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Deployment of Best Practice Benchmarking Results

Author(s):

Robert M. Monczka, Ph.D.
Robert M. Monczka, Ph.D., Director, Professor of Strategic Sourcing Management and The National Association of Purchasing Management Professor.
David J. Frayer, Ph.D.
David J. Frayer, Ph.D., Assistant Director of Research, The Global Procurement and Supply Chain Benchmarking Initiative, The Eli Broad Graduate School of Management, Michigan State University, East Lansing, MI 48824-1122, 517/432-2086.
Kenneth J. Petersen
Kenneth J. Petersen, Ph.D. Candidate and Research Associate, The Global Procurement and Supply Chain Benchmarking Initiative, The Eli Broad Graduate School of Management, Michigan State University, East Lansing, MI 48824-1122, 517/432-2086.

82nd Annual International Conference Proceedings - 1997 

Abstract. This session highlights an approach for effectively deploying best practice benchmarking results both within and across companies. The discussion is based on the Strategic Self-Assessment System (SSAS), designed by The Global Procurement and Supply Chain Benchmarking Initiative at Michigan State University, which offers member companies a means to assess current procurement and supply chain strategy/practice sophistication, to benchmark other companies/divisions internally or externally, and to develop action plans to address deficiencies and improve overall procurement and supply chain performance.

Figure 1: Approach to Best Practice Benchmarking (figure not available in this text-only version)

Adapted from: Michael J. Spendolini, The Benchmarking Book (New York, NY: AMACOM, 1992).

Best Practice Benchmarking. The use of procurement and supply chain best practice benchmarking information to improve company competitiveness and overall procurement and supply chain performance is increasing among corporations worldwide. With the assistance of specialized third-party benchmarking groups, companies are achieving significant strategic and financial impact on procurement and supply chain performance through best practice benchmarking. The Global Procurement and Supply Chain Benchmarking Initiative at Michigan State University provides strategic procurement and supply chain best practice benchmarking information for almost 200 manufacturing and service companies from a variety of industries worldwide. These companies are electronically linked via the Internet/World Wide Web and share procurement and supply chain strategies and practices on a regular basis for the purposes of improving overall company competitiveness and procurement and supply chain performance. The Benchmarking Initiative has adopted a five-stage approach to best practice benchmarking (see Figure 1). While the best practice benchmarking information is provided to member companies in a format designed to facilitate immediate understanding and ease-of-use, companies will increasingly require additional tools and techniques to aid in deployment of best practice benchmarking information company-wide and globally across business units.

Deployment of Best Practice Benchmarking Results. To address the need for deployment tools and techniques, The Global Procurement and Supply Chain Benchmarking Initiative has developed the Strategic Self-Assessment System (SSAS). The mission of the Strategic Self-Assessment System is to provide a benchmarking tool which will enable a company to assess its relative performance on a number of key process and key effectiveness dimensions and then make comparisons to other companies/business units/etc. on a real time basis. This is accomplished by using the Benchmarking Initiative's presence on the Internet/World Wide Web to position twelve strategic process areas for individual company and cross-company benchmarking.

The Benefits of Self-Assessment. Self-assessment has been successfully used by companies for decades to aid in the identification of opportunities for performance improvement and in promotion of strategic change initiatives. Some companies have relied on proprietary approaches designed internally in response to specific strategic requirements. General Electric and Xerox are companies who have successfully deployed such self-assessment techniques to drive strategic improvement in their organizations. Other companies have relied on the use of widely available approaches such as the Malcolm Baldrige National Quality Award (United States) or the European Quality Award (Europe). These and other self-assessment techniques help organizations develop and manage quality improvement or a wide spectrum of broad strategic initiatives. The Strategic Self-Assessment System applies similar principles within the context of strategic procurement and supply chain management in order to drive significant competitive and performance improvement.

Key Interactions for Strategic Effectiveness. The Strategic Self-Assessment System performs a central role in the integration and deployment of information provided by the Benchmarking Initiative. The various benchmarking outputs (e.g., GEBN benchmarking reports, field benchmarking reports, world class literature review and worldwide mail surveys) are linked to a company's overall change program through the type of gap analysis available in SSAS. Figure 2 illustrates these key interactions and how they combine to improve procurement and supply chain strategic effectiveness.

Figure 2: Key Interactions for Strategic Effectiveness (figure not available in this text-only version)

Strategic Self-Assessment System. The Strategic Self-Assessment System is designed to assist Benchmarking Initiative member companies to:

  1. Enhance awareness of best procurement and supply chain practices and develop a baseline of current business practices
  2. Facilitate cross business unit comparisons
  3. Provide a tool for cross-company benchmarking
  4. Drive continuous improvement in the organization through the self-assessment process and regular benchmarking survey updates
  5. Support independent analysis and provide for on-line access to comparative benchmarking data worldwide for key processes and selected effectiveness measures

The SSAS is a self-diagnostic tool containing twelve sets of questions related to procurement and supply chain management topics identified as strategically important by Benchmarking Initiative member companies. The process areas and related questions are designed to be relevant in most sourcing environments including direct materials, indirect materials, manufacturing, services, etc. In addition, the SSAS includes a flexible reporting capability to facilitate self-initiated comparisons across business units/companies/industries/etc.

