Dick Dadamo-Lunch & Learn Presentation March 4, 2016

BenchmarkingUnderutilized Measuring Tool

Dick DadamoLunch & LearnMarch 4, 2016

Startup Difficulty Forecasting the unknown is very difficult The less information the higher the risk Seek all the help and advice you can get

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The Wrong Assumptions by CEO's

Our idea/concept/product will win because it is unique and covered by IP's

Marketing is nothing more than obtaining a very small percentage in a growing market

Our company will beat out competitors because we are 1st to market

There is little to learn from other companies

Comparing (Benchmarking) other companies is a waste of time and effort and stifles innovation

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Benchmarking, the Underutilized Measuring Tool

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Benchmarking is a "must" for growth

What is Benchmarking?

Why Benchmark?

Who is Benchmarked?

How to get other company's Benchmarking data?

What performance factors to Benchmark

What are the methods of Benchmarking?

How will Benchmarking improve existing processes?

What not to do with Benchmarking

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What is Benchmarking?

A method of comparing a company's business processes and Key Performance Indicators (KPI's) to industry best practices.

A method of comparing company's business processes and KPI's to competitors.

A method of comparing company's business processes and KPI's to other industries.

A marketing tool to find where competitors are not fulfilling customers unfulfilled needs or wants

A method of validating your company's value proposition

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Why Benchmark?

Gap analysis - compare company's actual vs. potential performance To strengthen core competencies To improve business processes To achieve incremental performance gains To achieve a sustainable competitive advantage To provide a foundation for growth To provide a foundation for growth As part of a Strategic Plan – SWOT (Strength – Weakness – Operations

– Threats) analysis Can be foundation for business and marketing plansPick a revenue level to define the organization to get there

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Examples of SWOT’s Strengths Weaknesses

(What lies ahead)FinancialIntellectual LocationCustomer serviceEfficiencyInfrastructureQualityStaffManagementPriceDelivery timeCostCapacity

Get to know your company in depth

Relationships with customersBrand strengthLocal language knowledgeEthicsPrinciplesPatents & IPStrong brand namesGood reputation among customersCost advantages from proprietary know-howExclusive access to important resourcesFavorable access to distribution networksTime to MarketBoard of Directors and/or Advisors

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Examples of SWOT’s Opportunities and Threats

(What lies ahead)Political/Legal

Market trends

Economic condition

Strategic alliances

Expectations of stakeholders

Get to know your company in depth

Technology

Public expectations

Competitors and competitive actions

Bad PR

Global Markets

Regulations

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Why Benchmark?• Gap analysis - compare company's actual vs. potential performance

• To strengthen core competencies• To improve business processes• To achieve incremental performance gains• To achieve a sustainable competitive advantage• To provide a foundation for growth• As part of a Strategic Plan - SWOT analysis• Can be foundation for business and marketing plans• As a tool for "Thinking out of the box"• As a breeding ground for innovation • Quantum leaps (breakthroughs)• To learn "how to" from other more experienced companies• To determine what is needed to become a Best In Class

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Who should be Benchmarked?

• Employees• Partners• Competitors – Cornerstone • A Roll Model worthwhile following • Best in Class• Larger Public companies – PEP example $25 - $100 million

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From private Companies

•From their Customers•From their Vendors/Suppliers – C •Job applicant Interviews•Focus Groups•Roundtables•Trade Shows•Trade journals•News Releases• Internet

•Example –Bob G.

• Networking• your accounting and law firms• Investment Bankers• Consultants• From their Board of Directors• Advisors (EIRS) • Dunn and Bradstreet• Google/Facebook

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From public companies

• From Public company quarterly and yearly reports• From analysts reports• From Competitors– EM - Drives

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What performance factors to Benchmark – when needed

The Surface Factors

Quality as measured by customer

Time to produce product/service

Cost of product/service

Price of product/service

Financial data Revenue Gross Margin Profit

The Deep Dive Factors -in time

Cash conversion cycleDays OutstandingRFQ capture rateTime to deliver prototypes/1st articlesSales per employee – Yelp Added value per employee Organizational arrangementsCompetitors customer listsStrategic plansProductivity and EfficiencyAnalytics

