It is part of our human nature to compare ourselves to others. In business this practice is known as benchmarking. A good criterion of an effective benchmark project is that it provides objective data to answer specific questions about a company’s performance relative to others in their industry. It is important to have a clear outcome and purpose in order to get good data. Here are some guidelines to help you achieve the best results:
- Benchmarking is a means to an end – it is not an end unto itself. Quite often, managers and executives want to use the data to prove a point. Benchmarks are nothing more than a measurement. Like most measurements we need to do something with the information. Often times the benchmark results raise new questions, usually about strategy or operations that must be answered and acted upon. Have a clear objective of what you are measuring and be even more clear about what you are prepared to do once you review the results.
- Improvement not validation - Don’t go into benchmarking with false expectations. The results will do far more than validate how you are doing; it will provide insight on where you can improve. Rarely does a company engage in a benchmark study only to learn that everything is fine and dandy with the current status quo. Don’t for a moment think that there is nothing new to learn either. I’ve worked with many companies who commissioned benchmark studies to validate the need to make a change in one area only to learn that the perceived issue was only a symptom associated with a different problem.
- Scratch below the surface - Thoroughness is the name of the game when it comes to benchmarking. Often times the answers are hidden well below the surface. It is the job of the benchmark analyst to be an agent of change. This requires that they dig deep and go wide. Performance in one area may be directly related to performance in another. There are a number of factors that impact performance. Quite often these factors are the root cause of the problem and/or a function of the underlying systems and processes being measured.
- Look for relationships – You must understand relationships in the data if you are going to interpret it correctly. You also need to be good at spotting patterns. The goal of benchmarking is to get to the root cause of the problem and identify where improvements need to be made. Quite often only one or two corrective actions are needed to make significant performance improvements in multiple areas. This is only possible if you can effectively observe patterns and relationships in data.
- Seek advice of an expert - Let’s face it, benchmarking can be a complex task. Work with someone who has been there before. Find someone who has understands your business and the industry you are in. More importantly, make sure you find someone who understands what’s possible within the realm of reason so that you can innovate. Ideally, you’ll want to compare you company not only to direct competitors in your market but to best practice companies in any industry or market place with similar characteristics. After all, your customers will do this. Why shouldn’t you? It is likely you will want to hire or retain an experienced industry expert to help you with this analysis.
- The answers are within you – There are times when their will be anomalies in your data and sometimes these anomalies contain tons of answers as to why things are the way they are. The only person who can explain this is you. Also, one thing for certain is that even the greatest expert in the world can’t make decisions for you. Only you can do this. You’ve completed your benchmarking efforts, now it is time to make real change. Whether you use a consultant to help you make this change is up to you. It is all about being resourceful and we all have this capacity within us.
Takeaways - Benchmarking is a strategic endeavor that must be part of every executive’s tool kit. As the old adage goes, that which gets measured gets improved. This is the primary objective of any benchmarking effort. The ability to effectively analyze patterns and relationships in data is critical since the root cause of performance is often systemic or procedural in nature. The experience and perspective of an objective third party advisor can ensure quality results and an efficient process. While experts can’t make decisions for your company, they can serve as a valuable guide in helping you find answers.
Benchmarking is the key to understanding aftermarket services and reverse logistics performance and identifying areas for improvement. Benchmarking best practices apply to a company meeting industry standards for a particular task or service or group of tasks or services it provides.
Benchmarking is the process of comparing a company's business processes and performance metrics (e.g., cost, cycle time, productivity or quality to see how an individual company compares to the industry standard. For example, installation of a main frame computer occurs, 90 percent of the time by the industry within 3 days of delivery. If your company averages better than 3 days 100% of time you exceed the industry standard, if you only install within 3 days of delivery 65 percent of the time you are below the industry average.
Benchmarking is vital to any company, but companies that provide or are newly providing aftermarket services, including reverse logistics, need to implement a benchmarking program to see if their goals of improved quality and profitability of aftermarket service.
Benchmarking Can Be Provided On A Turnkey Basis
Many businesses often do not have the resources to do a professional Benchmarking study. They can turn to outside consultants who provide a turnkey program in an economical and expert manner. This is possible as databases already are created, all major after service markets are sampled and the program can provide critical data sorted by industry average, best in class or critical threshold. A benchmark database study allows companies to compile data in real time that provides a snap shot of current performance levels. Moreover, where critical needs to improve existing performance are identified, the data will support the development for creation of a "Burning Platform" for change.
Aftermarket services and reverse logistics are closely related and often overlap. Aftermarket services create a profit center for a company while reverse logistics are often treated as cost centers. Companies seeking to improve profitability try to convert as many reverse logistic costs into profit centers.
An example of this is a company that routinely disposes of a client company’s old computer hardware when they provide new hardware. There are costs associated with disposal of old computer hardware. Adding an electronic waste removal fee turns this cost into a profit center – making it optional does not force the client to purchase the service from the seller, but, the seller now avoids the cost of removal and disposal of old hardware if the client chooses to handle disposal himself.
Why Benchmark Best Practices
Benchmarking is important as companies that consistently under perform in Aftermarket Services and/or Reverse Logistics are at a competitive disadvantage. An example is the best way to illustrate its importance:
In this example, the service arm of an Original Equipment Manufacturer (OEM) is questioning if they are competitive in the area of field service. They decide to purchase a turnkey Benchmark study and quickly discover that there were several areas where they are falling short of industry standards:
- Excessive investment in spare parts compared to industry
- Excessive travel time of service personnel
- Excessive abandoned calls caused by lack of proper spare parts
- Excessive number of calls incomplete compared to industry
This Benchmark Study then provided the company the impetus to build a “Burning Platform” (a burning platform is a situation that requires a company to respond quickly to a known problem or suffer consequences worse than the problem) to invest in appropriate technology that allowed for minimizing gaps, cost reduction and better quality of service. By purchasing the software needed to optimize the inventory of service parts and allow for dynamic scheduling of field service personnel, the company is able to realize a reduction in operating cost by reducing unneeded inventory and reducing overtime labor costs.
Moreover, since they now have an original set of benchmarks, after rollout and adjustment of operations, the company can perform a second Benchmark study to evaluate if their improvements are working as designed.
Benchmark your company's performance against key operating metrics and financial benchmarks in your industry, then leverage this information to identify areas for improvement & strategic change.
The Blumberg Advisory Group benchmark database has more than 40 parameters on which we can analyze your company's financial and operating performance against industry average best in class metrics in aftermarket services and reverse logistics. We have information from over 350 small, medium, and large companies which service and support computers, office automation products,medical equipment, building and plant automation, telecommunications and network products, and medical electronics. Contact us for a free 30 miniute consulation to discuss your needs.