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Importance of Supply Chain Benchmarking
autoMOTIVE Logistics Leaders Congress 2009
Marc A. Brazeau
PrincipalADMi Supply Chain Consulting
June 3 2009
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Presentation Overview
Benchmarking and the Supply Chain
Types of Benchmarking
Integrating Benchmarking Activities
Applying the Results
Visibility, Cooperation, and Collaboration
Promotion of Industry Standards
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Benchmarking is the process of comparing the cost, cycle time, productivity, or quality of a specific
process or method to another that is widely considered to be an industry standard or best practice
What is Benchmarking?
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Benchmarking and the Supply Chain
Be globally competitive in quality, technology, systems cost and
supply
Have expert knowledge of opportunities and competition, as they
leverage even more of the international supply base
Adhere to principles of innovation and collaboration as the basis
for sustained business relationships
Global supply chain performance is challenged by a variety of important factors
OEMs require the automotive supply chain to:
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T raditional domestic supply chain:
Benchmarking and the Supply Chain
SupplierLocations
Plants
Static supplier base
Established logistics
networks
Limited border crossings
Coordinated customs
processes
Established carrier base
Existing infrastructure
Effective regulatory agencies
Regional plant locations
Integrated logistics centers
and cross-docks
National distribution
capacity
Specialized equipment
Stable
distances
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Benchmarking and the Supply Chain
SupplierLocations
Plants
Dynamic supplier base
Increased number of
supplier options
Multiple source
countries
Multiple International border
crossings
Complicated customs
regulations
Various data requirements
Multiple mode requirements
Broad and diverse carrier base
Multiple language requirements
Regional customs
High level of coordination
Multiple plant locations
Flexible manufacturing
Parts commonization
Increased mileage
International
dealership network
Extended Global supply chain:
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Benchmarking and the Supply Chain
NAFTA commercial border
crossings have increased 192%
since 1996
Increase in imports from Asia toU.S. grew from $45 Billion in
1995 to $243 Billion in 2005
Security compliance programs:
FAST
CTPAT
NBEST
Port and border congestion, and the increased security measures, require better shipment planning and
coordination
Sources: Journal of Commerce, Port Import/Export Reporting Service, Bureau of Labor Statistics, Association of American Railroads, AASHTO, CIA Fact BookSources: Journal of Commerce, Port Import/Export Reporting Service, Bureau of Labor Statistics, Association of American Railroads, AASHTO, CIA Fact Book
Increased border security and customs requirements
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Impact of natural disasters and pandemics
Benchmarking and the Supply Chain
Regional disruptions in key
component supplies
Reduced productivity
Capacity re-directed to emergency
causes
Reduced manpower availability
Need for robust contingency plans
Supply chain transparency and collaboration is more and more important
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Benchmarking and the Supply Chain
Global oil demand and the
impact on fuel prices
Raw materials costs
OEM and supplier economichealth
Global automotive demand
fluctuations
Transportation industry
manpower shortagesAbility to re-invest in
transportation equipment
Seismic volume fluctuations and market uncertainty stress the supply chains ability to re-invest
Economic Volatility
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Need for infrastructure investment
Benchmarking and the Supply Chain
North American highways, ports and
bridge infrastructure requires an
incremental $32 billion/year through
2020
Rail network requires $10 billion/ year of
incremental investment
East Asia will have to spend $165
billion/year over the next 5 years to be
in line with current needs
Increased port volume since 1994:
251% West Coast
284% East Coast
Investment decisions will be more difficult to make requiring potential innovation trade-offs
Sources: Journal of Commerce, Port Import/Export Reporting Service, Bureau of Labor Statistics, Association of American Railroads, AASHTO, CIA Fact BookSources: Journal of Commerce, Port Import/Export Reporting Service, Bureau of Labor Statistics, Association of American Railroads, AASHTO, CIA Fact Book
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Benchmarking and the Supply Chain
Dynamic ever-growing supplier
base
Multiple countries, languages, and
customs
Diverse transportation modes and
infrastructure
Complex data coordination
requirements
In-transit inventory float
Expanding mileage factors
Incorporating benchmarking activities into the strategic planning process will enable effective best practice
development and adoption
Summary challenges and tactical requirements:
Improve volume forecasting and
data transparency
Develop coordinated supply chain
contingency plans
Promote collaborative supply chain
networks (OEMs and suppliers)
Support industry best-practice
commonization and productivity
improvement initiatives
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Types of Benchmarking
Financial analysis comparison with other targets
to assess overall competitiveness and
productivity
Process of designing new products or upgrades
to current ones, including reverse engineering of
competitive products
Comparison of peer or target companies market
performance in considering corporate investment
alternatives
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Types of Benchmarking
Process of observing common or uncommon
groups competitive advantages or disadvantages
Identifies and observes specific business
processes with a goal of identifying best practices
Focuses on a single function in order to improve
the operation of that particular function.
