Why leaders benchmark and not laggards

Anna Falconer Insikter

Benchmark

“We helped our client to reduce the number of credit notes with 85%”

According to a leading benchmarking database ¹, companies that benchmark their business against competitors and have a high value management adoption, deliver their projects on schedule 1.9 times more often than average. Does the benchmark in itself make your firm better? Of course not. But the willingness and attitude in the organization to change and strive towards continuously finding areas for improvement and hidden potential, makes the difference between leaders and laggards. This is what Centigo call behaviors and attitude. It is hard to measure but it is crucial if you want to be a top performer in your industry and want the product to be outstanding financial KPIs over time.

“I compared our cash conversion cycle with our competitors and we are above average. We even have a strong cash flow from year to year”. Well, that is good of course. However, if you don’t know where your figures come from and how each part of it is compared to competitors; the aggregated KPI is of less interest from a benchmarking perspective. Cash conversion cycle on group level may cover weak Days Sales Outstanding in specific countries with wanting dunning processes.

Case:

We helped one of our clients to benchmark their order-to-cash process internally between different geographical markets and against external competitors. By data analysis we noticed that the company in general had a large number of credit notes. Through interviews we got the information that the most common reason for a credit note was incorrect data on the invoice. Due to that the pricing database wasn’t updated, wrong prices were populated to the invoices. By changing the process to involve updating the pricing database when the price for a product was updated by sales department, the client could reduce the number of credit notes with 85% and an estimated cost reduction of € 4.6m over 3 years.

  • Do you know how much time you spend on credit notes or how many credit notes per sales your competitors have on yearly basis?
  • Do you know what the industry average is for DPO and DSO? Do you have to pay your invoices with shorter lead times than your competitors which are affecting your working capital?
  • How is your transportation spend shared between different modes of transportation (truckload, parcel, air freight, intermodal, railcar, etc…), compared to your competitors?

Benchmarking is crucial if you want to be the leader in your industry.

Centigo helps its clients to benchmark their operations internally and externally in order identify opportunities, which are assessed and prioritized into an action plan. The benchmarks usually include both quantitative analysis and deep interviews with site visits.

About the author: Patric Olsson (Patric.olsson@centigo.se) works as a management consultant at Centigo within Business Transformation.

¹ SAP Value Management benchmarking database