Benchmarking Purchasing Costs

Each year at budget time, the standard question asked of the materials management group is why do you have so many people. Our standard answer has been we don't have enough. With more people we could lower total cost and manage inventories better. The inevitable stand off occurs with each side feeling the other does not understand the need for materials management services.

In the winter of 1989, we decided to be prepared to answer that famous question of Dr. W. Edwards Deming, "How do you know?" We wanted to show people we really did know our business, and this initiated a project to benchmark planning, purchasing, and scheduling services of other companies. This paper shares not only efforts, but also techniques for getting started.

As with any successful project, putting together a process is key to achieving the desired results. Our up-front process included the following:

• Reading reference material (Robert C. Camp book, Bench­marking, The Search for Industries Best Practices That Lead to Superior Performance).

• Formation of a steering team (three people).

• Formalize a purpose statement that will outline the desired results. (See at end of this paper.)

• Derive a list of questions you wish to have answered and ones you are willing to share the same data on with other companies. (See at the end of this paper.)

• Select companies you would be interested in benchmarking with a focus on selecting the best in their field. (It's hard to learn something from those that are not as good as you are.)

Now that all that is done, it is time to set up visits. One of the most difficult parts of this process was making contact with potential benchmarking partners. We used numerous methods to achieve this process including the following:

• Making contact with people we knew at other target compa­nies.

• Using contacts of other Eastman Kodak Company employees.

• Getting sources from consultants that service the Eastman Kodak Company.

• Posting signs soliciting other companies' interest at regional and national APICS meetings.

• When all else fails, call the main number of the plant you wish to visit and ask for the plant manager's office. This will usually get you to the person you desire.

The initial steps should include providing the company you wish to benchmark with a list of the questions you wish to benchmark on. Also, make sure you understand the business the company is in and be sure to share with them your business. On occasion we have had a visit canceled as the other company found areas where we were in direct competition. In all cases, to minimize the costs to the other company, we agreed to visit their facility while

extending an open invitation for a reciprocal visit to our plant.

To be Continued

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