As the coatings industry has continued to mature, it has become increasingly competitive. Having a manufacturing and distribution network that provides products to customers at the lowest possible cost will be a decisive factor in the success of all companies operating in the coatings industry. Furthermore, a successful strategy to increase market share by delivering preferred products and excellent service will be a key determinant of the winning companies. So how does one determine if his or her company’s costs, products and services are a source of competitive advantage or disadvantage? We believe that a good first step is benchmarking.
If the critical success factor is service level, then the appropriate metric might be the number of orders on time and complete. If the critical success factor is cost, then the gallons per direct man hour would be an appropriate measure.
Defining each metric adequately is critical to successful benchmarking. For example, if the correct metric is gallons per direct man hour, which functions within the operations group should be included in the total man hours? In some companies this would include batch makers, milling operators, filling operators and letdown operators. Other companies would include material handling and first line supervision in the direct man hours. The results can be very different depending on who is considered direct. Even a simple metric like gallons per man hour needs to be accurately defined in order to obtain apples to apples comparisons.
When defining metrics ensure that the terminology that is being used is the same. Terms vary from company to company and even from plant to plant. Some companies use the term “milling” to refer to high-speed dispersion processes and the grinding media processes. Others use the term to refer to only the grinding media processes. Process mapping requires attention to detail if the results are to be meaningful.
3. Internal Data Collection Once the metrics and processes have been defined it is necessary to collect the data from your own organization. Often data is not collected using the same definitions that have been used for the benchmarking. For normal internal reporting, direct man hours may have been defined to include material handlers. In the benchmark definition for direct man hours, you may not wish to include material handlers. This means that it will be necessary to subtract material handling hours from the figures in the standard internal reports.
Once you have started to collect the benchmarking data you may find that you have selected too many metrics or processes to map. Now is the time to review your critical success factors, the metrics and processes to be mapped, and determine if they are all necessary. Remember that any outside companies will also have to collect the same data if the benchmarking is to be meaningful. If you have selected too many processes or metrics, the outside benchmark group may balk at providing the data.
4. Select Comparison Organizations Finding companies that are willing to share their information with you can be difficult. This is frequently the case when they are direct competitors. Sometimes it is best to find a third party that can act as a data collector and buffer because no one wants to provide financial data to their competition. One way around this is to use a consulting company to collect the data and report only the average and the best-in-class performance figure. The individual values for any of the participants should never be published.
5. Collect Outside Benchmarking Data Collecting outside data can be difficult. Each organization must agree on the definition of each measure and accurately map each process studied. This can be very time consuming so it is important not to collect too much data. It is also important to remember not to ask for data that you are not willing to provide to the outside participants.
Due to the time-consuming nature of benchmarking, using an outside consultant can be beneficial. The consultant can ensure that the data is truly apples-to-apples comparisons and that the process mapping is done in enough detail to be useful. Using a consultant also gets over the hurdle of having competitors in the plant.
6. Assess The Competitive Gap and Develop an Action Plan This is a critical step in the benchmarking process. In this step you must: