Benchmarking should compare suppliers on a like-for-like basis, using the full range of products actually purchased, not just the items where pricing looks favourable.
Watch for subtle pitfalls like smaller pack sizes, loss-leader pricing, outdated price lists and hidden management or delivery fees that can distort perceived savings.
A valid benchmarking exercise should use a weighted shopping basket reflecting actual product volumes used, not simple unit price comparisons.
CIPS (Chartered Institute of Procurement and Supply) recognises benchmarking as a valuable activity for improving purchasing management when done correctly.
Why benchmarking matters for procurement cost control
Your organisation will benefit from carrying out regular price checks to ensure you are getting the best value from your current suppliers – across all areas of your spend.
Comparing the cost, delivery time and quality of one product or supplier against another can provide a highly effective measure of food costs, to help maximise best value.
However, for any benchmarking exercise to be valid it is essential that comparisons are made on a like-for-like basis. It’s also vital you ensure that you analyse the type and volume of products that actually reflect what is being used by the organisation.
Avendra International’s procurement analysts follow a stringent benchmarking process to give you a truly fair, impartial price review. If you’re benchmarking, there are plenty of pitfalls that could lead you to the wrong result – here are eight common errors that you need to be aware of.
8 common benchmarking mistakes to avoid
1. Benchmark your full shopping basket Ensure the price analysis is carried out across all the products you actually buy. Some benchmarkers may leave out products that are not competitive, leaving only items where their own pricing is favourable.
2. Watch out for brand switching to inferior products Switching from one branded product to other is fine, so long as the quality is the same. Beware of switching to cheaper alternatives, in order to achieve savings. The replacement can be a false economy, if it is inferior and fails to deliver the same yield.
3. Check pack sizes match Watch out for alternative products in smaller packs – of course they’ll be cheaper! Be sure to adjust the price accordingly.
4. Beware of loss leader pricing Supermarkets do it, so can commercial suppliers. Watch out for the flagging of a number of loss leader products, which may be discounted for a limited period before returning to a higher price after that.
5. Confirm price lists are up to date Check that pricing is current – accidental use of outdated prices could give an over-optimistic impression of greater savings.
6. Use a weighted shopping basket Benchmarking should not simply calculate savings on unit prices, it should take account of your product volumes over the period being compared.
7. Get the volume weighting right Just as unit prices won’t give a real world comparison, so can a skewed basket inflate savings. Best check product volumes match your use, over the period under consideration.
8. Check for hidden management fees Always double check for hidden extras such as management fees or delivery charges. These can be used to claw back headline savings.
FAQs
What is procurement benchmarking and why does it matter?
Procurement benchmarking compares supplier pricing, products and service levels against relevant market alternatives to help organisations understand whether their current arrangements remain competitive. A robust benchmarking exercise can highlight potential savings opportunities, identify areas for improvement and provide greater confidence that procurement arrangements are delivering value.
What mistakes should organisations avoid when benchmarking supplier prices?
Benchmarking should compare products on a genuine like-for-like basis. Common pitfalls include comparing different product specifications or pack sizes, using outdated pricing, focusing only on selected products rather than the wider basket, and failing to account for the quantities actually purchased. Delivery charges, management fees and other costs should also be considered when assessing overall value.
How often should organisations benchmark supplier pricing?
There is no single benchmarking frequency that will suit every organisation. Supplier pricing and procurement arrangements should be reviewed regularly, particularly when market conditions change or contracts are being reviewed, to help ensure pricing and service continue to deliver competitive value.
Can Avendra International carry out procurement benchmarking on our behalf?
Yes. Avendra International can use its procurement expertise and market knowledge to benchmark an organisation’s existing purchasing arrangements, using like-for-like comparisons to identify potential savings and opportunities to improve value. Benchmarking can also help organisations make more informed decisions about their suppliers and wider procurement strategy.
Ready to benchmark your procurement performance?
Understanding how your procurement performance compares can help uncover opportunities for improvement, identify potential savings, and support better-informed decisions.
If you’d like expert support with your benchmarking, our team can help. Get in touch with us at hello_UK@avendra.com to discuss your requirements.
