Discover the Impact of Process Benchmarking on Your Business
Understanding Business Process Benchmarking
Process benchmarking is the practice of assessing the efficiency and cost-effectiveness of your business processes by comparing your performance against your competitors. For example, it takes you an average of one hour to complete a certain process, and it takes another company in a similar industry 45 minutes to do the same. How do they accomplish this in less time? What can you do to catch up and meet the same level of performance?
Process benchmarking doesn’t solely exist to identify where your procurement department stands in comparison with your competitors. You can also utilize internal benchmarking to analyze your current metrics against past quarters or other departments. This ensures process benchmarking serves as the jumping-off point for continuous improvement within your organization—once you understand where your inefficiencies lie, you can take further strides toward world-class performance.
What Does Benchmarking Involve?
Process benchmarking is a detailed, involved process, but that doesn’t mean it has to be overwhelming or cause frustration. Here’s a step-by-step guide for performing process benchmarking within your organization.
1. Identify Your Goals and Objectives
The first step to any successful strategic benchmarking process is to define the scope and purpose of your efforts. What do you hope to gain from a benchmark analysis? What improvements will indicate a successful result? Establishing clear goals that align with your business objectives at the beginning of the process helps you stay on track and make sure each evaluation is thorough and productive.
2. Gather Information and Data From a Variety of Sources
Next, collect information from multiple channels that provide insight into where your procurement department stands in terms of performance. Pull from data sources such as surveys, stakeholder interviews, financial statements, internal processes, sales records, database reports, and more. This data should include information that indicates the resources used throughout a process, such as time, money, and staff, as well as customer satisfaction levels.
3. Perform a Thorough Analysis of Your Data
Once you’ve gathered the necessary data and information, it’s time to dig deeper into where you stand in terms of performance. By relying on a diverse data set, you can identify patterns within your processes that help explain why certain areas are performing well or poorly.
Data analysis is one of the most crucial elements of process benchmarking—without understanding how your data relates to your business, the meaning of benchmarking is lost.
Your data analysis provides key insight into the shortcomings of your procurement department. Check out our blog to learn more about when you need to elevate your procurement.
4. Set Benchmark Goals
After analyzing your data and identifying your vulnerabilities, you need to set some more expectations. Let’s look back to the example mentioned earlier, where a competing organization completed a process in 45 minutes. Do you want to simply level the playing field, or do you intend to surpass them in terms of efficiency? How much time do you want to save? How much more cost-effective do you want to be?
Setting process benchmark goals based on questions like these helps you understand how, specifically, you can improve your processes.
5. Implement Revised Processes and New Technology
Your success depends on the interplay between the people, processes, and technology within your organization. With an understanding of your procedural shortcomings and a comprehensive set of goals and objectives, you can begin taking concrete steps toward improvement. How can you refine your processes to save time and money? How can you leverage technology to make your processes more efficient?
Many procurement departments integrate automation solutions as part of their benchmarking procedure. While automated technology is great for reducing the amount of time, money, and resources spent on certain parts of your processes, you need to take the time to ensure it actually aligns with your overall objectives, stakeholders, and customer base. Too often, technology integrations are based purely on external factors like branding, bells and whistles, or functionality and don’t align with your short- or long-term goals.
6. Monitor Progress for Continual Improvement
As you make changes to how people, processes, and technology interact within your procurement department, keep a close eye on performance. How do you compare to past records or industry standards now that you’ve started to fine-tune your operations? Monitor your progress over time, and make adjustments as needed.
7. Realize Success, But Look at the Bigger Picture
Process benchmarking is essential, but it’s not a one-and-done deal. You need to regularly compare your performance to changing industry standards to ensure that you’re able to remain ahead of the competition. Once you meet your initial goals, set new ones and repeat the cycle.
Let’s Sum Things Up: Advantages of Process Benchmarking
Process benchmarking is a great way to assess your operations and drive improvement. Based on what we’ve discussed so far, here are some of its key benefits:
Gaining a comprehensive understanding of how well you perform against competitors.
- Identifying performance gaps and inefficiencies and remediating them.
- Establishing a standardized set of processes for your department.
- Creating a culture of improvement in which stakeholders, employees, and executives are on board.
- Setting achievable goals and performance expectations.
- Monitoring overall performance and managing change.
Set a New Benchmark With Velocity Procurement
Ready to take your procurement department to the next level? At Velocity Procurement, we help organizations optimize their people, processes, and technology so they can improve their procurement functions and become best in class. Get in touch today to learn more about how we support your procurement department.