Performance benchmarking – pushing your own limits
Fierce competition, cost pressure and regulatory changes are what drives companies to improve their own performance and stay one step ahead of their competitors.
It is often difficult for organizations to continuously generate optimization approaches. On the one hand, the common attitude “We’ve always done it this way” prevents them from questioning themselves sufficiently. On the other hand, top management is often not fully aware whether the optimization potential has already been fully exploited or not.
In these cases, the benchmarking approach can pave the way to supply chain performance optimization in a structured way. B&C distinguishes the following types:
Internal Benchmark
The company usually offers a large variety of evaluable performance data, enabling for example benchmarking of a specific manufacturing process. Results of a structured evaluation of process data typically show two different scenarios:
- Fluctuating performance: all “downswings” mean optimization potential. Identifying the root causes for the variance in performance results in ways to raise the potential.
- Stable performance: If there are no “downswings”, there are often still a lot of buffers. In this case, specific approaches need to be identified to increase the performance case by case and new standards should be developed.
For both cases, there are proven methods such as BDP (“best demonstrated practice”) to leverage the hidden improvement potential.
External Benchmark
It is always worthwhile to look beyond look beyond one’s own company for new ideas that can lead to further improvements. By thoroughly analyzing and understanding the differences between the own company and a suitable peer group, own limitations are uncovered, and further potential can be leveraged. Likewise, comparisons with similar peer groups can be useful to gain new perspectives and to develop completely new solutions. Therefore, we distinguish between:
- Comparison with the own peer group
For example, a cold rolling mill with the cold rolling mill peer group. - Comparison with a similar peer group
For example, the aforementioned cold rolling mill with the rolling mill peer group.
Example: Identification of optimization potential through benchmarking
Using a simplified project example, we show below how internal and external benchmarking can provide different impulses for improvement potential. The example company produces steel and processes it into long products in its own rolling mill. Since the rolling mill is often a bottleneck, improving its performance is essential to realize improvement potential for the entire supply chain.
Internal Benchmark
The internal benchmark uses performance data of the early, late and night shifts over a period of 12 months. Following the OEE principle, the distribution of main utilization time, secondary utilization time and downtimes (see Figure 1) serves as the initial set of performance KPIs.
A closer look reveals that the night shift performs better overall than the other two shifts. This initial finding was further substantiated by a detailed analysis leading to root causes and specific corrective actions. In addition, some quick wins were identified: different working methods and shift staffing (quantitatively and qualitatively, e.g. level of training and shift composition).
External Benchmark
With external benchmarking (see Figure 2), it was also possible to identify potential in machine setup processes and maintenance: Among the companies in the same peer group, the best-in-class company has a 26 percentage point higher share of main utilization time than the reference company.
To close the performance gap with the best-in-class, machine-specific KPIs were introduced and evaluated, and additional levers were identified. Additional analysis, such as comparing the reference customer’s key cost driver structure to that of the best-in-class company (see Figure 3), uncovered further improvement potential. Figure 3 indicates that the best-in-class company invests significantly more (in relative terms) in personnel and plant maintenance than the reference company. Linking these factors to the performance indicators reveals additional opportunities to improve. At this point, it should be noted that all measures must always be subjected to a profitability analysis to ensure that only topics that match ROI targets or provide strategical advantages in the future are implemented.
Our B&C experts will be happy to support you with industry-specific know-how and best-in-class methods to identify optimization potentials and to transform your company towards best-in-class performance. The benchmarking principle works for both production processes and administrative processes and, in our experience, is always highly relevant to business success.
For more information regarding benchmarking and our service offerings for improving Supply Chain performance, please contact us at
info@bronk-company.com.
Your contacts:
Dr. Pascal Lutter,
Manager
Cristian Germeroth,
Partner
