The Procurement Glossary » Benchmarking

Benchmarking

Spend & Analytics

Definition

Comparing prices, costs or performance against internal history, peers or the market to judge competitiveness.

Explanation

Benchmarking answers 'is this a good price/performance?'. Internal benchmarking compares sites; external uses market data or indices. It informs negotiation targets, savings baselines and supplier evaluation.

Example

Benchmarking shows the buyer pays 12% above the market median for logistics, setting the negotiation target.

Related terms

• Savings Baseline — The reference price or cost against which savings are measured.
• Should-Cost Analysis — A bottom-up estimate of what a product or service ought to cost, built from its materials, labour, overhead and reasonable margin.
• Price Index — A published measure tracking price changes for a commodity or category over time.
• Spend Analysis — The process of collecting, cleaning, classifying and analysing purchasing data to understand what an organisation buys, from whom and for how much.

Frequently Asked Questions

What is Benchmarking?

Comparing prices, costs or performance against internal history, peers or the market to judge competitiveness. Benchmarking answers 'is this a good price/performance?'. Internal benchmarking compares sites; external uses market data or indices. It informs negotiation targets, savings baselines and supplier evaluation.

Can you give an example of Benchmarking?

Benchmarking shows the buyer pays 12% above the market median for logistics, setting the negotiation target.

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