The Process Of Benchmarking

Published Date: 02 Nov 2017

The term "benchmarking" is the process of measuring an organization's internal processes then identifying, understanding, and adapting outstanding practices from other organizations considered to be best-in-class is the process of comparing one's business processes and performance metrics to industry bests or best practices from other industries. It is a continuous quality improvement technique for products, processes and services.

Benchmarking includes finding, adoption and implementation of best practices. Defined by Bruder and Grey as "a rigorous yet practical process for measuring your organization’s performance and processes against those of best in class organizations, both public and private, and then uses this analysis to improve, services, operations and cost positions dramatically".

It is a Unique tool by Which the companies use to Find the reall inner strength they have in comparison to competitors. It is basically a process comparing one’s business activities and performance measure to industry bests or best practices from other industries. Different factors typically measured are quality, time and cost. Basically in the process of benchmarking management of the organization determine the best firm in their industry or other industry consists of similar processes and compare the activities and result of those targets to one’s own activities and result.

Process of Benchmarking:

Determine which function will benefit most from benchmarking.

Identify key cost, quality and efficiency measures for those functions.

Conduct an expert opinion survey and literature review to find the best in class organization for each measure.

Measure the best in class performance in the key areas identified.

Compare your organization's performance against the best in class and quantify the gap.

Specify actions to close the performance gap to best in class and, if possible, the steps necessary to "leap-frog" the current industry leader.

Implement those actions and monitor your performance.

Four levels of benchmarking

Internal- The process of comparing one particular operation within your organization with another. Success in this area is a matter of "the left hand knowing what the right hand is doing." Internal benchmarking is by far the easiest, both to research and to implement. Productivity improvement achieved in this type is usually about 10 percent.

Competitive- The process of comparing an operation with that of your direct competitors. For obvious reasons, this is the most difficult type of benchmarking to carry out successfully, and legal considerations must always be kept in mind. Productivity improvement achieved in this type is usually about 20 percent.

Functional- The process of comparing an operation with that of similar ones within the broad range of your industry (e.g., copper mining techniques compared with coal mining techniques). Functional benchmarking is relatively easy to research and implement. Productivity improvement achieved in this type may be 35 percent or better.

Generic- The process of comparing operations from unrelated industries (i.e., ones often used by a wide variety of industries). An example would be a film library using the warehousing techniques of another industry to store more efficiently its catalogue of old movies. The advantage of this type is that the problems of competition do not apply, increasing the access to information and reducing the possibility of legal problems. Productivity improvement achieved in this type may be 35 percent or better.

Types of benchmarking

Product benchmarking

Process benchmarking

Strategic benchmarking

Performance benchmarking

Functional benchmarking etc.

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Questions

Comment on the given below statements:

1. Determine which function will benefit most from benchmarking;

2. Identify key cost, quality and efficiency measures for those functions.

Functional benchmarking

A company will focus its benchmarking on a single function to improve the operation of that particular function. Complex functions such as Human Resources, Finance and Accounting and Information and Communication Technology are unlikely to be directly comparable in cost and efficiency terms and may need to be disaggregated into processes to make valid comparison.

Let us consider the impact of benchmarking on different functions.

Impact of benchmarking Technology

The technique initially used to compare existing corporate strategies with a view to achieving the best possible performance in new situations, has recently been extended to the comparison of technical products. This process is usually referred to as "technical benchmarking" or "product benchmarking". Its use is well-developed within the automotive industry ("automotive benchmarking"), where it is vital to design products that match precise user expectations, at minimal cost, by applying the best technologies available worldwide. Data is obtained by fully disassembling existing cars and their systems. Such analyses were initially carried out in-house by car makers and their suppliers. However, as these analyses are expensive, they are increasingly being outsourced to companies who specialize in this area. Outsourcing has enabled a drastic decrease in costs for each company (by cost sharing) and the development of efficient tools (standards, software).

By benchmarking the technology of other industry, one can find significant performance rise in own company or industry. Managers find benchmarking other competitor’s technology as a very important tool for their own improvement. Many industries has benefitted from benchmarking the latest and improved technology. For example one can have a better supply chain management by benchmarking the latest technology.

