Prepared By

Sajna Abdul Rasheed

Benchmarking is the process of improving performance by continuously identifying, understanding, and adapting outstanding practices found inside and outside the organization.

 Benchmarking is not a method for 'copying' the practices of competitors, but a way of seeking superior process performance by looking outside the industry.

When Benchmarking a System, Adapt What You Find, Dont Just Copy It

1.Plan: It is necessary to select and define the process that is to be studied and benchmarked and then to identify the measures of process performance, followed by an evaluation of own capability at this process and determine which companies should be benchmarked against.

2.Do: Conducting primary and secondary research. Learning as much as possible about the target company's particular process through public disclosures in press and trade publications. Direct communication may include telephone interviews, interviews, written surveys or site visits.

3.Check: In this step all the gathered information is analysed to determine study findings and recommendations and identifying process gaps and enablers that contribute to improve performance and develop the own best practice

4.Act: Communicate, adapt and monitor the new process. The objective of benchmarking is to change an organisation in a way that improves its performance. Finally, recalibrate benchmarking and look for new Opportunities.

The term benchmarking was first used by cobblers to measure people's feet for shoes. They would place someone's foot on a "bench" and mark it out to make the pattern for the shoes.

Benchmarking was originally defined by D.T. Kearns, the CEO of Xerox Corporation, in 1981 as the continuous process of measuring products, services, and practices against the toughest competitors or non-competitors who is the leader in their industry

 Benchmarking gives us the chance of gaining: Better Awareness of Ourselves (Us)

What we are doing How we are doing it How well we are doing it

Better Awareness of the Best (Them)

What they are doing How they are doing it How well they are doing it

 On the basis of What is being compared with other organizations and Who is being compared with our organization, we can classify benchmarking.
What is being compared with other organizations

vs.

Who is being compared with our organization

 On the basis of What is being compared with other organizations we have four main types. These four major types of benchmarking are

Process Performance Product

Strategic

 On the basis of Who is being compared with our organization, we have these categories:
Best of the Best Best in Class International Generic Internal vs. External

 Many firms perform product benchmarking when designing new products or upgrades to current products. This process can sometimes involve reverse engineering which is taking apart competitors products to find strengths and weaknesses.

 Performance benchmarking allows the initiator firm to assess their competitive position by comparing products and services with those of target firms.

 Process benchmarking focuses on the day-to-day operations of the organization. It is the task of improving the way processes performed every day. Some examples of work processes that could utilize process benchmarking are the customer complaint process, the billing process, the order fulfillment process, and the

 Strategic benchmarking deals with top management. It deals with long term results. Strategic benchmarking focuses on how companies compete. This form of benchmarking looks at what strategies the organizations are using to make them successful. (Japanese firms)

 Sharing opinions between departments within the same organization.

Advantage: Easier to implement Easier to access data Disadvantage: External ideas blocked

 The gap between internal and external practices displays the way where to change and if there is any need to change.

Advantage: Helps to measure ones own performance Helps to search for best practices Disadvantage: Takes time Requires support Legal/ethical issues Industrial espionage

 Comparisons of business process or functions that are very similar, regardless of industry.

 Best practitioners are identified and analysed elsewhere in the world, perhaps because there are too few benchmarking partners within the same country to produce valid results.

Generally, initiator firms will choose to benchmark the best-in-class. Best-in-class refers to those firms or organizations that have been recognized as the best in an industry based on some criterion.

After becoming a best-in-class firm, it may be difficult to gain new insight and information from direct competitors. Therefore, the next level of improvement is called best-of-the best or best-in-the-world.

 Time Costs - Members of the benchmarking team will be investing time in researching problems, finding best practice 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.

 Visit Costs - This includes hotel rooms, travel costs, meals, a token gift etc. 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.

 There are international organizations specialized in benchmarking services, e.g.,

Global Benchmarking Council American Productivity and Quality Center Asian Benchmarking Clearing house Hong Kong Benchmarking Clearing house

Xerox: is photocopiers manufacturer. L.L. Bean: is mail order clothing company relays heavily on logistics. In 1980s, Xerox performance of warehouse and logistics was behind technology, Xerox faced financial difficulty due to the Japanese competitors.

There was potential for the elimination of the bottleneck in the warehouse. Technology was thought to be a key, but there was insufficient data to confirm any of the theories. L. L. Bean was thought to have the best performance, but its function was totally manual. Xeroxs order filling procedures were Benchmarked against L. L. Beans and found to pose the greatest

 Through a series of follow-up interviews and site visits, Xerox determined that L. L. Bean organised its warehouse so that the fast moving inventory (shirts, promotional items, etc.) were located near the loading dock. This minimised the amount of time it took to pick an order and get it loaded on a truck Additionally, incoming inventory was stored using an automated system for maximizing space more efficiently. Xerox took these findings and implemented them at their warehouses. Its overall order filling efficiency improved and costs were