Benchmarking: VDDW Corporate Performance Management Initiatives for Results

RESULTS: Initiatives > Benchmarking



	Initiatives: Overview Pricing Supply Chain Routing Planning & Budgeting Return On Advertising NOP–driven Negotiating NOP–driven Commission & Incentives Sku Rationalization Customer Profitability Market Segmentation Partner and Product Benchmarking Improved Category Management Staffing efficiencies Process Costing

“Benchmarking” is simply another word for comparison, but a comparison applied with a little more formality and rigor. Thorough comparative analysis is key to understanding how the various segments of a business function so as to pinpoint bona-fide areas for performance improvement.
Effective comparative analysis is an iterative, ad hoc process of stacking up various segments of the business side-by-side (customers, suppliers, products, locations, etc.) to see how they compare against one another. The process is particularly concerned with identifying outliers (both positive and negative), as well as similarities – that is to say, where were similarities expected, but differences found? And then the converse, where were differences expected, but similarities found? The comparative analysis process begins as ad hoc discovery, but progresses to root-cause analysis as interesting comparisons are identified. This is where the next natural question presents itself: Why? Why are the results so much different than one would expect? And as the causative factors become clear, the process then progress into Action Analysis. That is, “What, if anything, can we do about it now?” and “What can we do about it over time?” The latter question is where benchmarking comes in, for benchmarking establishes the formal performance targets against which the various segments of the business will be measured.
The business uses of a good benchmarking strategy are numerous, and it serves as a foundation to pretty much all of the other business initiatives discussed elsewhere in this site. Benchmarking can help improve negotiations with trading partners, supply chain decisions, staffing decisions, product performance and role-in-category decisions, to name a few.
Of course, the better the quality of the metrics and supporting information, the better the quality of the benchmark, and here is where the VDDW excels. It exposes Net Operating Profit (or even deeper – economic profit factoring in the cost of capital) for every slice of the business. It also exposes operating expenses business process-by-business process. It exposes the efficiency of each of these processes as a percentage of sales, and the correlations of these performance results to the key drivers which determined them. Finally, it provides complete traceback on the resources contributed to process-performance, exposing productive utilization, NOP-leverage achieved, and the breakdown of process expenses by various GL categories. All of this is available in ad hoc fashion for every customer, product, supplier, channel, location, or other pertinent business dimension.