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Formatting your Benchmark

Comparison to Competition

Profit Gross Margin

Operating cost Marketing Cost R&D cost

Inventory level Hiring – Great to be a leader

PP&E level

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$ million ChangeCompany Ticker Product Q1-09 Q2-07 to Q1-09AVX Corp AVX Diversified Electronics $271.81 -29.1%Checkpoint Systems Inc CKP Security & Protectuion Service $158.95 -18.8%Coherent Inc COHR Scientific & Technical Instruments $105.40 -26.1%CTS Corp CTS Diversified Electronics $118.10 -30.4%Dolby Laboratories Inc DLB Diversified Electronics $204.10 70.7%Littelfuse Inc LFUS Industrial Elecrical Equipment $84.40 -34.6%Methode Electronics Inc MEI Diversified Electronics $89.80 -28.3%MTS Systems Corp MTSC Scientific & Technical Instruments $107.70 2.4%National Instruments NATI Technical & Systems Software $157.80 -12.1%OSI Systems Inc OSIS Semiconductor Equipment 7 Materials $144.10 -5.7%PLEXUS Corp PLXS Printed Circuits Assembly $388.90 2.4%Rogers Corp ROG Plastic & Printed Circuit material $65.50 -33.1%Scansource Inc SCSC Computer Wholesale $389.80 -25.7%Trimble Navigation Ltd TRMB Scientific & Technical Instruments $289.00 -11.8%TTM Technologies INC TTMI Printed Circuit Boards $149.00 -8.0%

Peer Group Max $389.80 70.7%Peer Group 75% $237.96 -6.9%Peer Group Average $181.62 -12.5%Peer Group Median $158.38 -12.3%Peer Group 25% $106.55 -28.7%Peer Group Min $65.50 -34.6%MFLEX MFLX FPC & Assembly $174.10 67.2%MFLEX % Rank 66.6% 99.6%

Revenue

MFLEX – Companies in Base— Change During Recession —

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Operating Cost% (SG&A%) vs Gross margin%

0.0%

10.0%

20.0%

30.0%

40.0%3.

3%

5.2%

5.4%

5.5%

5.8%

7.2%

8.4%

8.7%

9.5%

12.2

%

14.5

%

14.7

%

21.5

%

22.1

%

23.2

%

24.2

%

25.6

%

29.1

%

32.1

%

33.9

%

42.0

%

Gross Margin%

SG&A%

Correlation

0% Operating Profit

Trend

PMTR

BHE

MFSATSN

PWER

MERX

NTE

MAG

MOBE

SLR

INVX

JBL

ROG

VICR

TTMIPKE

PLXS

SANMFLEXCLS

MFLEX

increasing profit

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Benefits of Performance comparison charts

Normalizing the data allows comparison of different size companies

Shows position of your company in field of companies

Shows how your position changes from one time period to the next

By charting many parameters you can focus on the ones needing improvement

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NameName PricePrice Added Added ValueValue

QualityQuality TechnoloTechnologygy

AssemblAssemblyy

MFSMFS

GlobGlobalal

NittoNitto

FoxcoFoxconnnn

How does M-FLEX compare to the Flex competitors:

How does M-FLEX compare to the EMS competitors:

NameName PricePrice Added Added ValueValue

QualityQuality TechnolTechnologyogy

FlexFlex

FoxConnFoxConn

PemstarPemstar

FlextroniFlextronicscs

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Trends derived by plotting one financial parameter versus another often exhibits a company's strategy often exhibits a company's barrier

Benefits of graphic comparisons

By selecting appropriate financial parameters in a graph the relative position of your company in the field of competitors is evident there is an indication of what your company needs to change to grow

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How will Benchmarking improve existing processes?

• Quality improvement• Cycle time reduction – S • Learn industries best practices • Align strategic planning • Competitor analysis • Customer satisfaction determination • Performance measurement • Reward and recognition

• Organization restructuring• Create Value• Marketing research• Partnership sources• M&A sources• Create Innovation• Evaluate company's Barriers• Needed for Strategic Planning

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What not to do with Benchmarking

Settle for the median or average level

Should not be used to copy competitors (2nd best strategy)

Wrong Model – P & C

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Summary

Benchmarking is a method of comparing performance to others

There are many parameters, other than Sales and profit, to Benchmark

Benchmarking can use graphic and analytical methods of comparison

Benchmarking is a source of productivity and profit improvement

Management learning and experience accelerates by Benchmarking

Benchmarking teaches you what to do and what not to do

If growth is your plan, Benchmarking is a must

Where to start

Dick [email protected] Small Business ObserverStartup Knowledge Basewww.richarddadamo.comReservoir information “You Know I Am There”

Time ManagementAdvisory Board

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mailto:[email protected]

http://www.richarddadamo.com/

Education

Dick Dadamo-Lunch & Learn Presentation March 4, 2016