Distribution

Supply Chain Management

In its most developed stage Supply Chain Management (SCM) is the oversight of materials,

information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer. It is said that the ultimate goal of any effective supply chain management system is to reduce inventory (with the assumption that products are available when needed). As a solution for successful supply chain management, sophisticated software systems with Web interfaces are necessary or web service providers that provide part or all of the Supply Chain Management.

Increasing numbers of companies are turning to Web sites and Web-based applications as part of the SCM solution. A number of major Web sites offer e-procurement marketplaces where manufacturers within the arts and culture industry can trade and even make auction bids with suppliers therefore this will be extremely useful in marketing products and selling them off more efficiently.

In the cultural sectors scenario basic supply chain management is necessary where things like

electronic catalogue, on line ordering can be used. The key enabler within this domain is the internet.

Internet Technologies

The greatest impact on the sector are online marketing tools consisting of e-commerce, internet and other such technologies which will enable access to international as well as local end-consumers. The Internet is rapidly becoming an effective and efficient means of communication and marketing for crafts-makers.

The internet industry is characterized by rapid development of content over computer networks. The rapid pace of the internet has resulted in intense competition for web audience attention and users of internet software. The internet industry encompasses all companies engaged in creating, developing or processing electronic information through a computer network system.

Manufacturing Processes

Improved manufacturing capabilities are essential to the industry's success in producing superior products that will meet the cost, quality and performance expectations of their customers. The single, most important consideration in maintaining global competitiveness is the requirement to be able to generate, transmit and utilize technical data by an effective technology. With the latest benchmarked technology all aspects of the process design, analysis, process modelling, process planning/programming, process monitoring, process control/ real-time feedback and inspection maintain design integrity, and also other wasteful reprogramming steps are eliminated.

Software Technologies

Computer software consists of the programs, routines, and symbolic languages that control the functioning of computer hardware and direct its operations. Simply software uses a computer-language program that operates by turning certain electronic pulses on and off within a computer. Software remains one of the most innovative and fastest growing sectors of the global economy. Today the industry remains in the growth stage of its life cycle. Demand is increasing throughout the world. Consumption is greater in industrial countries, but is seeing faster growth rates in developing markets.

So industries always need to have upgraded and latest software system or technology to be able to compete with the globalized world and ever increasing demand of products.

Thus by benchmarking technology in all the aspects and functions of a business, a firm or industry can always gain edge and competitive strength in the market. So benchmarking is a management tool to have their processes more comparable and up to the requirement of the market leading to successful sustaining in d market.

Benchmarking is used to measure performance using a specific indicator (cost per unit of measure, productivity per unit of measure, cycle time of x per unit of measure or defects per unit of measure) resulting in a metric of performance that is then compared to others. This way the cost, quality and efficiency of product or services can be calculated and compared with the other improved and proven ones.

Costs involved in benchmarking:

The three main types of costs in benchmarking are:

Visit Costs - This includes hotel rooms, travel costs, meals, a token gift, and lost labor time.

Time Costs - Members of the benchmarking team will be investing time in researching problems, finding exceptional companies to study, visits, and implementation. This will take them away from their regular tasks for part of each day so additional staff might be required.

Benchmarking Database Costs - Organizations that institutionalize benchmarking into their daily procedures find it is useful to create and maintain a database of best practices and the companies associated with each best practice now.

The cost of benchmarking can substantially be reduced through utilizing the many internet resources that have sprung up over the last few years. These aim to capture benchmarks and best practices from organizations, business sectors and countries to make the benchmarking process much quicker and cheaper

Quality

Quality is measured by defects per unit of measures. If the quality of a particular product is not up to the demand and requirement of the market, then that is improved by benchmarking those of better and improved ones. Oorganizations evaluate various aspects of their processes or quality of their processes in relation to best practice companies' processes, usually within a peer group defined for the purposes of comparison. This then allows organizations to develop plans on how to make improvements or adapt specific best practices, usually with the aim of increasing some aspect of performance. Benchmarking may be a one-off event, but is often treated as a continuous process in which organizations continually seek to improve the quality of their practices.

Efficiency

Efficiency is measured by cycle time of x per unit of measure. To be more efficient and effective in their processes industries often benchmark their efficiency with that of better, improved and proven ones. Benchmarking has been identified as valuable tool to increase efficiency and reduce cost over the time.