be more realistic with regards to the current market situation.
Such types of benchmarking are tightly connected and should rarely be treated as separate entities. Companies must develop a deep understanding of what exactly is being compared and evaluate with each type of strategic benchmarking and have a clear understanding of when each must be applied. Organizations must also figure out how to use the results of the three different types of benchmarking and combine them in order to build a more complete data set.
The chemical industry client wanted to benchmark the best practices and enhance the productivity and efficiency of their business operations. To identify and establish new functional goals, the chemical industry client approached SpendEdge to devise a comprehensive approach to compare and benchmark their business processes and metrics to the industry best practices.
A detailed quantitative analysis was carried out by assessing research-based data, industry surveys, and interviews, which enabled the client to identify, assess, and benchmark the industry best practices. Best practices benchmarking also offered detailed evidence-based insights on the overall industry’s performance, which helped the chemical industry client to set new functional goals.
About the Client:
A multinational chemical company – the client is a leading player in the chemical industry with several well-established subsidiaries operating in over 30 developed economies.
The client wanted to benchmark industry best practices to formulate winning strategies, tactics, metrics, and plans.
How did SpendEdge Help the Client?
- Step 1: Developed a three-step methodology
Our industry best practices benchmarking experts followed a structured approach.
- Step 2: Detailed assessment of the company’s process performance gaps
A detailed understanding of the existing business processes and performance gaps helped in deciding the what factors need benchmarking.
- Step 3: Prioritized metric to benchmark
This step involved the identification and analysis of collected data to reveal the extent to which the current performance can be improved for each segment.
The implementation of these steps helped the chemical company to gain a clearer picture of their performance levels in comparison with others in the chemical industry.
Key questions answered in this industry best practices benchmarking study include:
Benefits of the Engagement:
Our industry best practices benchmarking solution helped the chemical industry client to analyze the organization’s past performance in relation to the industry best practices, competitors’ strategies, and proposed benchmarking changes. It also offered detailed insights on the potential benefits of adopting the benchmarking practices; thereby, enabling them to establish new functional goals.
Why incorporate industry best practices benchmarking?
Industry best practices benchmarking is essential for organizations striving to enhance their operational performance and efficiency across different aspects of the industry. Benchmarking industry best practices also enables firms to acquire knowledge on hard facts such as – performance gaps, operations rates, and industry risks. It also offers information on ways to improve their organizational performance.
It is noted that most organizations are reluctant to use industry benchmarks. For any organization, it is important to understand the acceptable industry standards and determine where their company stands vis-à-vis that standard. Industry best practices benchmarking also help firms to stay in sync with the current market scenario.
To know more about our best practices benchmarking engagement
Overview of the Animal Feed Industry
The animal feed manufacturing segment plays a significant role in the global food industry, enabling the large-scale economic production of animal proteins across the globe. Organizations in this sector manufacture food for livestock including poultry, cattle, and other such animals primarily from grains, proteins, and vitamins. Additionally, the growing demand for animal protein in developing nations has accelerated the growth of the global animal feed manufacturing sector.
The Business Challenge and Journey
The client, a leading animal feed manufacturing company, was looking at leveraging SpendEdge’s industry best practices benchmarking solution. The client was facing several issues related to their inefficient management strategies. The company’s supply chain management executives recognized the tremendous benefits of adopting the best practices in industry benchmarking. As such, they were looking at reducing the company’s risk profile by improving the efficiency of their overall operations by comparing them with the set industry standards.
To identify challenges in the supply chain functions, the market intelligence experts at SpendEdge carried out extensive research comprising interviews and discussions with prominent stakeholders in the animal feed manufacturing sector. The experts also compiled information across a wide array of reliable sources such as trade shows, company presentations, industry forums.
Why should you leverage industry best practices benchmarking?
Industry best practices benchmarking is a valuable exercise for organizations striving to enhance their operational efficiency and the effectiveness of the overall business operations. Industry best practices also exposes hard facts about the performance of your company while recommending ways to improve them. Moreover, best practices benchmarking done right is more than just a casual, anecdotal look at the competition. Determining which of the hundreds of metrics to focus on may seem tricky at the moment, but worthwhile pursuit. However, to succeed, organizations will have to develop a well-thought-out strategy to obtain the desired results.
Fundamental questions answered in this industry best practices study include:
SpendEdge’s industry best practices benchmarking solution offered relevant insights that helped the animal feed manufacturer monitor their performance and implement changes to drive profit margins. Our solution also enabled the client to identify, adapt, and implement the best practices that produced the best performance results in the animal feed manufacturing sector. Moreover, the best practices benchmarking engagement enabled the client to achieve breakthrough improvements in their overall performance. Furthermore, it offered relevant insights to better understand the market scenario, industry standards, and expectations.
