Tips on getting the most from benchmarking to drive profit

Benchmarking is good for business, but only if you are honest with the figures.

The exercise becomes meaningless if the numbers are incorrect, says Cheshire-based consultant Gaynor Wellwood.

Results are supposed to be accurate and reliable enough to use in business decision-making – and help maximise profit.

See also: Dairy tips: Benefits of benchmarking your parlour

“Benchmarking identifies areas for improving performance, and this should drive excellence on farm.

“It helps to determine some clear objectives, so if you come away from a discussion group with three as a minimum, you have some direction and strategy,” she explains. As well as being spot-on, numbers need to be put into the right row. 

Gaynor finds that categories in spreadsheets headed “sundries” or “miscellaneous” tend to be “dumping grounds” for many items. “There should be no large sums [of money] in these columns.

“Sundries are items such as tail tape or ear tags, but people put things in here when they don’t know where else they go.

“Agree on separate headings with peers to start with. And split costs out,” she says.

Scrutinise every cost

Her advice to get the most out of benchmarking is to look at every cost line by line. Focus on the “chunky” costs first, followed by trying to shave 5-10% off the rest.

Those stand-out large costs need some interpretation, however, before deciding how to tackle them.

It is important to understand their relation to herd KPIs and cow performance, she points out.

Often, big expenses relate to feed inputs, which can double overnight in the case of drought; in other years, costs can creep up.

“You need to ask yourself whether you are still as focused on forage utilisation as you should be,” says Gaynor.

“Look at how well you are utilising grass and/or silage. Determine quality by reviewing the analysis, then whether you are presenting the best quality to cows.

“And meeting your physical KPIs: are you on target for milk yield and fertility? If there is a problem – cows not milking well or not getting back in-calf – it’s multifactorial.”

Compare results with other farmers

She thinks benchmarking results are best compared in a discussion group with other farmers.

A combination of peer support, finding out new ideas or ways of doing things, and good negotiation skills on deals and prices helps to lower input costs.

It is not easy, she admits, but comparing prices is invaluable when trying to make small adjustments to inputs.

For instance, when reviewing tonnage costs for feedstuffs, comparisons must be for the same formulation, whereas ranking the main vet products used will clearly identify differences in price or use.

Although electricity prices are finally starting to fall at least in the short term, Gaynor thinks not enough people monitor their use and cost on a monthly basis.

“For any new commodity contract, get three quotes. The AHDB website is good for prices,” she points out.

Build resilience

Progress in reducing inputs, such as changing supplier or buying a new product, should filter through to the cashflow budget. This can then be tracked monthly by looking at actual spend versus budget.

“Weekly office time gives you a greater return on investment in managing costs [than physical work], especially in periods of low milk price,” says Gaynor. “Benchmarking moves your business forward and has the power to change how you run your farm.

“You are trying to build financial resilience: the ability to survive the volatility caused by the external economic environment. “Maximise profit each year by good cost control without reducing performance.”