Benchmarking: Comparing performance over time and against industry norms
Competition will best serve the needs of society.
Calculations useful in the feed and grain industry might include things like: labor cost/ton of feed produced; labor cost/dollar of profit; advertising dollars/ton of feed; or miles per gallon for delivery/transportation vehicles.
Some business experts also measure efficiency as: Efficiency = [100% * (Actual Output/Standard Output)]
Standard Output in the equation above is a number that is arrived at by looking at historical data for the job and by experience. One would hope this number is not an arbitrary one, but a number derived by looking at a historical time series. You might use this to measure key “volumes.” For instance, on some of your best days — when everything was running “in-sync,” and your business was “firing on all cylinders,” you might have produced 300 tons of feed, or took in 20,000 bushels of grain — these can be used as your “standard,” and other days or periods can be measured against these.
Quality measures
In the feed and grain business example, quality measures might be things like a 16% dairy ration for a feed mill, or Number 2 yellow corn for a grain elevator. These measures may be required legally by the government to meet a particular standard or label requirement. Others might be characteristics that are more “perceptual” in nature, e.g. for example, rather than ground oats, using rolled oats in a feed ration to give the visual and textural appearance of quality — though the nutrition in the feed using either ingredient may be the same. Quality may be influenced by the use of “higher grade” inputs, items which clearly provide superior performance — feedstuffs which supply higher protein or higher energy (more so in the feed business than the grain industry).
Incoming feed ingredient quality is also sometimes used as an indicator of quality — what percentage of incoming feedstuffs are rejected or turned away? Other quality measures can relate to how product is handled, and the attention paid to cleanliness and grain condition (moisture, pest control — insects and rodents, percent fines or damaged kernels, dockage and foreign material, or tramp metal). Any or all of these standards can be set and/or used as benchmarks.
Timeliness measures
Measures of timeliness focus on meeting deadlines and measures that look at capacity. Often these are driven by customer needs, and/or providing quality customer service. Industry examples here might include: tons of feed manufactured/hour or day or month, percent of customer deliveries made the same day as order (or the next day — depending on your policies), percent of phone calls returned within two hours of when call is taken (or whatever is appropriate for the size of your staff), turnaround time on railcars or barges (obviously avoiding demurrage is good, but goals can assist you in achieving them), length of time for hires (from listing position to hire), or others of your own choosing.
At its most basic, productivity is all about getting the most output per unit of input. In your feed and grain business, inputs are one of two types: labor (your people) and capital (everything else — dollars invested, and assets that dollars purchase). To increase productivity, we need to either increase the numerator of this equation (output), or decrease the denominator (labor or capital) — or other combinations that improve the ratio (keep output constant and reduce inputs, etc.).
Accomplishing the above feat is not rocket science; however, the “devil is in the details,” and is all about how you manage your business. This is the art part of management — making the trade-offs that pay off. We know different employees have different productivities: some work quickly with no mistakes (which enters into the quality measures discussed above), others may work more slowly, and yet others may work fast but make mistakes.
How do you impact employee productivity? There are whole books that are written on this topic, but the executive summary says: Hire good people; give them appropriate incentives; and give them good and continuous training.