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Animal feed industry challenges
- The availability of local proteins – In the global animal feed manufacturing industry, there is an increase in the pressure to substitute common protein sources like soybeans with less globalized ones.
- The use of additives and premix– Premixes as well as additives like vitamins, enzymes, or amino acids play a crucial role in ensuring optimum feed for livestock. Also, animal feed manufacturers who are not engaged in the ongoing war between additives and premixes may have to adopt either of the two eventually.
- The emergence of genetically modified organisms (GMO)– A major challenge for animal feed manufacturers revolves around the use of such techniques. However, genetic engineering offers benefits such as a reduction in prices of animal feed, increased crop yields, reduced need for pesticides, and enhanced nutrient composition.
Integrating the industry best practices into the organization will eventually result in the generation of valuable data that encourages discussion and sparks new ideas and practices. However, the approach to benchmarking can be as critical as the data. Organizations that successfully incorporate benchmarking practices into their processes by collaborating with key decision makers and personnel throughout the process will gain a competitive advantage.
The fleet management industry is regarded as one of the primary industries in logistics and transport, driven by connected vehicles and smart transportation solution by various organizations. Over the years, this industry has seen an astonishing growth due to the higher efficiency and performance at reduced costs and a much-streamlined process. According to SpendEdge’s industry best practices experts, it has been noted that the tensions with procurement created by resource sharing, driver reimbursement, and life cycle costing are all affected by external market factors; thereby, challenging fleet management companies to cut down on costs. As a result, many fleet management companies have started adopting industry best practices studies to gain a list of diverse skill sets and establish themselves in this market space.
Moreover, the industry best practices studies offered by SpendEdge help fleet management companies adopt best-in-class sourcing and procurement strategies.
The Procurement Pain Point and Insights Offered
A leading fleet management company wanted to identify a list of the major competitor businesses and their key suppliers. Additionally, the client also wanted to implement a lean, scalable, best-in-class, and efficient procurement process and cut down costs. Furthermore, they also wanted to assess the sourcing and procurement best practices of peer group companies to serve their clients better.
To cater to the specific category requirements of the client, the industry best practices experts at SpendEdge carried out a blended research methodology, which included primary and secondary research coupled with qualitative and quantitative data collection methodologies.
During the course of this industry best practices study, the fleet management client was able to identify the key drivers for this procurement process transformation project, including organization design, technology, and optimization techniques. Additionally, the client was provided a list of the major competitor companies and their key suppliers to enhance their overall procurement process.
Key questions answered in this industry best practices study include
The industry best practices study helped the client implement a lean, scalable, best-in-class, and efficient procurement process. Additionally, the client was able to identify and discard the inefficient and unproductive processes across platforms. As a result, the fleet management client was able to cut down the overall cost.
Want to know more about our industry best practices solutions?
The global aluminum market has grown rapidly due to the rise in demand from sectors such as automotive and aerospace because of its characteristics such as strength, durability, and low maintenance. Also, aluminum finds extensive applications in the packaging sector due to its ability to offer protection against light, oxygen, moisture, and bacteria.
The Procurement Pain Point
A leading aircraft manufacturing company in the US was facing challenges identifying and shortlisting suppliers in the aluminum market in terms of cost components, procurement models, and major service providers. The client wanted a deep-dive assessment of the aluminum supply market and approached SpendEdge to carry out an exhaustive procurement market intelligence study.
Procurement Insights Offered and the Outcome
To help the client understand the supply market landscape for the aluminum market, SpendEdge carried out an in-depth research process comprising of primary and secondary research methodologies supported by qualitative and quantitative data collection methods. Our analysts engaged in detailed discussions with the industry experts, procurement managers, and client consultants to understand the latest trends in the supply market and the preferred procurement models. Moreover, we collaborated our research with a vast database of proprietary resources such as industry journals and reports, periodicals and news articles, and whitepapers. This procurement market intelligence study offered the client with a better understanding of the procurement best practices and key service offerings of the suppliers.
In a span of four weeks, this procurement market intelligence study helped the client identify the major suppliers of aluminum. This study also helped the client with a better understanding of the cost components, procurement models, and key service offerings and assisted the aircraft manufacturer to negotiate better contractual terms on a long-term basis and strategize effectively.
This supply market intelligence study offered the client insights into the supply market landscape and crucial cost components.