UNIT-3 Benchmarking

Contents
Benchmarking: ........................................................................................................................................ 2
CHARACTERISTICS OF BENCHMARKING.................................................................................................. 2
TYPES OF BENCHMARKING ..................................................................................................................... 2
Major Application of Benchmarking ....................................................................................................... 3
REASONS OF BENCHMARKING................................................................................................................ 3
BENCHMARKING PROCESS ...................................................................................................................... 4
Issues that are to be addressed in Benchmarking .................................................................................. 7
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UNDERSTANDING BENCHMARKING CONCEPT

Benchmarking:
The procedure which involves comparing firms’ performance standards and business processes with
those which have best practices in the same industry or are the best standards in the other industries
is known as benchmarking.

Generally, dimensions which are measured include time, quality and cost.

Through the process of benchmarking, the firm is able to recognise the best performing firms in the
same industry or those with the similar procedures in other industry can compare their targets and
results.

According to Xerox Corporation, “Benchmarking is the continual process of measuring products,

services and practices against the toughest competitors or those companies recognised as the
industry leaders.”

CHARACTERISTICS OF BENCHMARKING
Following are the characteristics of Benchmarking

1.It is Structured: It is the tendency of managers to judge the performance of their departments in
relation to the other departments.

2. It is ongoing: Companies must adapt benchmarking if they want to become leaders as new goods,
processes, and techniques are continually being developed. Benchmarking plays a very big role in the
achievement of this objective.

3. Comparison is with best practices: Benchmarking looks at the external environment. The idea is to
compare with the best practices.

4.Its aim is Organisational improvement through the establishment of achievable goals:

Benchmarking against best practices helps a corporation understand the differences between its own
procedures and best practices.

TYPES OF BENCHMARKING
Benchmarks can be broadly divided into two groups:

1. Internal Benchmarking

2. External Benchmarking

Internal benchmarking compares a company’s operations, procedures, and practices with those of
other divisions; such as different teams, business units, groups or even individuals. Benchmarks, for
instance, could be employed to compare the operations of one retail location with those of another
location within the same chain.

External benchmarking, also known as competitive benchmarking, evaluates a company’s

performance in relation to that of other businesses. However, this is not always the case; for
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instance, benchmarking can be used to compare performance, procedures, and practices across
different industries. These external organizations are frequently rivals or competitors.

Major Application of Benchmarking

There are three main applications for benchmarking, regardless of whether internal or external. They
are listed below.

Process benchmarking is all about understanding your processes, assessing performance across
internal and external benchmarks, and identifying ways to optimize and improve your processes. The
premise is that by learning how top performers execute a process, you can uncover ways to improve
the effectiveness, efficiency, and speed of your own operations.

Strategic benchmarking examines strategies, business techniques, and business models to help you
improve your strategic planning and identify your strategic priorities. Understanding the tactics that
successful businesses (or teams, or business divisions) rely on will help you compare them to your
own plans and find areas where you can improve your competitiveness.

Performance benchmarking is gathering data on your performance in terms of results and

comparing these results either internally or externally. This can also refer to comparing the
performance of several departments, such as the HR department (using indicators like the employee
rating score or staff engagement surveys) or the marketing department (measuring customer
response or brand awareness, for instance).

REASONS OF BENCHMARKING
Tracking progress and achieving objectives more quickly can be accomplished by benchmarking your
company’s operations using clear measurements. The advantages of this are as follows:

1.Clarity

2.Objectivity

3.Lowering Labour cost

4. Improving Product Quality

5. Immediate Application

CLARITY

Benchmarking helps the organisation to develop a clear perspective. The relative success of the firm
and the performance of a specific emplyee can be determined by benchmarking or compairing
performance indicators such as revenue or the number of pieces generated each minute.

OBJECTIVITY

One major factor is objectivity because benchmarks are often quantitative rather than qualitative.

LOWERING LABOUR COSTS

By analysing the operations of the other leader firms of the industry , companies used to establish
benchmarking for the purpose of labour cost reduction .

IMPROVING PRODUCT QUALITY

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Bencjmarking also plays critical role in improving company’s product quality . Most of the time
engineers purchase competitors product in order to study the quality, relaiblity and durablity of
those product .

IMMEDIATE APPLICATION

The benefit of being instantaneous when benchmarking is considered is that it makes it simple and
quick to compare the performance of two companies.As a consequence, the benchmarking data may
be used right away , and business may also benefit from fresh ideas for quicker improvements to its
procedures, goods or performance monitoring.

BENCHMARKING PROCESS
Following are the steps involves in the benchmarking procedure:

Phsae-1 Planning

1. Decide what to benchmark

2.Identify comparator Organisations

3. Collect data on the superior Organisation

Phase-2 Analysis

4. Determine the performance gap

5. Project future Performance Levels

Phase-3 Integration

6. Communicate Benchmarking Findings

7. Establish clear -cut goals

Phase-4 Action

8. Develop action plans

9. Implement changes and monitor planning

Phase-5 Maturity

10. Recalibrate the Benchmarks

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Decide what is to be benchmarked

There are number of possibilities within each of the broad options , being explicit about the process
to be benchmarked is crucial when understanding a process benchmarking study. It is crucial that this
should be a formal specification exercise.

Identify comparator Organisations

Since the goal is to learn from the very best, they must be found utilising the data and information
already accessible. This ought to be businesses willing to participate in the benchmarking processes,
it feasible.

3.DATA COLLECTION

While site visits are helpful for comparing processes and procedures .Data sources may frequently
provide the majority of the data required for a benchmarking study.

Such trips might not be feasible when comparing to rivals, but they should be for internal
comparisons and might be utilising an industry comparator.

4. DETERMINE THE PERFORMANCE GAP

Here, management plays a crucial role since it is crucial to comprehend the costs of
underperformance and the possible advantages of operating according to best practices. Costs and
benefits are calculated by imaging an ideal procedure and contrasting it with the way things are
currently done.

5. PROJECT FUTURE PERFORMANCE LEVELS

It focuses on calculating the advantages of applying best practices as shown in the comparable
organisations, while also accounting for expected future changes.

6. COMMUNICATE THE BENCHMARK FINDINGS

Since management relies on people to accomplish tasks, it is important to urge them to make
changes by implementing the changes made by doing so. It will be of no use to the organisation until
and unless the manager implement it effectively.
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7.Establish clear cut goals

Acting is often committed to by consensus .Therefor, the purpose of thi stage is to reach consensus
and the suggested modifications are intended to achieve.

8. Develop Action Plans

Careful planning is required against the changes required in order to reduce the potential risks
associated with those changes. A roadmap outlining the steps to take in order to gat at the desired
destination is often necessary .

9.Implement the changes and Monitoring Progress

Implementing the changes and monitoring the progress is required to make any corrective measures
needed as making changes is quite difficult.

10.Recalibrate the Benchmarks

This is more of a closing of the loop that starts with choosing what should be benchmarked than a
step.
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Issues that are to be addressed in Benchmarking

1. The ability to collaborate and co-create

2. A commitment to ongoing development

3. A readiness to embrace innovation and change

4. Pay attention to accelerating throughput.

5. Marking use of quality management practices.

6. Make use of official, ongoing benchmarking procedures.

7.In the design of logistics systems, flexibility is regarded as the main objectives.

8. Do their personnel all adhere to the same key principles of customer care?

9. Are they actively trying to enhance communication with us?

10. Does their management team place a high priority on overall quality control?
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