3. WHAT IS BENCHMARKING?
Is a tool for evaluating an organisations
objectives, capabilities, performance and
strategic plans in relative terms.
The success of an organisation depends on
beating competitors or improving on past
performance.
Therefore benchmarking is simply a method
of comparing performances.
4. WHAT TO BENCHMARK
There are a number of bases that can be used for
benchmarking and three common ones are:
Historical: comparing to own performance in prior
periods.
Industry/sector: comparing to the performance seen
in other similar industries.
Best-in-class: comparing to the performance of the
best competitor.
5. WHAT ElSE TO BENCHMARK?
In the previous slides we focused mainly on organisational
benchmarking but benchmarking can be applied at almost
every level of the organisations operations for example:
Functional benchmarking: comparing specific functions (e.g.
distribution) with the same functions in other companies.
Product benchmarking: comparing specific products with those
produced by competitors.
Financial benchmarking: comparing financial performance with
that of competitors
Strategic benchmarking: comparing strategies with those
employed by other companies
8. best in class bencHmarking
AFDIS DELTA
Earnings per share - US cents 2.01 7.44
Share Price - US cents 30 115
Price earnings ratio 14.93 15.46
Current Ratio 1.87 1.36
Debt/equity ratio - 17%
Equity/total assets ratio 67% 67%
2014
BENCHMARKS
10. Financial perFormance bencHmark
WitH konyagi tanzania
Afdis F14 Konyagi F12
$ 000 $ 000
Gross income 35,149 67,200
Net Income 23,952 50,700
Cost of sales (11,589) (19,700)
Gross margin 12,363 31,000
Overheads (9,307) (9,800)
Operating income 3,056 21,200
Finance costs (253) (500)
Profit before tax 2,803 20,700
Sales Volumes (000 litres) 6,094 16,100
Net sales per litre 3.93 3.15
Gross margin per litre 2.03 1.93
Gross margin percentage 35% 46%
Operating cost per litre (1.53) (0.61)
Operating income per litre 0.50 1.32
PBT per litre 0.46 1.29
11. Cost BenChmark with Distel
Material costs:
20c is due to differences in bottle costs
6c is due to differences in packaging costs i.e. cartons and fillers.
Improvement can be seen from F14 to F15 with a 4c reduction
Production overheads:
Major contributors to difference in production overheads are capacity
utilisation and production volumes. F15 shows a 4c reduction in overhead
cost per litre due to improved production volumes
Distel
F15 F14 F14
Material cost 1.40 1.44 0.81
Production overheads 0.34 0.38 0.17
Total cost per litre 1.74 1.82 0.98
Afdis
12. other areas you Can BenChmark
Distribution productivity indicators
Volume delivered – 1,1 million litres
Fuel consumption – 3.3km/litre
DSD km/veh/month 6 700
Freight km/veh/month 5 457
Distribution cost per litre – Afdis 10 cents Delta 10 cents
Packing line performance
Volume packaged
Machine efficiencies-68%
Energy cost per litre – $0.04
Capacity utilisation – 30%
Litres per man hour-70
13. other areas you Can
BenChmark
Product quality
Customer complaints – 2
Quality index – 95%
Human resources
Employment cost per litre sold – 0.69
Canteen costs per head per day $1,31
Minimum wages and allowances
14. the BenChmarking proCess
While there is no set of ten commandments to
benchmarking, there are some general steps that help
ensure that the right benchmarks are chosen in order to
achieve the desired goal.
1. Identify problem areas, current gap
2. Identify other industries/companies with similar problems,
and from these the industry leaders.
3. Carry out detailed survey of the other company’s business
practices
4. Identify, reverse engineer and implement desired business
practices from other companies.
5. Monitor improvements/recalibrate benchmarks /targets
15. What are the benefits
Continuous improvement-improves
productivity
Eliminates guesswork-trouble shooting-you
get to know the specific areas to work on
Prioritise on opportunities
Communication –increases enthusiasm –it
gets easier to convince team
16. But …
Be weary of complacency after achieving the
goal
17. It’s not always a walk In the park!
There can be considerable difficulties in obtaining
from competitors data needed for benchmarking. For
example, no competitor is likely to volunteer how
long it takes to make a product or what internal
quality standards it sets.
There may be a significant amount creativity that
may be required to obtain the desired information,
this has given rise to things such as Industrial
espionage.