Auto Logistics Leaders ADMI 2009

Importance of Supply Chain Benchmarking
autoMOTIVE Logistics Leaders Congress 2009
Marc A. Brazeau
Principal
ADMi Supply Chain Consulting
June 3 2009
Copyright ©2009 AutoDiversity Management, Inc. (ADMi) - All Rights Reserved. Do Not Remove This Notice
Presentation Overview
Benchmarking and the Supply Chain
Types of Benchmarking
Integrating Benchmarking Activities
Applying the Results
Visibility, Cooperation, and Collaboration
Promotion of Industry Standards
What is Benchmarking?
Benchmarking is the process of comparing the cost, cycle time, productivity, or quality of a specific
process or method to another that is widely considered to be an industry standard or best practice
OEM’s require the automotive supply chain to:
Be globally competitive in quality, technology, systems cost and

supply
Have expert knowledge of opportunities and competition, as they

leverage even more of the international supply base
Adhere to principles of innovation and collaboration as the basis for

sustained business relationships
Global supply chain performance is challenged by a variety of important factors

Traditional domestic supply chain:

• Limited border crossings • Regional plant locations
• Coordinated customs • Integrated logistics centers
processes and cross-docks
• Stable
distances
• Static supplier base • Established carrier base • National distribution

• Established logistics • Existing infrastructure capacity
networks • Effective regulatory agencies • Specialized equipment
Extended Global supply chain: • Multiple plant locations

• Flexible manufacturing
• Multiple International border • Parts commonization
crossings
• Complicated customs
Supplier regulations Plants
Locations • Various data requirements
• Dynamic supplier base • Multiple mode requirements • Increased mileage

• Increased number of • Broad and diverse carrier base • International
supplier options • Multiple language requirements
dealership network
• Multiple source • Regional customs
countries • High level of coordination
Increased border security and customs requirements

NAFTA commercial border
crossings have increased 192%
since 1996
Increase in imports from Asia to
U.S. grew from $45 Billion in
1995 to $243 Billion in 2005
Security compliance programs:
 FAST
 CTPAT
 NBEST
Sources:
Sources: Journal
Journal of
of Commerce,
Commerce, Port
Port Import/Export
Import/Export Reporting
Reporting Service,
Service, Bureau
Bureau of
of Labor
Labor Statistics,
Statistics, Association
Association of
of American
American Railroads,
Railroads, AASHTO,
AASHTO, CIA
CIA Fact
Fact Book
Book
Port and border congestion, and the increased security measures, require better shipment planning and
coordination
Impact of natural disasters and pandemics

Regional disruptions in key
component supplies
Reduced productivity
Capacity re-directed to emergency

causes
Reduced manpower availability
Need for robust contingency plans
Supply chain transparency and collaboration is more and more important

Economic Volatility
Global oil demand and the
impact on fuel prices
Raw materials costs
OEM and supplier economic
health
Global automotive demand
fluctuations
Transportation industry
manpower shortages
Ability to re-invest in
transportation equipment
Seismic volume fluctuations and market uncertainty stress the supply chain’s ability to re-invest
Need for infrastructure investment

North American highways, ports and
bridge infrastructure requires an
incremental $32 billion/year through
2020
Rail network requires $10 billion/ year of
incremental investment
East Asia will have to spend $165
billion/year over the next 5 years to be
in line with current needs
Increased port volume since 1994:
 251% West Coast
 284% East Coast
Sources:
Sources: Journal
Journal of
of Commerce,
Commerce, Port
Port Import/Export
Import/Export Reporting
Reporting Service,
Service, Bureau
Bureau of
of Labor
Labor Statistics,
Statistics, Association
Association of
of American
American Railroads,
Railroads, AASHTO,
AASHTO, CIA
CIA Fact
Fact Book
Book
Investment decisions will be more difficult to make requiring potential innovation trade-offs
Summary challenges and tactical requirements:
Dynamic ever-growing supplier Improve volume forecasting and

base data transparency
Multiple countries, languages, and Develop coordinated supply chain
customs contingency plans
Diverse transportation modes and Promote collaborative supply chain
infrastructure networks (OEM’s and suppliers)
Complex data coordination Support industry best-practice
requirements commonization and productivity
In-transit inventory float improvement initiatives
Expanding mileage factors
Incorporating benchmarking activities into the strategic planning process will enable effective best practice
development and adoption
Financial
Financial analysis comparison with other targets

to assess overall competitiveness and
productivity
Investor
Comparison of peer or target companies market

performance in considering corporate investment
alternatives
Product
Process of designing new products or upgrades

to current ones, including reverse engineering of
competitive products
Strategic
Process of observing common or uncommon

groups’ competitive advantages or
disadvantages
Process
Identifies and observes specific business

processes with a goal of identifying best practices
Functional
Focuses on a single function in order to improve

the operation of that particular function.
Performance
Helps companies assess their competitive

position by comparing specific performance
dimensions
Metrics
Used to develop yardstick comparisons, allowing

outsiders to evaluate the performance of
operators in an industry
Supply chain benchmarking generally revolves around Strategic, Process, Function, and Performance
benchmarking…thus promoting more effective performance metrics
Benchmarking relies on the collection of both qualitative and quantitative data, depending on the
chosen process
Logistics scorecard
Lagging Leading
1 Outsource all logistics Some internal logistics Retain critical strategy logistics
Strategy functions capabilities resources and capabilities
2 Fully decentralized Specific functions / groups Centralized and integrated

Organization are centralized
3 Network design and Rigid network; defined by Flexible Flexible, optimal network
operation third party
4 Lack of control of cost drivers; Internal / external costs Full control of cost drivers;
Cost management Significant cost disadvantage managed moderately well significant competitive
advantage
5 Lack of awareness of key Limited involvement in key Strategic involvement in key
External affairs issues issues issues
6 Externally developed and Internally managed, but Internally managed and

Systems
managed primarily tactical strategic integration
Supply chain benchmarking contains 6 performance and structural elements.

