What is Benchmarking?

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.

Definition
“measuring our performance against that of best-in- class companies,
determining how the best-in-class achieve those performance levels
and using the information as a basis for our own company’s targets,
strategies and implementation .”

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 The Essence of
Benchmarking

“moving from where we are to where we want to be”

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 Why Benchmarking?

 To Obtain an External Perspective of What Is Possible

 To Assist in Setting Strategic Targets
 To Promote Improvements in Performance
 To Establish a Competitive Edge
 To Enhance Customer Satisfaction
 To Reduce Costs
 To Improve Employee Morale
 To Achieve Quality Awards
 To Survive

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 When Benchmarking?
 If the company’s QMS is not properly developed, documented and
implemented.

 If company’s great strength areas are not measured.

 If company’s great weakness areas are not measured.

 If company’s great opportunities are not measured.

 If customer needs are not assessed and rectified .

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 Benchmarking in the Context of
TQM
TQM Key principles include:

 Comparisons with best practice.

 A Strong emphasis on meeting the needs of the customer (internal

and external).

 The importance of efficient, effective business processes.

 The need for continuous improvement .

 Enhances a TQM program .

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Levels Of Benchmarking In Competitive
Environment
 Internal benchmarking - Within one’s org.

 Competitive benchmarking - Analysis the performance

and practices of best in class companies.

 Non-competitive benchmarking - Is learning something about a

process a company wants to improve by benchmarking.

 World class benchmarking - Ambitious and looking towards

recognized leader.

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 Benchmarking
Methodology
Best Practice
Overlap
Competitive
• Industry leaders
• Top performers with
similar operating
characteristics

Functional Internal
• Top performers • Top performers
regardless of industry within company
• Aggressive innovators • Top facilities
utilizing new within company
technology

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 Types Of Benchmarking
 Performance benchmarking:
It involves – pricing, technical quality, features and other quality.

 Process benchmarking:
It involves processes such as billing, order entry or employee training.

 Strategic benchmarking:
Examines how companies compute and seeks the winning strategies that have led to
competitive advantage and market success.

 Financial benchmarking:
It involves comparing the organizations: costs, revenue and working capital

 Product benchmarking:
Comparing products functions, attributes, performance and quality
 Functional benchmarking:
Comparing who other orgs perform particular functions 8
 Areas Of Benchmarking

Operational Strategies: Supply chain management:

• Inventory management • Warehousing and distribution

• Inventory control • Transportation

Marketing management: H.R. Practices:

• Customer service levels • Talent Acquisition / Search

• Purchasing • Training and Development
• Billing and collection • Compensation management etc.
• Purchasing practices

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 Guidelines to Benchmarking

 Do not go on a fishing expedition.

 Use company people.

 Exchange Information.

 Legal Concerns.

 Confidentiality.

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 Five Phases Of Benchmarking
 Planning: Identify the product, service or process to be benchmarked

 Analysis: Determine the gap between the firm’s current performance and that
of the firm’s benchmarked and identify the causes of significant gaps.

 Integration: Establish goals and obtain the support of managers who

must provide the resources for accomplishing the goals

 Action: Develop action plans, and team assignment, implement the plans,
monitor progress and recalibrate benchmark as improvements are made.

 Maturity: Leadership position attended, best practices fully integrated

into process.

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 Benchmarking
Strategy
 Decide what to benchmark.

 Select companies to benchmark.

 Obtain data and collect information.

 Analyze data and forms action plans.

 Recalibrate and start the process again.

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 The Seven Step Benchmarking
Model
Activity What is included
Step 1: Identify what to benchmark  Clarify the benchmark objectives
 Decide whom to involve
 Define the process
 Consider the scope
 Set the boundaries
Agree on what happens in the process
 Flowchart the process

Step 2: Determine what to measure  Examine the flow chart

 Establishes the process measures
 Verify that measures match objectives

Step 3: Identify who to benchmark  Conduct general research

 Choose level to benchmark

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 The Seven Step Benchmarking
Model
Step 4: Collect data  Use a questionnaire
 Conduct a benchmark site visit

Step 5: Analyze data and determine the gap  Quantitative data

 Qualitative analysis

Step 6: Set goals and develop an “Action  Set performance goals

Plan”  Develop an action plan

Step 7: Monitor the process  Track the changes

 Make benchmarking a habit

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 Factors For Success Of
Benchmarking
 Benchmarking must have the full support of senior management
and they should actively involve with this process.

 For Benchmarking, team and process training is very imp.

 Benchmarking should be a team activity.

 Benchmarking is an ongoing process.

 Benchmarking efforts must be organized, planned, and carefully

managed.

 Correct use of benchmarking can lead you to the competitive

edge in today’s business market place.
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 Advantages
 Benchmarking is a systematic method by which organizations can measure themselves
against the best Industry practices.

 It promotes superior performance by providing an organized framework through which

organization learn how the “ best in class” do things.

 Intensive studies of existing practices often lead to identification of non-value

added activities and plans for process improvement.

 It helps for continuous improvement.

 Benchmarking inspire managers (and organization) to compete.

 Through Benchmark process organization can borrow ideas, adopt and refine them
to gain
competitive advantages.

 Benchmarking provides a basis for training human resources.

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 Disadvantages
 The most resistant criticism of Benchmarking comes from the idea of
copying others.

 It is not a strategy nor is it intended to be a business philosophy. Therefore, it

is
a time taking technique.

 Benchmarking is not “instant pudding”. It will not improve performance

if proper infrastructure of Total Quality Management is not in place.

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 Performance Measures
 Financial Performance Measure

 Productivity Performance Measures

 Customer related Performance Measures

 Operating Results

 Quality Measures

 Human resources measures

 Market share measures

 Structural Measures