Each of the twelve strategic process areas contains a number of questions which identify significant strategies related to a given process area. Following each question are three statements that identify a range of practices which characterize the degree of strategy implementation (see Figure 3). The questions and responses are integral and should be read together to enhance understanding of the strategy and highlight the differences in practice along the continuum. If the strategy is not applicable or inappropriate to the business unit's situation, "not applicable" is provided as an acceptable response.

Figure 3: Sample Question (figure not available in this text-only version)

The primary objective of answering each question is to facilitate self-awareness by comparing a business unit's strategic position on each process area/question to the identified best practices. The objective is not necessarily to score highly on each question. By completing the questions, analyzing the output, and comparing results to other business units/companies, participants will independently be able to:

  1. Determine which strategies/best practices are currently being employed
  2. Compare the business unit strategies to other business units/companies/etc.
  3. Develop and prioritize action plans as appropriate
  4. Review progress and compare progress over time as strategies/best practices are implemented

The SSAS is designed to be flexible and facilitate comparisons on multiple dimensions. Member companies utilizing the SSAS can submit one response for the entire company or any number of individual responses for business units within the company as defined by the user. If multiple responses are submitted within a company, the intra-company respondents may either be identified or may remain anonymous. For purposes of inter-company comparisons (e.g., cross industries, by country, etc.) individual business units are aggregated and reported anonymously.

The survey is designed to be completed by a cross-functional team knowledgeable about procurement and supply chain practices at the company/business unit/commodity team/etc. One suggested approach for completing the SSAS is:

  1. Distribute SSAS questionnaire to team
    The appropriate questionnaire(s) can be provided to each team member in hard copy format or via the Internet/World Wide Web
  2. Read and respond to questions
    Each team member should read the questions independently and decide which of the three statements below the question characterizes current business unit practices (or whether the question is "not applicable" to the business unit situation)
  3. Conduct team meeting
    Once each team member has completed the survey independently, the team should meet
  4. Reach consensus
    At the team meeting, the team should review each process area, one question at a time. For each question, the team should reach consensus on which of the three statements characterize current business unit practices. This exercise provides tremendous opportunity to air differences and build a common understanding of current procurement and supply chain strategy/practice
  5. Evaluate sophistication
    Upon reaching consensus concerning the most appropriate statement, the team should rate the degree of implementation of the statement by selecting one of the three numbers to the right of that statement. The lowest of the three numbers next to the statement represents the lowest level of concurrence/ implementation
  6. Enter results
    Upon completion of the evaluation process, one team member should enter the results into the data base
  7. Compare responses internally and/or externally
    Upon completion of data entry and submission to the Benchmarking Initiative data base, the on-line reporting functions can be used to analyze responses and provide comparative benchmarking within and across companies. The information is provided in both tabular and graphical formats to facilitate east of use

Key SSAS Comparisons. The Strategic Self-Assessment System is designed to facilitate both external and internal benchmarking comparisons (see Figure 3). External comparisons with other companies, business units or commodity teams are based on user-defined segmentation or clustering of the data (e.g., by industry, by geography, etc.). These external comparisons establish strategic position (higher, lower) relative to the specific "cluster" of interest. Respondents can also compare scores across business units/commodity teams within their own company to identify company-wide deficiencies or core competencies and/or individual problem areas or "pockets" of excellence. Such information can be used to enhance the effectiveness of procurement and supply chain strategies, to provide for company-wide knowledge transfer or to develop training and development programs to address specific problem areas.

Figure 4: Key SSAS Comparisons - Not included in this text version

Conclusion. In the future, companies will require flexible, integrated approaches for deployment of procurement and supply chain best practice benchmarking results company-wide and globally across business units. The Strategic Self-Assessment System, developed by The Global Procurement and Supply Chain Benchmarking Initiative at Michigan State University, provides an innovative and highly versatile approach for conducting comparative benchmarking on a real-time basis. The effective deployment of this and/or other similar benchmarking tools requires that companies develop and support strategic change management programs.

For further information concerning the Strategic Self-Assessment System or membership in The Global Procurement and Supply Chain Benchmarking Initiative, please contact David J. Frayer, Ph.D. at:
Phone: 517/432-2086
Facsimile: 517/432-2094
E-mail: sourcres@msu.edu

Of course, the dynamic nature of business will necessitate further refinements and changes to the Strategic Self-Assessment System to maintain its value and relevancy. Based on feedback from actual use of the system, several enhancements are already under development including an on-line discussion forum for sharing experiences across companies, expanded administrative tools designed to aid in company-wide deployment/analysis, additional reporting capabilities and the ability to compare individual responses over time (longitudinal analysis).

REFERENCES

Spendolini, Michael J. The Benchmarking Book. New York, NY: AMACOM, 1992.


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