Now that we are emerging from the economic down turn, corporations are shifting emphasis from maintaining position to focussing on achieving sustainable profitable growth and seeking ways to scale and replicate successful business processes globally. Process benchmarking is one of the effective ways of identifying the best processes to replicate or highlighting those which need improvement.
Benchmarking provides an organisation with a comparative view of their own business processes against the best in class standard, allowing them to manage processes optimisation.
Benchmarking can only add value if the right metrics are chosen, these should be the parameters which truly impact overall business outcomes. Looking at a business process end to end from the perspective of these metrics, across functions will enable discovery of the right levers to achieve the strategic goals.
For example, the key business outcome measures for any source to pay processes are total cost of ownership (TCO), working capital optimisation and material availability. These can be directly linked to more fine grained Level 2 and Level 3 key performance measures and drivers such as spend through preferred suppliers, requisition to PO cycle time, cost of PO Processing, percentage of electronic POS and days payable outstanding. If a business unit is monitoring the right Level 2 and Level 3 metrics, it will be able to quickly identify gaps in process performance, the consequences of these gaps and be able to take steps to fix the processes and hence influence the key business outcome.
Once appropriate metrics are identified, finding the right benchmark data for intra and cross industry comparison is vital to help fix improvement targets. Non profit or academic organisations like AQPC and companies involved in managing large scale global business processes across verticals can be a good source of benchmark data. Many organisations have myopic view, choosing only to use industry specific benchmarks. This is usually an error, as it can prevent them from identifying and leveraging applicable process best practices from outside their sector.
This is where developing an enterprise process view could be helpful, for example over 60% of indirect procurement categories remain the same for most organisations, and hence their source to pay processes remain similar, so using best in class measurement irrespective of industry vertical is a rational way of using available benchmark data.
Knowing where your process ranks and where you need to be is the important part of benchmarking, the rest of the journey becomes tactical. Whether a company is leader, laggard or median on a benchmark scale, setting a realistic target for process change is critical to drive improvements and optimally utilise the resources available.
A regular process benchmarking programme can be an effective way to improve the overall process ecosystem, linking and breaking silos between business units, regions, countries and service providers to help make the business’ processes scalable and nimble in response to external change.
