Benchmarking in Food and Farming

Creating Sustainable Change

Lisa Jack

• Publisher: Routledge
• Year: 2016
• Print ISBN: 9780566088353
• eBook ISBN: 9781317175209
• Topic: Business
• Subtopic: Agribusiness
• Index: Business

At a time when food producers have to make significant changes to their businesses in order to survive, a review of benchmarking in agriculture and discussion of its future potential is critical. This book meets that need by providing an overview of existing benchmarking practices in agriculture and the food supply chain, and evaluating the potential of these practices to drive sustainable innovation in food and farming. Increasing pressures from commodity markets, corporate buyers, government and rising input prices (particularly fuel prices) are creating an environment in which farmers and their advisors are keen to make greater use of performance information for survival and growth. Where farmers are diversifying into alternative production methods, non-agricultural enterprises and on-farm production and sales, the greater the interest in a wider range of accounting tools for decision making. Lisa Jack and her contributors draw on a wide range of data and sources from Australia, New Zealand, the USA, the UK and Europe to provide critical evaluations of what might be considered 'state of the art' benchmarking practices at this time, including recent strategic developments such as the use of non-financial measures in balanced scorecards. The food and farming industry is unusual in that benchmarking takes place among large numbers of small, family-owned businesses working in a global industry. Not only, therefore, is this book important for those working in food supply chain businesses, but also for those involved in the general practice of benchmarking.

CHAPTER 1
Sustainable Change and Benchmarking in the Food Supply Chain

LISA JACK and JULIE BOONE

Introduction

Those outside agriculture are usually very surprised to find that benchmarking is a longstanding and highly developed practice in the agricultural industry. Certainly, in reading about the development of benchmark setting and benchmarking for best practice, there is very rarely any mention of farming and food. Yet benchmarking practices can be traced back to the late nineteenth century and new, innovative practices are being developed today. A review of benchmarking in agriculture and a discussion of its future potential is overdue, particularly at a time when food producers have to make significant changes to their business practices in order to survive.

What is equally surprising is the evidence that relatively very little benchmarking takes place downstream from producers in the food supply chain, among the processors, manufacturers, distributors and retailers of the food and drinks industry.

The discussions and case studies in this book should be of interest to anyone involved in benchmarking as a practice, as well as to those involved in the food and farming industry. These are stories of innovation and collaboration among producers and their advisors. What sets benchmarking in agriculture above the usual explorations of benchmarking for best practice in major corporations is that benchmarking here is among large numbers of small, often family owned, businesses working in a global industry. This is about accounting practice as sharing, trust and a sociable activity, driven by a thirst for information. It is also about sustaining farming and food in individual businesses and for everyone: as the slogan (attributed to American farmer and philosopher Wendell Berry) has it ‘if you eat, you’re in agriculture’.

What is Sustainable Change?

The term ‘sustainable change’ is used here in its rather literal senses of making changes that can be sustained and of making changes that will sustain the business or individual who has made the decision to change. ‘Sustain’ has a number of connotations related to endurance, nourishment and capability of survival, all integral to the mindset of farmers and producers. On wider, societal and global levels, there are connotations of environmental protection, preservation of landscape and economic well-being. Agricultural producers as much as, and probably more than, any other group are under pressure to perform economically by creating livelihoods and profits for themselves, and affordable food, fibre and fuel for others, whilst at the same time minimizing damage to the environment. Furthermore, direct links between producers and consumers exist but are not the main means of food distribution. Producers upstream are linked through processors, distributors and retailers to consumers in sometimes complex supply chains, which themselves need to be sustainable.

What is Benchmarking?

In fourth century BC Greece, Xenephon wrote:

You (Socrates) have discovered the reasons why some farmers are so successful that husbandry yields them all they need in abundance, and others are so inefficient that they find farming unprofitable. I should like to hear the reasons in each case, in order that we may do what is good and avoid what is harmful.

The term ‘benchmarking’ is used to cover a number of practices found in farming and food that are designed to highlight the good and make it possible to avoid the harmful. The first task is to clarify what is meant by benchmarking in each of these practices, before assessing their contribution to the development of sustainable change in these industries.

In general business practice, benchmarking is used to signify a particular systematic approach in which a business evaluates its own operations and procedures through a detailed comparison with those of another business, in order to establish best practice and to improve performance. This is usually referred to as ‘best practice benchmarking’. The leading company for this fashion is often cited as being Xerox Corporation in the late 1970s. However, as shown in Part 2 of this book, agriculture has a claim to have been using a similar approach about two decades before this, through farm discussion groups. Furthermore, these groups (also referred to as business improvement clubs) involve a high level of collaboration and networking, and a notion of benchmarking as a learning practice, which in other sectors is regarded as recent and highly innovative.

