1 Define your sourcing objectives

The first step is to define your sourcing objectives and align them with your business goals and strategy. What are you trying to achieve with your sourcing activities? How do you measure your sourcing performance and value? How do you support your internal and external stakeholders? Your sourcing objectives should be clear, specific, measurable, achievable, relevant, and time-bound.

2 Identify your benchmarking scope and criteria

The next step is to identify your benchmarking scope and criteria. What aspects of your sourcing strategy do you want to benchmark? For example, you may want to benchmark your sourcing processes, such as supplier selection, negotiation, contracting, relationship management, risk management, or innovation. Or, you may want to benchmark your sourcing outcomes, such as cost savings, quality, delivery, responsiveness, or sustainability. You should also define your benchmarking criteria, such as key performance indicators, best practices, or benchmarks of excellence.

3 Select your benchmarking sources and methods

The third step is to select your benchmarking sources and methods. You can decide who you want to benchmark against and how you will collect and analyze the data. Internal benchmarking allows you to compare performance, processes, and practices with other units or functions within your organization. Competitive benchmarking lets you compare yourself with direct competitors or industry leaders. Functional benchmarking enables you to compare performance, processes, and practices with similar or best-in-class functions across different industries or markets. Generic benchmarking helps you compare yourself with generic or universal standards or frameworks. Desk research, surveys or interviews, site visits or audits, and collaborative benchmarking are all methods for gathering data about your benchmarking partners. Desk research involves using secondary data from published reports, surveys, databases, or online sources. Surveys or interviews use primary data from questionnaires, interviews, or focus groups. Site visits or audits involve direct observation and verification of the performance, processes, and practices of your benchmarking partners. Collaborative benchmarking involves joint projects or initiatives with your benchmarking partners to share and learn from each other.

4 Analyze and compare your benchmarking data

The fourth step is to analyze and compare your benchmarking data. How do you measure up against your benchmarking partners or standards? What are your strengths and weaknesses? Where are the gaps and opportunities for improvement? To answer these questions, you should use appropriate tools and techniques such as statistical analysis, gap analysis, SWOT analysis, and a benchmarking matrix. Statistical analysis can be used to summarize, visualize, or test your data. Gap analysis can be used to measure the difference between your current and desired performance, processes, or practices. SWOT analysis can help identify strengths, weaknesses, opportunities, and threats based on your benchmarking data. And a benchmarking matrix can plot your performance, processes, or practices against your benchmarking partners or standards.

5 Develop and implement your action plan

Developing and implementing an action plan is the fifth step. This plan should be SMART - specific, measurable, achievable, relevant, and time-bound. Specifically, you should clearly and precisely define your actions, indicators and targets to measure them, resources and capabilities to execute them, alignment and impact of the actions with your sourcing objectives and business goals, as well as timeline and milestones to complete them. This will help you improve your sourcing strategy based on your benchmarking findings.

6 Review and update your benchmarking process

The sixth and final step is to review and update your benchmarking process. You should assess how effective and efficient it was, identify any challenges and lessons learned, and consider the benefits and outcomes. To do this, you should use a PDCA cycle: plan your benchmarking process and objectives; execute the process and actions; monitor and evaluate the results; and adjust and improve the process and actions. Benchmarking is a continuous and dynamic process that can help you improve your sourcing strategy by learning from the best. By following these six steps, you can use benchmarking to enhance your sourcing performance, processes, and practices, and meet your sourcing objectives and business goals.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?