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Types of Benchmarking
Helps companies assess their competitive
position by comparing specific performance
dimensions
Used to develop yardstick comparisons, allowing
outsiders to evaluate the performance of
operators in an industry
Supply chain benchmarking generally revolves around Strategic, Process, Function, and Performance
benchmarkingthus promoting more effective performance metrics
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Types of Benchmarking
Benchmarking relies on the collection of both qualitative and quantitative data, depending on the
chosen process
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External affairs
Systems
Cost management
Network design and
operation
Organization
Strategy
Logistics scorecard
Strategic involvement in key
issues
Limited involvement in key
issues
Lack of awareness of key
issues
LeadingLagging
Internally managed and
strategic integration
Internally managed, but
primarily tactical
Externally developed and
managed
Full control of cost drivers;
significant competitive
advantage
Internal / external costs
managed moderately well
Lack of control of cost drivers;
Significant cost disadvantage
Flexible, optimal networkFlexibleRigid network; defined by
third party
Centralized and integratedSpecific functions / groups
are centralized
Fully decentralized
Retain critical strategy logistics
resources and capabilities
Some internal logistics
capabilities
Outsource all logistics
functions
1
2
5
3
4
6
Integrating Benchmarking Activities
Supply chain benchmarking contains 6 performance and structural elements.
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Integrating Benchmarking Activities
Benchmarking may be a one-off event, but is often treated as a continuous process in which organizations
continually seek to challenge their practices
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Applying the Results
Transit performance has a direct impact on inventory carrying costs, equipment utilization and overall
strategy
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Applying the Results
Data details should be analyzed at a variety of levels and granularities
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Applying the Results
Cost level analysis identifies performance gaps when compared to competitive sets
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Applying the Results
All identified gaps should be categorized and dollarized in order to develop strategic plans to address
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Applying the Results
The overall benchmarking should form the basis for annual planning and future performance tracking
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Applying the Results
Customer (Client) Surveys are the most used (77%) of 20
improvement tools, followed by SWOT (72%), and Informal
Benchmarking (68%). Performance Benchmarking was used by
(49%) and Best Practice Benchmarking by (39%)
60% of organizations indicated that the tools that are likely to
increase in popularity the most over the next three years are
Performance Benchmarking, Informal Benchmarking, SWOT, and
Best Practice Benchmarking
When Best Practice Benchmarking is done well significant benefits are obtained with 20% of projects
resulting in benefits worth US$250,000
Source: Global Benchmarking NetworkSource: Global Benchmarking Network
In a 2008 survey on benchmarking, results showed that:
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Supply chain visibility is the cornerstone for effective benchmarking and rapid collaboration
Visibility, Cooperation, and Collaboration
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Promotion of industry standards
Professional developmentTransportation associations
Shipper conferences
OEM sponsored
All supply chain partners should engage and participate in the promotion and development of
operating and reporting standards
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Promotion of industry standards
The AIAG provides a forum for the OEMs and tiered supply base to effectively collaborate
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