To remain competitive in today’s volatile environment, manufacturing businesses must understand how they measure up against peers, requiring discipline and awareness beyond just healthy profit margins. Benchmarking is a crucial element to aid these businesses in meeting industry performance standards, but for manufacturers navigating tight margins and global competition, it can be the difference between thriving and obsolescence.
According to Manufacturing Systems: Foundations of World-Class Practice (National Academies of Sciences, Engineering, and Medicine), benchmarking is the quantitative comparison of your current performance against a world leader and is a “critical foundation” for the successful operation of any manufacturing business. It also serves as a practical tool that helps in identifying improvement opportunities, setting realistic goals, unlocking the potential learning from the industry leaders and enhancing your competitive edge, to name a few.
Benchmarking carries significant benefits, as McKinsey and Co. highlight in a chemical company case study examining indirect manufacturing costs. In this example, benchmarking contributed to efficiency improvements of up to 25% by optimising their processes. Their benchmarking exercise involved shopfloor observations and maturity assessments, which consequently resulted in new improvements delivering reduced logistics costs of 12- 18 per cent, a 20- 24 per cent decrease in quality costs, and roughly 30 per cent reduced maintenance costs.
This use case highlights that real transformation doesn’t have to take years; when you have accurate analytics and benchmarking data on hand, it can take mere weeks and often unlocks underutilised resources that manufacturers can leverage in areas like improved plant performance.
The risks of falling behind
Benchmarking unlocks actionable insights; this is crucial because market pressures mean manufacturers can quickly fail. Manufacturers have so much to contend with daily, from supply chain disruptions, the introduction of tariffs looming, and rapidly changing compliance requirements – all that can easily cause manufacturers to fall behind. Avoiding this requires strategic benchmarking and robust analytics to identify shortcomings, improvements, and opportunities. Solutions like INCIT’s XIRI-Analytics are designed to address these challenges effectively, and the list of challenges seems to be growing every day, making it harder and harder to stay in business.
In a highly competitive industry that sees companies come and go—only about half of U.S. manufacturing businesses survive over five years based on the analysis of U.S. Bureau of Labor Statistics data by the Commerce Institute— minor lapses can have grave consequences. Without the proper insights from analytics, companies are operating in the dark. Yet, the practice of benchmarking not only illuminates any inefficiencies or lacklustre performance, but it can also reveal a clear path forward.
The top 5 benefits of benchmarking in manufacturing that provides several key advantages that directly combat these risks:
1. Enhance operational efficiency
By exploring how you measure up against your peers, hidden inefficiencies are revealed and can be addressed for rapid impact on operations. An example of a production downtime comparison between similarly sized plants could shine a light on ineffective preventive maintenance scheduling, requiring corrective actions that improve uptime.
2. Switch to facts-based decision-making
New business insights unearthed through benchmarking can help form the right strategic approaches for greater efficiency and fostering innovation. Take the example of energy usage benchmarks; a factory might identify that switching out older machinery could be a significant cost driver.
3. Gain a deeper understanding of global and regional performance
Examining your company’s technology adoption, productivity, operational vulnerabilities, and more against global peers will ultimately boost competitiveness. Segment-level insights can help manufacturing companies drill down into specific industry clusters for detailed analysis. Learning from your industry peers can support your fact-driven decisions and provide a solid reason for the change.
4. Develop targeted growth strategies
What you cannot measure, you cannot improve, but with more in-depth data, you can reset your growth trajectory with a clear vision of how to achieve it. Benchmarking can support your cost profiling that could lead to cost savings such as energy optimisation and resource allocation but also uncover a demand gap in the global market sector, leading to new product ideas and diversifying product offerings.
5. Drive collaboration and alignment
Fast Company asserts that a “reinvention mindset” sets high-performers apart from peers, but benchmarking with this mindset can help bring the team together through insights showing the entire organisation’s current status. For instance, examining data of how peers address inefficiencies in supply chain logistics can encourage teams to craft streamlined workflows.
Can benchmarking help Europe’s automotive industry reclaim competitiveness? A case study in point
According to McKinsey and Co., the European automotive industry, a key economic driver, faces challenges: the market share dropped 13 percentage points and supplier profitability declined from 7.4 per cent to 5.1 per cent over the last five years. The challenges included disruptive shifts in powertrain technology, changing customer demands for specific features within vehicles, and the shift from hardware- to software-defined vehicles. To regain competitiveness with a sense of urgency, European automakers have the opportunity to implement targeted benchmarks to guide their strategies and improve their performance.
Benchmarking can support European automakers by detecting performance gaps, aligning with best practices, and driving advancements like within the vehicle architecture innovation space. McKinsey and Co. indicate that if auto manufacturers adopt a zonal-based electrical/electronic (E/E) vehicle architecture (consolidating electric control units into fewer domain controllers responsible for different zones in the vehicle, for example) they can quickly enhance cost-effectiveness, reduce material costs by 10-20 per cent and boost overall efficiency.
Benchmarking for future protection: a data-driven future for smarter manufacturing
Navigating these complexities requires robust tools. But don’t lose heart; take inspiration from the case studies we explored, and that there are frameworks and analytics designed by organisations like INCIT to specifically answer these challenges. Singapore-based thinktank INCIT created these innovative frameworks to futureproof manufacturing companies by leveraging benchmarking and analytics to deftly navigate the industrial sector’s volatility, uncertainty, and ambiguity.
Empowering over 60 countries with actionable insights, INCIT’s innovative maturity assessments, combined with XIRI-Analytics, offer a strategic advantage, enabling manufacturing businesses to pinpoint areas for improvement and drive significant growth. With the critical insights they gain, they have a bird’s eye view of areas of improvement as they can compare industry benchmarks across the globe, regions, and country clusters. This enhanced visibility offers the potential for significant transformation within your manufacturing organisation, showing your board and stakeholders how to strategically blaze a path forward in this digital, modern age.
To learn more about how we can help you unlock valuable insights, visit the INCIT website.
