What is Benchmarking about?
During benchmarking, a company’s values (e.g. spend/ procurement volumes, prices or cost savings key figures) are compared with a reference value (the so-called benchmark). This reference value may have been deduced from corresponding values from other companies or from market observations (e.g. an index value).
Benchmarking can also be undertaken between different departments in a company (internal benchmarking). The internal benchmarking of purchase prices or spend structures and other KPIs within a group of companies, in particular, is an essential part of modern purchase controlling.
In order to even be able to implement benchmarking, the data/ information must firstly be made comparable. There is content management or master data management software for this purpose. They generate the required transparency and comparability at object level, so that apples and oranges are not being compared. Modern software tools, such as the DataCategorizer from Orpheus, do precisely that:
- they recognize duplicates in the master data
- they group and cluster similar components/ suppliers.
- Transaction data as well, such as invoices and orders, are classified (e.g. according to a classification standard such as eClass or UNSPSC), in order to make the comparable and to prepare them for benchmarking.
The actual benchmarking can begin if the data quality for benchmarks is adequately high. The following analyses are thereby executed:
- Corporate comparisons with top-level KPIs, in order to compare corporations (corporate divisions) with one another (see BME key figures)
- Category spend ratio analyses, in order to benchmark the spend structure (especially in indirect purchasing)
- Category spend fragmentation, in order to find supplier rationalization approaches
- Price benchmarks for the same components/ materials in different departments
- Price benchmarks for similar components/ materials in different departments. This requires clustering of similar materials (material clustering via DataCategorizer, for example)
- Shared suppliers and their performance in the individual corporations (corporate divisions)
- BME key figures as a standardized comparison between corporations for certain top-level KPIs
- Process benchmarks, in order to execute comparisons between corporations or departments in a group of companies for purchasing procedures
With its standardized ERP interfaces you can connect the spend cube of SpendControl within a short time frame to any ERP system (e.g. SAP, Navision, Oracle etc.).
Read blog articles about spend management, initiative management and data management in procurement, or other articles from our experts.
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