Why benchmarking is so important?
As consultants, we often notice that companies are not eager to benchmark their expenses or consider it in the wrong way. We have identified 3 sorts of stereotypes that lead companies to inefficient situations:
The first type is the company which claims that, due to their skilled procurement personnel, have no need to benchmark their costs. Nonetheless, without external advice, it is nearly impossible to evaluate the results of your purchasing staff. You may be overlooking important savings. Alternative solutions may be neglected.
The second type are the companies which look to their own annual budgets to benchmark on their own. In general, budgets are a bad benchmark to assess ones performance, because they are based on historical and not current expenses. Situations, expenses and solutions hardly stay the same over the course of one year.
Finally, there is the type of company which already has a 10% cost reduction program running and is therefore confident that benchmarking is not useful. Despite their efforts, it is possible that they do not obtain their maximum cost savings potential, because it is probably bigger than the 10%.
We advise companies to rethink their benchmark or use the help of consulting companies on a no cure no pay basis.
