Every company is interested in knowing what lies beneath the skin of competing products, so that it can make its own products even better and win over customers. However, many companies lack the resources and/or knowledge to perform the necessary analysis of a product and its components themselves. The idea of composite benchmark is to send a choice of competing products to several suppliers for expert examination. These analyses are often intensive, revealing information about a supplier’s production costs. The result is a cost model of “the best product from the best supplier with the best production processes.”
This approach is suitable for products consisting of a number of different (but not overly complex) components, insofar as a sufficient number of existing and potential suppliers can be recruited for the composite benchmark process.
A crucial factor for success is the make-up of the team, which should comprise specialists with both technical and commercial expertise. Composite benchmark is carried out in seven steps:
o Identification of the supplier with the lowest price for each of the products in the existing configuration.
o Reconfiguration of a product using components with the lowest costs.
o Identification of the lowest production costs. The optimum production costs for each combination of products are determined. To this end, the benchmark costs of the “best of the best” (with optimum functionalities and lowest manufacturing costs) are identified for the original product.
The outcome of composite benchmark is a reliable analysis of comparable competing products. It allows for ambitious but realizable cost savings to be identified and directly implemented in negotiations with suppliers.
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