Benchmarking for best practice has two forms, identified by Spendolini (1992): a functional or generic form, where the benchmarking activity involves the identification of products, services and work processes of external organizations that may not be in direct competition with the organization in question, involving some collaborative sharing of data; and a competitive form, where the products, services and processes are from direct competitors. Benchmarking activities may also be internal, where the processes and services are compared across divisions or departments or some other sub-unit, in order to set standards or to promote internal competition. In farming and some food companies, benchmarking for best practice takes a generic form – very few, if any, examples have been identified of competitive benchmarking from available data – but there are examples of internal benchmarking in corporate farm groups.

Bogan and English (1994) distinguish carefully between benchmarking for best practice and the practice of setting benchmarks for the analysis of the performance of an entity. This distinction is essential in understanding the use of benchmarks in the agricultural sector. In its widest sense, the migration of the terms ‘benchmark’ and ‘yardstick’ from surveying into business since the 1920s signifies the provision of a reference point or standard against which the performance of a business can be judged. In developed countries, the use of pooled data through surveys or client bases to provide standardized data against which financial and production performance can be measured is widespread and highly institutionalized in the agricultural sector, and has been since the late nineteenth century. The data and the performance measures derived from the data are used at local levels in farm advisory work and at national and international levels to inform agricultural policy. Academics have used the term ‘comparative analysis’ to distinguish the use of benchmarks for diagnostic purposes from the practice of benchmarking for best practice, which involves the analysis of processes in an entity.

In this book, benchmarking practices will be identified under three headings: benchmarks for performance analysis; benchmarking for better practice; and best practice benchmarking or process benchmarking. Underlying the whole, however, is the notion that benchmarking covers any activity where managers compare their practices and performance with someone else’s, and make changes intended to result in improvement of both. This can result from something as straightforward as a walk around someone else’s farm (and farm visits are considered here as an important element of benchmarking) or as complex as a spreadsheet to analyse detailed financial and physical data supplied by a number of producers.

The Link between Sustainable Change and Benchmarking

Bogan and English (1994: 211) in their book Benchmarking for Best Practices: Winning Through Innovative Adaption claim, ‘If organizations decide to approach the management of change in a systematic way, benchmarking is arguably the single most powerful tool within their grasp.’ They state that benchmarking can:

• create motivation for change;

• provide a vision for what an organization can look like after change;

• provide data, evidence, and success stories for inspiring change;

• identify best practices for how to manage change;

• create a baseline or yardstick by which to evaluate the impact of earlier changes.

Through these means, the innovations of others can be adapted to the circumstances of other businesses, and new innovations uncovered. The points listed here have been extracted from a longer list, but the other pointers they give are more relevant to larger organizations motivating a large number of employees in the change process – less of an issue in producer businesses, which are essentially small businesses.

Hence, numeric benchmarks can provide a ‘kick’ to producers to convince them that change is needed. The many research findings and anecdotes available show – more effectively than numbers – that seeing how other outfits work and how they have achieved successful change in their operations are great motivators for making sustainable changes. Throughout the book, the various approaches to benchmarking are assessed for how well they meet the above criteria, and, furthermore, the extent to which the different approaches drive new and adaptive innovation.

Benchmarking in the Food Supply Chain

Recent research into the use of benchmarking in the food supply chain among distributors, manufacturers and retailers (that is, not the primary producers) has shown that there is relatively little evidence of benchmarking, despite its popularity in other commercial sectors. A CIMA sponsored study by Luther and Abdel-Kader (2006: 344) stated that ‘neither EVA® nor benchmarking have yet gained popularity despite the Benchmarking and Self-Assessment Initiative’, the latter being launched by Leatherhead Food Research Association in the 1990s. Furthermore, they conclude by supporting the findings of an earlier study into the area (by Mann et al., 1999) that ‘UK food sector companies had less well developed management systems than other industries and were not as good at meeting financial targets using appropriate financial and non-financial indicators’ (Luther and Abdel-Kader, 2006: 350).

Food Manufacture magazine carried an article reporting on a study into value adding practices in the cereals supply chain:

Walking the value chain from plough to plate is a great way of highlighting non value-added activity, and there is a lot of it in this sector. The complexity of the cereals supply chain is incredible, which can lead to delivery errors, transport inefficiencies, no shows, rejections on the basis of quality problems and overstocking ... The information flow is consistently inefficient, the workforce is resistant to change and there are low levels of staff empowerment, recognition and reward, plus a general lack of benchmarking and electronic commerce.

(Barnes, 2007)

Another study from 2006, again looking at cereals, highlighted the inherent problems in supply chains as a deeper problem than the techniques available to suppliers and customers:

Supply chains have a good size structure providing a stable supply of raw material, well-located for usage outlets. However there appears to be a lack of co-operation, integration and trust within the supply chains. Specific training and education is required and there is a problem of recruiting and retaining skilled staff. There is a lack of benchmarking and sharing of good practice.

