Strategic Supply Chain Management - Supply Chain Online

APPENDIX A Source and Methodology for Benchmarking Data 261
There are many survey questions where the BIC definition cannot be
applied. Some examples include those related to demographics (e.g., number
of locations) or business characteristics (e.g., percentage of sales by
region) that do not represent relative performance and for which BIC is
not applicable.
While the BIC performance level provides a useful measure of the top
level of performance represented by the best 20 percent of respondents for
a given metric, the BIC levels across a set of metrics do not represent the
performance of any one set of companies. For example, for a population of
20 companies in the chemical industry that primarily use a make-to-stock
manufacturing strategy, the four companies that have the best delivery performance
may not be the same four companies that have the best inventory
performance. Because virtually no company is best in all metrics, PMG
created an index consisting of several different supply chain metrics. This
best-in-class company (BICC) index provides a method for sorting the
“high performer” companies from the “typical performer” or “low performer”
companies and enables comparisons among subpopulations.
ENSURING “QUALITY” BENCHMARKS
To be effective, a benchmark must have a precise definition that can be
applied consistently across companies. For quantitative metrics, this means
a clear description of the formula and the data sources. For qualitative practice
measures, this means a detailed characterization of practices, including
IT-enabled functions, and a rule to clarify how consistently the practice is
used in the organization.
Quality benchmarks are rooted in the age-old saying, “An apples to
apples comparison.” PMG provides support and logical estimation techniques
to participants during data collection and validates all survey submissions
prior to creating benchmarks. Quality benchmarks are maintained
by screening out data that are extreme outliers relative to the population,
requiring a certain minimum number of data points, and updating the
benchmarks on a regular basis based on the latest survey submissions.
Confidentiality of company-specific data is ensured by disclosing
only benchmarks, rather than individual company data, for use in comparisons
with the database. The vast majority of companies consider measures
of their internal operations and business-unit financial performance
to be confidential. Contractual obligations between participating companies
and PMG prohibit the disclosure of company-specific survey information,
and PMG limits the disclosure of the names of companies in the
database to companies that are interested in using the database.