The Importance of Supply Chain Benchmarking

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Importance of Supply Chain Benchmarking

Automotive Case

Marc A. BrazeauPrincipal

ADMi Supply Chain Consulting

Spring 2009


Overview

Benchmarking and the Automotive Supply Chain

Types of Benchmarking

Integrating Benchmarking Activities

Applying the Results

Promoting Visibility, Collaboration, and Industry Standardization

Key Take Away Points


Benchmarking and the Supply Chain

Be globally competitive in quality, technology, systems cost and capacity

Have expert knowledge of opportunities and competition, specifically in relation to emerging markets

Adhere to principles of innovation and collaboration as the basis for sustained business relationships

Provide supply chain transparency

Global supply chain performance is challenged by a variety of important client demands

OEM’s require the automotive supply chain to:


Traditional domestic supply chain: US Market


• 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



Supplier Locations

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: US Market



NAFTA commercial border crossings have increased 192% since 1996Increase in imports from Asia to U.S. grew from $45 Billion in 1995 to $243 Billion in 2005Security 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


Impact of natural disasters and pandemics


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


Need for infrastructure investment


North American highways, ports and bridge infrastructure requires an incremental $32 billion/year through 2020Rail network requires $10 billion/ year of incremental investmentEast Asia will have to spend $165 billion/year over the next 5 years to be in line with current needsIncreased 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



Global oil demand and the impact on fuel pricesRaw materials costsOEM and supplier economic healthGlobal automotive demand fluctuationsImpact on transportation industry capacityAbility to re-invest in transportation equipment

Seismic volume fluctuations and market uncertainty stress the supply chain’s ability to re-invest

Economic Volatility



Dynamic ever-growing supplier baseMultiple countries, languages, and customsDiverse transportation modes and infrastructureComplex data coordination requirementsDisaster recovery planningExpanding mileage factors

Incorporating benchmarking activities into the strategic planning process will enable effective best practicedevelopment and adoption

Summary challenges and tactical requirements:

Improve volume forecasting and data transparencyDevelop coordinated supply chain contingency plansPromote collaborative supply chain networks (OEM’s and suppliers)Support industry best-practice commonization and productivity improvement initiatives



Financial

Investor

Product

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



Strategic

Process

Functional

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.



Performance

Metrics

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 benchmarking…thus promoting more effective performance metrics



Benchmarking relies on the collection of both qualitative and quantitative data, depending on the chosen process


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


Supply chain benchmarking contains 6 performance and structural elements.



Benchmarking is often treated as a one-off event, but should be treated as a continuous process in which organizations continually seek to challenge their practices

Organizational Commitment

Resu

lts V

alue

Method Options:



Operational gap analysis provides insight into immediate improvement opportunities

Data details should be analyzed at a variety of levels and granularities

Transit comparison has a direct impact on inventory carrying costs, equipment

utilization and overall strategy



Cost level analysis identifies longer term improvement opportunities

All identified gaps should be categorized and

dollarized in order to develop

strategic plans to address



Overall benchmarking activities should form the basis for 1-3-5 year long term strategic planning



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 specific Projects resulting in benefits worth over US$250,000 each

Source: Global Benchmarking NetworkSource: Global Benchmarking Network

In a 2008 survey on benchmarking, results showed that:


Key Points

1. Participate in benchmarking opportunities

2. Identify and formalize a corporate benchmarking plan

3. Promote collaboration and support industry standards


Contact Us

[email protected] Management inc. (ADMi)1259 Cadieux Grosse Pointe Park, MI48230313.530.8088

The Importance of Supply Chain Benchmarking

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