Individual Client
Study Administration and Data Collection Study Analysis and Results
Summaries and
Opinions
Performance
Benchmarking Individualized
Planning Repeat
Benchmarking Process Study Results Client Reviews
Support Annual
Dimensions Publication Conference
Cycle
Webcast
3 Part Industry Macro Study
Scope (Blinded data Results
analysis) Explanation of Goals/
Comparison
Confirmed Gaps Objectives
Participants
Industry
1 Part Trend
Individual Analysis Opportunity
Geography Participant Cost
Comparison Summary Explanation Cost
(Confidential) Management
Dimensional Plan
Breakout
Sessions
Cost SWOT
Comparison Peer Group Diagram
3 & 5 Year
Networking Commodity
Planning
Performance
Measurement &
Scorecarding
Benchmarking may be a one-off event, but is often treated as a continuous process in which organizations
continually seek to challenge their practices
Transit performance has a direct impact on inventory carrying costs, equipment utilization and overall
strategy
Data details should be analyzed at a variety of levels and granularities

Cost level analysis identifies performance gaps when compared to competitive sets
All identified gaps should be categorized and dollarized in order to develop strategic plans to address
The overall benchmarking should form the basis for annual planning and future performance tracking
In a 2008 survey on benchmarking, results showed that:
Customer (Client) Surveys are the most used (77%) of 20

improvement tools, followed by SWOT (72%), and Informal
Benchmarking (68%). Performance Benchmarking was used by
(49%) and Best Practice Benchmarking by (39%)
60% of organizations indicated that the tools that are likely to

increase in popularity the most over the next three years are
Performance Benchmarking, Informal Benchmarking, SWOT, and
Best Practice Benchmarking
Source:
Source: Global
Global Benchmarking
Benchmarking Network
Network
When Best Practice Benchmarking is done well significant benefits are obtained with 20% of projects
resulting in benefits worth US$250,000
Visibility, Cooperation, and Collaboration
Supply chain visibility is the cornerstone for effective benchmarking and rapid collaboration
Promotion of industry standards
Professional development
Transportation associations
Shipper conferences
OEM sponsored
All supply chain partners should engage and participate in the promotion and development of
operating and reporting standards
The AIAG provides a forum for the OEM’s and tiered supply base to effectively collaborate
Project Scope:
The development of standard event descriptions, definitions, and communication protocol/options that
improved visibility of the finished vehicle supply chain across all manufacturers and their suppliers
Issues:
Ambiguous “chain of evidence” hand-offs and inventory
responsibility
Lack of common or industry wide forecasting visibility
Impact of poor upstream visibility on capacity planning
Gaps in carrier visibility accuracy, timing, and proof of delivery
Value Proposition:
Common understanding of industry operations
Improvements in the North American supply chain:
 Visibility of in-transit volume and capacity
 Operational efficiency for manufacturers and their
transportation providers
 Utilization of shared assets and facilities
 Reduced dwell time & increased velocity of vehicles
 Lower overall cost of operations
AIAG Committees promote the development of mechanisms that provide unbiased visibility
and transparency to all supply chain partners
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Importance of Supply Chain Benchmarking

autoMOTIVE Logistics Leaders Congress 2009

Benchmarking and the Supply Chain

Integrating Benchmarking Activities

Applying the Results

Visibility, Cooperation, and Collaboration

Promotion of Industry Standards

OEM’s require the automotive supply chain to:

Be globally competitive in quality, technology, systems cost and

Have expert knowledge of opportunities and competition, as they

Adhere to principles of innovation and collaboration as the basis for

Global supply chain performance is challenged by a variety of important factors

Traditional domestic supply chain:

• Static supplier base • Established carrier base • National distribution

Extended Global supply chain: • Multiple plant locations

• Dynamic supplier base • Multiple mode requirements • Increased mileage

Increased border security and customs requirements

Impact of natural disasters and pandemics

Capacity re-directed to emergency

Reduced manpower availability

Need for robust contingency plans

Supply chain transparency and collaboration is more and more important

Need for infrastructure investment

Summary challenges and tactical requirements:

Dynamic ever-growing supplier Improve volume forecasting and

Financial analysis comparison with other targets

Comparison of peer or target companies market

Process of designing new products or upgrades

Process of observing common or uncommon

Identifies and observes specific business

Focuses on a single function in order to improve

Helps companies assess their competitive

Used to develop yardstick comparisons, allowing

2 Fully decentralized Specific functions / groups Centralized and integrated

6 Externally developed and Internally managed, but Internally managed and

Supply chain benchmarking contains 6 performance and structural elements.

Data details should be analyzed at a variety of levels and granularities

In a 2008 survey on benchmarking, results showed that:

Customer (Client) Surveys are the most used (77%) of 20

60% of organizations indicated that the tools that are likely to

Questions & Answers

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