BEST PRACTICE

Definition

A best practice is an industry-wide agreement that standardizes the most efficient and
effective way to accomplish a a desired outcome. A best practice generally consists of a
technique, method, or process. The concept implies that if an organization follows best
practices, a delivered outcome with minimal problems or complications will be ensured.
Best practices are often used for benchmarking and represent an outcome of repeated and
contextual user actions.1

A best practice is a technique or methodology that, through experience and research, has
proven to reliably lead to a desired result. A commitment to using the best practices in
any field is a commitment to using all the knowledge and technology at one's disposal to
ensure success. The term is used frequently in the fields of health care, government
administration, the education system, project management, hardware and software
product development, and elsewhere.2

A best practice tends to spread throughout a field or industry after a success has been
demonstrated. However, it is often noted that demonstrated best practices can be slow to
spread, even within an organization. According to the American Productivity & Quality
Center, the three main barriers to adoption of a best practice are a lack of knowledge
about current best practices, a lack of motivation to make changes involved in their
adoption, and a lack of knowledge and skills required to do so.

When is it deemed as best practice?

A practice, method or process may be deemed a best practice when3:

 It produces superior results. Superior is defined as 25 percent or higher results
than the normal output.
 It is clearly a new or innovative use of manpower or technology.
 It is recognized by at least three different references as a best practice (that is,
three or more public domain sources have referenced this practice).
 It has received an external award for this practice.
 It is recognized by their customers or suppliers.
 It is recognized by an industry expert.
 When the organization(s) utilizing it have a patent for this practice.
 It leads to exceptional performance. An example here would be General Electric's
"Workout" practice.

1 https://www.techopedia.com/definition/14269/best-practice
2 https://searchsoftwarequality.techtarget.com/definition/best-practice
3 Burke, Charles. 10 Steps to Best-Practices Benchmarking. https://www.qualitydigest.com/feb/bench.html
Many businesses are looking to employ best practice to ensure they keep their
competitive edge.

In view of the trend and current economic climate, there is a global move to practise what
is best and sustainable for the airlines (Holloway 2002, Wheatcroft 1998, Clark 2002). 


Benchmarking

Definition

“Benchmarking is part of the process of continuous improvement in Services marketing.

It is defined as measuring that of the strongest competition in order to establish best
practice”. Companies use benchmarking as a way to help become more competitive. By
looking at how other companies are doing, they can identify areas where they are
underperforming. Companies are also able to identify ways that can improve their own
operations without having to recreate the wheel. They are able to accelerate the process
of change because they have models from other companies in their industry to help guide
their changes. 4

Benchmarking is a continuous process of evaluation of products, services and practices

with respect to those of the strongest competitors or of the enterprises recognized as
leaders. In a direct way, the benchmarking is a process of evaluation and improvement of
performance. Therefore it can be used for assessing the competitive situation of units or
even systems as a whole. Within the port, and maritime industry, benchmarking is an
important used by the majority of companies and organizations in order to improve
competitive practices, functions and products.5

 Is “an external focus on internal activities, functions or operations in order to

achieve continuous improvements” (Leibfreid and McNair, 1994)

 “(...) the practice of being humble enough to admit that someone else is better at
something, and being wise enough to learn how to match and even surpass them
at it.” (American Productivity & Quality Center, 1993)

 Benchmarking is a system by which organisations or units can measure their

position and performance level by comparing the performance of similar
processes to other corporations or units

Some types of Benchmarking

4 http://www.iosrjournals.org/iosr-jbm/papers/Conf-ICSMTSA/Volume%203/1.%2001-03.pdf
5 http://www.portopia.eu/wp-content/uploads/2016/07/D9.1-A-review-of-existing-benchmarking.pdf
 Competitive Benchmarking

Benchmarking is performed versus competitors and data analysis is done as to what

causes the superior performance of the competitor.

It can be, in some respects, easier than other types of benchmarking and in some
Respects more difficult. It is easier in the sense that many exogenic variables
affecting Company performance may be the same between the source and the
recipient Organization, since we are talking about companies of the same sector. On
the other hand it is more difficult because, due to the competitive nature, data
recuperation will not be straightforward. Difficulties of this type may be overcome if
the two organizations have for e.g. different geographical markets.

Best practices

This is a benchmark report where companies choose to look at a company or

companies that they aspire to be like. By choosing companies that are on the leading
edge of the industry, they can identify best practices that help improve their own
company.

Peer benchmarking-

This is a benchmark report where companies choose to look at other businesses very
similar to themselves. This allows companies to make sure they are staying
competitive with similar businesses.

Benchmarking in transport sector6

As mentioned before, commercial companies use benchmarking in order to improve their
performance and gain a heads up on their competitors. The transport sector is no different
on a local and competitive level. However at EU and Member state level benchmarking
implies measuring the performance of the transport sector and comparing results with
fixed points or standards (OECD, 2000).

