Cost benchmarking is the measurement, refinement and analysis of one's
Cost of Goods Sold
Cost of goods sold (COGS) (also cost of products sold (COPS), or cost of sales) is the carrying value of goods sold during a particular period.
Costs are associated with particular goods using one of the several formulas, including specific iden ...
(COGS) when compared to market peers. Cost benchmarking identifies
competitiveness of pricing in industry terms, highlighting best in class pricing and subsequently showing areas for competitive pricing improvement. Cost benchmarking is a valuable tool for
Supply Chain Managers when creating a
negotiation strategy to drive down overall COGS. The objectives of
benchmarking
Benchmarking is the practice of comparing business processes and performance metrics to industry bests and best practices from other companies. Dimensions typically measured are Project management triangle, quality, time and cost.
Benchmarking is ...
are to determine what and where improvements are called for, to analyze how other organizations achieve their high performance levels, and to use this information to improve performance.
Cost benchmarking is a growing factor in Cost Analysis, where there is a systematic breakdown of existing cost data to allow for closer examination. However,
Procurement
Procurement is the process of locating and agreeing to terms and purchasing goods, services, or other works from an external source, often with the use of a tendering or competitive bidding process. The term may also refer to a contractual ...
Professionals often face immense difficulty in identifying their market peers' pricing due to the
confidentiality
Confidentiality involves a set of rules or a promise sometimes executed through confidentiality agreements that limits the access to or places restrictions on the distribution of certain types of information.
Legal confidentiality
By law, la ...
tied to competitive advantage.
References
{{Reflist
Pricing