Benchmarking the Supply Chain Using SAP SCPM
Benchmarking technique is a systematic approach by which any organization can compare their performance in a particular process to that of a “Best-In-Class” organization, finding out how the organization achieves those performance levels and applying them to their own organization. It follows several steps:
- Determine and choose the business process for which benchmarking is needed.
- Identify an organization that is “Best-In-Class” in performance.
- Study the organization to the depth.
- Analyze the data i.e., determine the differences between your process and the benchmark organization.
As companies strive to create better value for their customers in today’s competitive marketplace, managers are beginning to realize the important role of supply chain management (SCM) plays. The notion behind benchmark is the acceptance of the fact that some organizations somewhere in the world have developed the same or a similar process or product that is more effective and superior compared to any other organization. This “world class” process will be the “benchmark” for that category of processes. Thus, benchmarking involves continuous monitoring and measurement of a company’s performance against the “best-in-class” companies. The principal motivation comes from its desire to search for excellence in order to become competitive in the marketplace. SAP SCPM as an operational analytics tool provides a solution for efficient and effective benchmarking by monitoring the performance of each SCOR based KPI, comparing and analyzing the data with the actual data of the metrics.
Types of Benchmarking
Generally there are different types of benchmarking techniques but the most often used are:
- Competitive and
- Co-operative benchmarking
Competitive benchmarking involves identifying the major competitors of an organization in the marketplace. The supply chain group then looks at the competitors’ product, cost, technology, service, and the functioning of their organizations. Having a robust knowledge, the group looks at their own product and processes and determines that what is required to improve them in each of the above areas. For example, when Xerox used benchmarking in the early 1980s, they looked at the Japanese competitors, IBM and Kodak, to uncover weaknesses in their products, services, and processes.
On the other hand Co-operative benchmarking involves comparing one’s own organization with the “best-in-class” companies in the worldwide marketplace, not necessarily in the same industry. This kind of benchmarking often can be most beneficial in as a source of competitive advantage. It needs the ability to visualize the transfer of a practice from one industry to other. Direct applicability of process and product innovations may not be readily apparent. Recognizing and adapting innovations to new environments require creative thinking and adaptive behavior.
Benchmarking Process Using SAP SCPM
Benchmarking is a part of Total Quality Management which is a continuous process of comparison of products, services, processes and methods with the best in class companies. The best in class companies are defined as the best companies with regard to the investigated performance processes. These performances can be determined once the actual data and the planned data are entered into the SAP SCPM system. Traditional German metrics comparison projects only refer to businesses within the same industry, whereas SAP SCPM benchmarking projects can cover different branches of industry. It can be with respect to the Financial, Total Supply Chain Costs etc, perspective. The selection of those businesses depends on their performance of specific processes. Companies with the most efficient fulfillment of similar performance requests to the processes in question should be included in a benchmarking project.
It is a structured proceeding, which can be divided into four phases including the ten steps as:
(1) Defining and determining of investigated process.
(2) Selection of benchmarking partner (Depends on internal/external benchmarking).
(3) Information collection.
Analysis (Done using SAP SCPM)
(4) Finding the performance gaps.
(5) Evaluating root causes for the gaps.
Integration (Done using SAP SCPM)
(6) Persuading the employees.
(7) Fixing targets.
Implementation (Done using SAP SCPM)
(8) Developing action plans.
(9) Implementing actions.
Application of SAP SCPM
SAP SCPM study generates a comprehensive set of fact-based performance measures that can be used to accurately describe a world-class supply chain of plan, source, make and deliver activities. The aim of benchmarking is to help companies to take a broad supply chain process perspective by quantifying performance improvement opportunities across the whole supply chain. The comprehensive SAP SCPM benchmarking study may cover four areas, which are identified as the “keys” to unlock the supply chain excellence:
1. Delivery performance;
2. Flexibility and responsiveness;
3. Logistics cost;
4. Asset management.
The SCPM SCOR KPIs for these key areas are:
1. Delivery performance including: Delivery-to-request date; Delivery-to commit date; Order fill lead time.
2. Flexibility and responsiveness including: Production flexibility; Re-plan cycle; Cumulative source/make cycle time.
3. Logistics cost including: Total logistics cost; Order management costs.
4. Asset management including: Inventory days of supply; Days of sale outstanding.
Benefits of Benchmarking in SAP SCPM
The potential benefits of benchmarking in supply chain using SAP SCPM are:
- It helps to encourage improved performance of supply chain.
- It helps to plan improvement in supply chain processes.
- It helps to reengineer business processes in supply line.
- It helps to gain a competitive advantage for a chain in the industry.
- It is used for performance comparisons and to set targets.
- It helps to understand and learn best practices.
- It is used as tool for collective learning through networking.