Everyone needs benchmarks to up their supply chain expense game
If you aren’t aware of it, benchmarking is your key to becoming the best-of-the-best in supply chain expense management. No longer can we guess where our savings reside. We need to know, with clarity and certainty, where our savings are hidden for the following three reasons:
- No one has the unlimited resources to search in the weeds for buried savings that might never result in realizable dollars.
- No one has the visibility that is necessary to ferret out savings that are obscured from your view.
- No one has the time that is required to uncover where your next savings opportunities are coming from.
- Yet, all of these negatives can become positives, with the right benchmarking system.
A system in place
Benchmarking, if done artfully and scientifically, can solve your challenges of not having unlimited resources, unrestricted visibility and limitless time to search for new savings opportunities, because benchmarking pinpoints with near certainty where your best savings opportunities reside. For instance, a Children’s hospital client of ours saved $525,233 on their lab reference tests when our benchmarks identified a 6 percent savings gap with their cohort group. Without this yardstick this hospital, in our opinion, would have continued to spend half-a-million dollars a year unnecessarily for their lab reference tests for many years.
As you know, your department heads and managers are super busy and often don’t even have the time to attend your value analysis team meetings. So when you get them to a meeting you had better not have them work on projects that end up as “dry holes,” or they will surely start skipping your value analysis meetings in the future. This is another benefit of benchmarking, it can give the fuel that is necessary to almost guarantee savings for your value analysis project managers.
Another advantage of benchmarking is that you can estimate your savings opportunities before, during and after your value analysis projects to ensure that your value analysis
project managers have squeezed the towel dry on any given savings that were identified through benchmarking.
Here’s how this works. If your benchmarking tells you that there is a $127,987 savings opportunity on pulse oximeters, you then have a targeted savings goal for this value analysis project. If at the end of the project your team member has only uncovered $56,322 in realizable savings then you need to audit this project to find out what happened to the other $71,167 that was your original goal.
We often find that value analysis project managers miss their targeted savings goal because they didn’t dig deep enough into the data, didn’t work hard enough to make savings happen, the data was flawed or the benchmarks were calculated improperly. No matter what the reason, we insist that our clients audit their value analysis projects if they come up short on their estimated savings goals. It just makes sense to do so! This is how to develop a learning organization, rather than point fingers at each other!
To recap, benchmarking is the search for best practices that lead to superior performance. There are no shortcuts to this process, but there are big rewards for those supply chain professionals who benchmark their way to success in turbulent times.