(Thewell and Ritson, 2006)

There are examples of what could loosely be termed benchmarks being used in the industry in the form of key performance indicators and standards to which suppliers are required to conform. A number of these are used as illustrations in Chapter 7 (Standards, Indices and Targets for Environmental Performance) and Chapter 9 (Process Benchmarking and other Developments in Agriculture). The sources of these standards and indicators derive from the areas of logistics (the SCOR initiative), sustainability (the supermarkets Wal-Mart and Tesco both introduced environmental standards for suppliers and themselves in 2008, for example), efficient customer response (ECR), value chain analysis and product quality. However, these are not referred to as benchmarking as such and do not conform to the definition of best practice benchmarking. Having said that, there are a number of large corporations that do employ benchmarking in parts of their business and well-known examples of this, which are illustrated in Chapter 9, include Frito-lay, Mars and Kellogg’s.

Therefore, the question could be asked whether benchmarking for sustainable change is relevant throughout the food supply chain. In Chapter 9 it is argued that the data collected and available in the chain already presents opportunities for benchmarking activities that might create value to all parties, but that issues of trust and transparency need to be addressed before this potential can be realized.

Benchmarking in Farming

Despite the low take-up of benchmarking in the food supply chain downstream from primary production, there is a wealth of evidence of the use and the potential of benchmarking among farmers and their advisors. The aim of this book is straightforward: to review and evaluate the widespread existing practices in benchmarking in the industry, and then to explore the potential for further development and innovation through isolated examples of innovative practice in agriculture and other industries.

The history of benchmarking in agriculture shows that it was introduced by agricultural economists and has been extended by academics, farm management consultants and advisors, agricultural extension workers and farmers themselves over the course of a century. A significant part of benchmarking in the industry has been based on the comparative analysis of financial accounting records of groups of farmers, complemented by physical stock and husbandry records. Benchmarking has had a very numeric feel to it in the industry, but there is also evidence that more tangible, process analysis elements are being incorporated into practices. However, as will be seen in Chapter 2, the identification of best practices from records and observation can be traced back to the Middle Ages in Europe and beyond, through model farms and demonstrations of farming methods and machinery to the present day: seeking for best practice, as the quote above from Xenephon suggests, is embedded in agricultural practice.

The material in this book is drawn from a number of sources. These include historical records, academic research, the agricultural press, secondary data, the author’s own original interview and observation research data, and case studies from those involved in facilitating, promoting and studying benchmarking and performance measurement in farming and food. However, it is not a comprehensive and definitive review. Leading players in the field have been identified, but not every scheme in every country is covered. This is in part owing to the research focus of the author, which has mainly encompassed the UK, the US, Australia and New Zealand. This is not to say that benchmarking does not take place elsewhere; only that the scope of this book is limited to these countries.

The studies and examples chosen are indicative of what is happening in the industry, and the aim is to create a picture of where the industry is at this time, with examples of leading-edge practice to demonstrate what is possible in the industry. The use of benchmarking among primary producers – farmers – shows clearly that there is an appetite for learning through information and that the benefit of practices already in place is the potential for learning and improvement that benchmarking brings. This aspect of benchmarking is well studied outside the industry and this book aims to highlight how farmers are becoming ‘information rich’ as one New Zealand study puts it (Verissimo and Woodford, 2005).

Benchmarking and Learning

Learning is a process which can involve experience, practice or insight. These bring about relatively permanent changes in ways of thinking, attitudes, knowledge, skills or behaviour. Vicarious learning can occur through observing the actions of others and their consequences, providing the knowledge can be transferred to a different situation. So benchmarking is essentially a vicarious learning tool, where imitating successful firms, or avoiding the actions of unsuccessful ones, can enhance the capacity for and speed of learning.

Benchmarking’s purpose is, firstly, to help firms identify what they need to change to improve their performance. Secondly, it should provide a model or principles to guide the implementation of practices and bridge the gap between goals and aspirations. Just as people and firms learn, then so too should supply chains. It is difficult enough for people to learn; how much more of a challenge, then, for a complex network of individuals and their organizations?

As the pace of business change accelerates, speed of learning is increasingly an issue. Some companie...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• List of Figures
• List of Tables
• Acknowledgements
• List of Contributors
• Chapter 1 Sustainable Change and Benchmarking in the Food Supply Chain
• PART 1 BENCHMARKS FOR COMPARING FARM PERFORMANCE
• PART 2 BENCHMARKING FOR BETTER PRACTICE IN FARMING
• PART 3 ENVIRONMENTAL BENCHMARKING IN FOOD AND FARMING
• PART 4 BENCHMARKING FOR BEST PRACTICE: INNOVATIVE PRACTICE AND FUTURE DEVELOPMENTS IN FOOD AND FARMING
• Index