Key Performance Indicator (KPI) Benchmarking should be one of the most important tools in your supply chain toolbox to determine how your supply chain practices compare with your peer cohort. I know it is for SVAH! We have employed KPI benchmarking every day since we started our business 35 years ago to help our clients get better in all aspects of their supply chain operations. For you see, we believe that you don’t know what you don’t know until you compare yourself to industry leaders. Just as important, we have found that these three important basic rules will further maximize your KPI benchmarking results:
Maximize Your KPI Benchmarking Results
1. Define The Goal For Your KPI Benchmarking Study. It’s essential that you establish your goal for your KPI benchmarking study to ensure that you collect valid data. For example, if your goal is to determine your laundry/linen consumption cost compared to your peer cohort, you will need to know the cost per pound (total laundry-linen cost/soiled pounds processed) consumed by your healthcare organization over the past 12 months. This goal setting exercise enables you to visualize the data you need to collect.
2. Search For KPI Benchmarking Partners Inside and Outside Of Healthcare. It is important to compare your institution to like healthcare organizations, but it is just as important to try to compare your hospital, system, or IDN to others outside of healthcare when benchmarking. The reason for this is that some of the best world class practices in your supply categories (e.g., mail room, food service, transportation, material handling, etc.) are to be found in other industries.
3. Use Meaningful and Universal Metrics. We often find that a client has been using a key performance indicator that is not universally used by other healthcare organizations or isn’t meaningful for KPI benchmarking. For instance, if a client is using cost per patient day for office supplies, this isn’t meaningful or universally used by other organizations to measure the cost of their office supplies. A much better metric is office supply cost per employee which is universally used and directly relates to your organization’s office supplies consumption. The basic rule is to keep your metrics simple, activity-based, and universally used by other healthcare organizations. Otherwise, you won’t be able to obtain comparables!
Benchmarking in general has its detractors, we find, because so-called practitioners of this art and science didn’t follow these and other basic rules of benchmarking, therefore presenting flawed results that could hurt your standing with management. Don’t let one or two bad experiences with benchmarking turn you off to this powerful tool, because it is one of the secrets to having a supply chain operation that is second to none. If you aren’t KPI benchmarking your performance against your peer cohort, you are fooling yourself if you think you are best in class in all areas of your supply chain operations. It just isn’t possible!
P.S. If you would like to learn more about the power of Key Performance Indicators, just email me at [email protected] for your copy of our new ValueKPI WHITE PAPER: Moving to the Next Level of Supply Chain Performance.
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