Benchmarking

“Improving ourselves by learning from others”

What is Benchmarking?

Benchmarking is the measurement of an organization’s performance and a comparison with those of related and comparable organizations/ sectors/ peer groups.   The comparisons can be of quality, time, costs, output, etc. For improvement, for that matter comparison can be of anything.   

Application

-          It is increasingly used as a continuous process to improve the performance of the organization.

Benchmarking features-

It has 3 main features-

1.      Continuous method of analyzing, measuring and comparing a process with others.

2.      Discover performance gaps between own process and those with leading one’s.

3.      Incorporate best process into own strategy to fill the gap and in turn improve organization performance.

A benchmark is an exemplary operational performance which every organization should have. There are many famous examples in the world like-

1.      Toyota for processes

2.      Intel for Design

3.      Honda for Rapid product development.

What to benchmark-

Identifying resources and capabilities that can add value

Why Benchmarking?

      1.      Market condition and Customer needs keep changing. One has to on the heels to be in competitive market.

2.      Any product and or services which are not upto the standard will not catch the eyes of customer. That will lead to loss of customers.

3.      It prevents the “Re-inventing the wheel”. There are always scope to improve with comparison result and latest technology.

4.      Creates awareness of ourselves and of the best as well.

5.      It speeds up organization’s ability to improve.

Benchmarking Process-

 

Various types of Benchmarking-

Benchmarking can be of any time. For easy understanding here we have discussed only of two types. The two basic types are based on “what” and “who”.

“What” is being compared with.

“Who” is being compared with.

Further they can be sub-classified as-

1.      “What” is being compared with- this has four sub-categories . They are-

a.       Product Benchmarking- benchmark is used to understand the strength and weaknesses of own design of product/service/process.

b.      Performance Benchmarking- It includes sales, after sale services, customer satisfaction, etc.

c.       Process Benchmarking- applies mostly to day to day activities of an organization. Example- Costumer complaint management, Risk management, etc.

d.      Strategic Benchmarking- It involves top management and long term results. Such as Deming award, RBNQA award, Accreditation etc.

e.       Systems Benchmarking- system of proactive visits of customers by MD and Higher authority includes management system.

2.      “Who” is being compared with- has five categories, they are-

a.       Internal Benchmarking- comparison of departments within company or between their sister companies.

b.      External Benchmarking- comparison of self with those of domestic and oversea companies.

c.       Functional Benchmarking- it focuses on comparison of similar functions within the same broad industry. Example- purchase, logistics HR, etc.

d.      Vertical Benchmarking- comparison between the quantity and cost, workloads, productivity and performance in certain areas like inspection or audit department.

e.       Horizontal Benchmarking- comparison between the quantity and cost, workloads, productivity and performance of a process irrespective of their location of the institute.

f.        Cross- industry benchmarking- comparison ideas from absolutely different type of industry with similar functions. Example- Arvind eye care hospital benchmarked their cataract operation service process with that of Mc. Donald.

Advantages of Benchmarking-

1.      Product and process improvement- organization can improve in operation activities using benchmark.

2.      Time and cost reduction- As benchmark involves imitation and adaptation it saves time and cost.

3.      Competitive strategy – By improving operational process, organization will be able to give tough competition to their competitors.

Disadvantages of Benchmarking-

1.      What is best for someone else may not suit you.

2.      Poorly defined benchmarks may lead to wasted efforts, consumables, time and results.

3.      Reluctance to share information

4.      Selection of sector/peer group/ organization may sometime be difficult task.