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Importance of Supply Chain Benchmarking
Automotive Case
Marc A. BrazeauPrincipal
ADMi Supply Chain Consulting
Spring 2009
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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
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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:
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Traditional domestic supply chain: US Market
Benchmarking and the Supply Chain
• 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
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
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Benchmarking and the Supply Chain
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
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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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Need for infrastructure investment
Benchmarking and the Supply Chain
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
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Benchmarking and the Supply Chain
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
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Benchmarking and the Supply Chain
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
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Types of Benchmarking
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
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Types of Benchmarking
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.
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Types of Benchmarking
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
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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 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:
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Applying the Results
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
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Applying the Results
Cost level analysis identifies longer term improvement opportunities
All identified gaps should be categorized and
dollarized in order to develop
strategic plans to address
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Applying the Results
Overall benchmarking activities should form the basis for 1-3-5 year long term strategic planning
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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 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:
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Key Points
1. Participate in benchmarking opportunities
2. Identify and formalize a corporate benchmarking plan
3. Promote collaboration and support industry standards
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