Academic journal article The Journal of Business Forecasting

Benchmarking Best Practices

Academic journal article The Journal of Business Forecasting

Benchmarking Best Practices

Article excerpt

(This is an ongoing column in The Journal, which is intended to give a brief view on a potential topic of interest to practitioners of business forecasting. Suggestions on topics that you would like to see covered should be sent via email to llapide@mit.edu).

My advice to those contemplating benchmarking is to make sure they don't automatically assume that a simple apples-to-apples comparison can be made among organizations. Results from a benchmarking exercise require careful analysis to understand fully what can be gleaned from the information. This is especially the case when it comes to Business Process Benchmarking. (see my column in the Fall 2002 issue of the Journal of Business Forecasting that discusses this and the two others forms of benchmarking - internal and external benchmarking).

Business Process Benchmarking entails managers visiting other companies for extended site visits to get an in-depth look at how they are doing things. In this way, they can learn about the best business processes that are in place at the other companies, with the intent of replicating them in some way. However, when it comes to trying to replicate another company's best practice, you have to be careful and evaluate whether it is really right for your company. Many have visited supply chain leader companies, such as Dell and Toyota, only to find that the best business practices at these lead companies will not make sense for their firm nor can such practices be replicated in their company's business environment. This is because so-called "best business processes" are not necessarily best for everyone else. In addition, while they may be best for a company using them today, they may not be best for the same company in the future, as its competitive business environment changes.

That said, this does not mean that benchmarking best business practices is not useful. The key to learning something from a best business process is to understand why it is beneficial to the company using it. An important question to address is: How does the best business practice add value to the company using it? In this regard, as will be discussed later, this means identifying the underlying operating principles being leveraged by the best business practice. The underlying principles may prove effective in another business environment; however, the business practices or processes used to enable these principles might be drastically different from those used at the benchmarked company.

MIT SUPPLY CHAIN 2020 PROJECT

At MIT we are engaged in Supply Chain 2020 (SC2020), a multi-year project to identify the underlying factors and principles that can lead to successful supply chains out to the year 2020. We recently completed Phase I (http: //www.supplychain2020.net), which was focused largely on understanding what makes supply chains tick. This project also has started to identify the underlying principles that are being leveraged by successful or excellent supply chains run by companies such as Dell, Wal-Mart, and LimitedBrands to gain competitive advantage. Twenty-one (21) company supply chains in nine (9) industries were researched qualitatively, and twenty-five (25) quantitative studies were analyzed to assess how company performance is impacted by Supply Chain Management (SCM).

The qualitative research delved into each industry's drivers and challenges, and the various supply chain responses to them. Supply chains of successful companies were profiled to identify the important linkages that exist among competitive strategies, operating models, operational performance objectives, and business practices.

While excellence is a very subjective term, the research supported the premise that an excellent supply chain must do four things:

1. Support, enhance, and be an integral part of a company's competitive business strategy

2. Leverage a distinctive supply chain operating model to sustain a competitive edge

3. …

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