Both academic and private sector benchmarking tools exist. However since the public
sector works on a higher level the dimensions of the problem increase and the used
theories require modification. Transport benchmarking is prevalent in the railway sector,
waterway and air transport system an id thee linkage of logistical nodes or
telecommunication systems. For an entity like a port this offers a wide array of
underlying indicators due to the inherent complexity. Its productivity and efficiency
depend on geographical and external factors, the demographic structure of hinterland and
local industry and differences in management culture and national policies.
Examples of existing benchmarks on country level are: the Netherlands general
efficiency of the freight transport sector, efficient utilization of infrastructure, messenger

6 Id.
intermodality, promotion of cycling, port hinterland traffic, inland navigation), Austria
(modal share public transport, modal share railway passenger transport, infrastructure
pricing, CO2 emission from transport); Sweden (road safety transport, port hinterland
container traffic by rail, modal share rail freight transport), the UK (road transport safety,
efficiency of air transport sector and Denmark (infrastructure quality).

OECD intermodal benchmarking report

An important lesson to take away from the OECD intermodal benchmarking exercise is
the different goals of benchmarking with regards to the different stakeholders in the
benchmarked entity. If we transpose this to the required benchmarking system of
PORTOPIA we have to deduce that the benchmarking had to be tailored to the main user,
being ports.

Consumers’ perspective (better services at lower prices):

 Evaluate reduction in logistics costs, taking into account consumer service levels
Shippers’ and logistics service providers’ perspective (better services at lower
cost):
 Accurate evaluation of reductions in logistics costs in relation to the quality of
logistics services and transportation;
 Estimation of total logistics costs, including production, sales, collection, storage,
transportation and data processing;
 Selection of the most appropriate transportation service(s) from origin to
destination by assessing all the factors, including time, cost, reliability and
flexibility.

Government perspective (balance between efficiency and environmental friendliness

of logistics, improvement in transport safety):

 Efficiency: efficient infrastructure development projects in terms of the

advancement of logistics;
 Deregulation and standardisation to enable improvements in logistics efficiency;
 Environmentally friendly logistics: comprehensive assessment of external costs of
logistics systems (i.e. air and noise pollution, congestion), and improvement in
intermodal transport systems;
 Improvement in transport safety.

Benchmarking, competitiveness

Benchmarking is an instrumental method for improving competitiveness and increasing

value from your customers’ perspective and a powerful vehicle for overturning the inertia
that often sets in when companies become inward-looking and insulated. Through
benchmarking your Marketing organization can making dramatic improvements to
Marketing processes that will contribute to the bottom-line. As best practices within your
 organization mature, you will be able to build models for what Robert Camp refers to as
the “best of the best.” These models are what serve as your company’s path to excellence.
Learn how to create a Marketing Center of Excellence to establish best practices that
create pathways to improvement and enable the collaboration that facilitates the adoption
of change by providing platform for alignment, quality improvement, and reduced costs
while improving market differentiation and higher customer satisfaction, and ultimately
market leadership, revenue, profits and sustainability7

To survive and thrive in today’s competitive environment, companies must continuously

adapt and deliver more, faster, better and less expensively. Today’s emphasis for more
and faster growth is the focus for many organization’s strategic planning. Companies use
the strategic planning process to identify what the business should become and how to
best achieve their vision. Part of this process entails appraising, then improving, the
company’s capabilities and processes.

How do you know where to aim and how far? One valuable approach is to use
benchmarks. A benchmark, that is a measure, serves as a standard or point of reference
against which things may be compared or assessed. If the benchmark is the “what”,
benchmarking is the “how.” The American Productivity and Quality Center (AQPC)
defines benchmarking as “the process of identifying, understanding, and adapting
outstanding practices and process from organizations anywhere in the world to help your
organization improve its performance.” Benchmarking is not the same as a metric. A
metric is a comparative number, which serves as the norm, whereas a benchmark is a
standard for the best.

Benchmarks have become an integral part of strategic planning and operational

improvement. According to the AQPC study, Strategic Planning: The Value of
Benchmarking, about 68% of companies conduct benchmarking to support the strategic
planning process. Benchmarking enables your company to collect quantitative and
qualitative information needed to identify gaps and pinpoint ways to improve
performance, achieve superior results, and enhance your competitive advantage.

Marketing Processes and Capabilities to Benchmark

Which Marketing processes and/or capabilities should your company benchmark?

