BENCHMARKING

Presented ByMuhammed Aslam

S4 MIBRoll No: 16SMS,CUSAT

Benchmarking

¥ Benchmarking is the process of identifying "best practice" in relation to both products and the processes by which those products are created and delivered.

¥ Benchmarking is the process of comparing the business processes and performance metrics including cost, cycle time, productivity, or quality to another that is widely considered to be an industry standard benchmark or best practice.

What is Benchmarking…

Distinction between benchmarking and competitive

analysis

• competitive analysis involves comparing your product with your competitors.

• On the other hand, benchmarking goes into more detailed comparison that includes how the product is engineered, manufactured, distributed and supported.

The benefits of conducting a benchmarking exercise can include:• Creating a better understanding of

the current position• Increasing awareness of changing

customer needs• Encouraging innovation• Developing realistic, stretching goals• Establishing realistic action plans

Types of benchmarking

Competitive benchmarking

Internal benchmarking

External benchmarking

Internal benchmarking¥ Compares and contrasts a number of

facilities that operate the same supply chain processes within the organization.

¥ Example: ¤ A company operates five distribution

centers in the US and Canada.¤ Examine a number of operations that

take place at each of the distribution centers.

¤ Compare performance and make improvements.

Competitive benchmarking

¥ Organizations use performance measures to compare themselves against similar organizations.

¥ Example:¤FMCG’s comparing with each other

for Market share, Retention rates, profits, costs etc.

External benchmarking¥ Takes a company outside of its own

industry and exposes them to different methods and procedures.

¥ Example:¤ A manufacturer and distributor of electrical

components have internally benchmarked their warehouses for a number of years and have exhausted ideas on improving efficiencies.

¤ They approached a very successful retail company to visit their central warehouse and benchmark the processes that occur there to compare to their own warehouse processes.

Components of benchmarking¥ FINANCIAL: Financial

analysis comparison with other targets to assess overall competitiveness and productivity.

¥ PRODUCT: Process of designing new products or upgrades to current ones, including reverse engineering of competitive products.

…contd¥ STRATEGIC: Process of

observing common or uncommon groups’ competitive advantages or disadvantages.

¥ PROCESS: Identifies and observes specific business processes with a goal of identifying best practices

¥ FUNCTIONAL:Focuses on a single function in order to improve the operation of that particular function.

¥ PERFORMANCE: Helps companies assess their competitive position by comparing specific performance dimensions.

¥ METRICS: Used to develop yardstick comparisons, allowing outsiders to evaluate the performance of operators in an industry.

Benchmarking Process

PLAN

SEARCH

OBSERVE

ANALYSE

ADAPT

Plan :• Select the key areas to be

benchmarked for study.• Then form a team.• Understand the vital points and then

carry out the documentation process.• Consequently, establish performance

measures.

Search:• First of all list the criteria for

selecting a partner.• Then conduct a general or a

secondary research.• Decide the level to benchmark.• Then identify potential partners and

contact.

• Observe: During, this stage necessary

information is collected using a questionnaire sent to partner, telephone contact and direct observation or site visit.

Analyze: • The data and information obtained in

the previous stage is sorted.• Quality control information and data

are also taken.• Normalize data if necessary.• Identify gaps in performance level

and the causes for gaps.

Adapt:• The last stage involves identification

of opportunities for improvement.• Then a target is set for

improvement .• An implementation plan is developed

and the progress monitored.• The final report is documented.

Advantages

¥ Best practices from any industry can be incorporated.

¥ Stimulates and motivates professionals to perform & implement benchmark findings.

¥ Helps to identify technological breakthrough.

¥ It opens organizations to new methods, ideas and tools to improve their effectiveness

Disadvantages

¥ Maintaining benchmarking efforts is costly.

¥ Reluctance to share information.¥ Today's realistic applications may not be

tomorrows applications.¥ What is best for someone else may not

suit you.¥ Poorly defined benchmarks may lead to

wasted effort and meaningless results.

THANK YOU