The Power of Benchmarking

7 in 10 people think statistics are misleading….. or they have no real evidence and yet used right they can transform your business. 

The above statistic was totally made up, by me.

But I imagine it would be close to the truth after extensive research.

And how do we really know that 8 out of 10 cats really prefer Whiskas cat food?

If you were running a hospital and where told you were in the bottom 25% of hospitals for mortality, would you be worried?

More so than someone saying that they have a gut feeling you might be an outlier.

Statistics when evidence based can be useful in making decisions or for driving change.

One of my objectives for 2023 is to read 42 books. And I’m glad to say so far so good.

One of those books Black Box Thinking by Matthew Syed.

In the book Matthew gives an example from the Second World War.

• Too many planes were being lost due to enemy fire.
• Researchers proposed that more protective armour be added. However, only so much armour could be added to each plane before they became too heavy.
• Specific parts of the plane had to be chosen to be armoured.
• Researchers analysed the locations of the bullet holes on all returning planes.
• They established that there were more bullet holes per square foot in the wings and the fuselage than in the engine and fuel system.
• Logic (benchmarking) followed that armour should be attached to the wings and the fuselages.

Would you make the same decision?

A mathematician named Abraham Wald didn’t agree.

He proposed that armour be attached to all the places where there were few or no bullet holes.

Why?

The locations of the bullet holes in the planes that had come home safely had not brought the aircraft down. 

It's easy-to-follow data and think it's telling you one thing when it is telling you something else.

Or you might use the data wrongly to back up your decision.

How might this be relevant to you?

Statistics can be useful, and often in the absence of data we assume that everything is ok.

Often when I start working with clients, the conversation starts in the same way, they tell me they "have competitive prices for x because their team looked at them last year".

While this is undoubtably true, they were looked at, the bit that’s unknown is whether they are competitive prices.

We only know what we know.

Rather than me telling you about how our team of specialists helped improve processes and save lots of money, let me tell you another story.

Recently for one of my clients our logistics specialists reviewed their c£6m of logistics spend.

The client believed they had a good deal, but even so they wanted an external view as it’s a large area of spend.

What our specialists found after reviewing 12 months of their data was that they did indeed have a good deal, they had the right processes, the right suppliers and the prices paid were some of the lowest our team had seen.

We were able to inform the client that their prices are likely to rise because of other movements in the market, but those prices would still be market leading.

The client, rather than a hunch, now knows they have a good deal.

Validation that things are right allows the business to focus on the areas that can make a difference.

So next time you share a fact…

"We have good pricing, we have a great supplier, our processes are marketing leading".

Ask yourself what data is those "facts" are based upon.

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Expense Reduction Analysts (ERA) are procurement and cost reduction experts, we work with small companies right through to instantly recognisable brands like BT, DFS and Ikea.

What makes us unique, our cost specialists, all devoted to their specific area of expertise which means we can use our knowledge and buying power to rapidly validate your suppliers, processes, and prices across a range of cost categories.

Delivering improvements where we see opportunities.  

Unlike other consultancies, if we don’t deliver direct savings, there is no charge.

💡If you would like an exploratory conversation then please email me at jrimmer@expensereduction.com