Research by Doug Vorhies, Neil Morgan, VisionEdge Marketing, and others has revealed
eight Marketing capabilities that can be benchmarked:

1. Product development (the processes by which a company develops and manages

product and service offerings)

2. Pricing (the ability to extract optimal revenue from your customers)

3. Channel management (the organization’s ability to establish and maintain channels of

distribution that effectively and efficiently deliver value to the end-customer)

7 https://www.nimble.com/blog/how-to-employ-the-practice-of-benchmarking-for-best-practices/
4. Marketing communications (the organization’s ability to manage customer value
perceptions)

5. Market information management (the processes organizations use to learn about their
markets and use market information)

6. Marketing planning (the organization’s ability to create optimal marketing strategies)

7. Marketing implementation (the processes which strategies are deployed)

Various studies have shown that companies who excel at these Marketing capabilities
significantly outperform those who are below the benchmark in terms of customer
satisfaction, return on assets, profitability, and market effectiveness. If you desire to
improve in these areas consider benchmarking your organization’s Marketing
capabilities.

The conception of competitiveness as the route to regional economic success, coupled

with the transmission of its principal ideas by particular players and through key
networks, is critical to understanding its potential to promote sameness in regional ideas
and approaches. Since competitiveness is a relative concept, it implies the need to
compare with others, such that regions are inexorably sucked into the continual
monitoring and periodic benchmarking of what the competition is doing and where the
“best offer” or success story lies. (Maleski, 2004).

National governments, the EU and international organizations have played a powerful

role in facilitating this process and actively encouraging regions to benchmark
themselves against other regions and to draw best-practice lessons through a range of
tools, including scoreboards, comparative indices of competitive performance and case
studies of successful regions.

Use of benchmarking by airlines

The high uptake of benchmarking is probably due, 136 in part, to the turbulent nature of
civil aviation. This places significant economic pressures on managers, who have
frequently turned to benchmarking as a means of improving the performance of their
organisations. Whilst not all the experiences were equally successful, the tendency was
for them to be considered as beneficial. Although benchmarking is widely used in civil
aviation, the nature of these activities is variable in terms of how and what information is
collected and the use(s) made of it. The move towards airline alliances and airport groups
has facilitated the availability of benchmarking partners. There are differences between
the airlines and airports in terms of some of the specifics of the benchmarking activities.
This is not surprising given the different (although inter-related) nature of the industries.
What is perhaps more surprising and interesting is the range of activities within each
sector taking place in the name of benchmarking.
Airline management has long recognised the importance of comparing airline
performance both within the airline and in relation to the performance of other airlines.
Cost data comparisons from published sources by organisations such as the International
Air Transport Association (IATA), the International Civil Aviation Organization (ICAO),
the UK Civil Aviation Authority and periodicals such as Air Transport World and
Aircraft Economics are available for use by management to assess comparative
performance and as a starting point for exploring the reasons behind the performance
differences. Some of these differences can be explained by geographical variation in
labour and other input costs. In addition to published statistics a number of reports
providing “benchmark” statistics and comparisons of airline performance have emerged
in recent years (Mason et al., 2000; Morrell et al., 2000; Transport Research Laboratory,
2002a). Quality of service indicators are collected by airlines internally and by
International Air Transport Association’s annual world passenger survey which monitors
customer satisfaction with 29 aspects of airline service (IATA, 2002). Each airline can
compare itself with the ratings for the rest of the sample to provide a measure of relative
performance.

In terms of airline size, larger airlines were more likely to engage in some form of
benchmarking activity than smaller airlines (see Table V). Benchmarking was found to
be a given part of airline management activity at all airlines handling ten million
passengers or more that responded to the survey. This is consistent with the findings of
Holloway et al. (1999) who found that larger organisations were more likely to
benchmark than smaller ones. This said, the prevalence of benchmarking activity is still
high among the airlines handling between one and nine million passengers per annum.
Airline alliances were found to provide useful frameworks for benchmarking activity
with the survey discovering that 49 per cent of airlines undertook benchmarking with
alliance partners. Given the trend towards globalisation of the industry, benchmarking
with alliance partners is a further means beyond the established commercial agreements
of leveraging management benefits from alliances and creates a natural opportunity for
benchmarking activity that ought to be less prone to data sensitivity and confidentiality
issues.

The pressure for improved performance and the dynamic nature of airline management
with respect to looking for new ways to measure airline performance is perhaps reflected
by the surveys finding that 62 per cent of the airlines that responded to the survey had
introduced new performance measures within the last two years.

There is a tendency for airlines to look within the industry for benchmarking partners (see
Table VI) as opposed to benchmarking and learning from organisations that have similar
processes but are part of non-air transport related organisations. “It was good experience,
letting us position our company towards the other airlines” The value of comparison with
similar organisations and the difficulties associated with obtaining certain commercially
sensitive data was highlighted by a number of managers. One stated that benchmarking
was:
 Very useful even if, for commercial reasons, the exchange of information is
limited and slow with competitors. Other airlines are very easy to approach and
good at sharing process, and technology applications, experience. Naturally large
culture and environment (and resistance sometimes) issues can make adaptation
or replication difficult.

Airlines use benchmarking as much for financial comparisons as for operational

comparisons (see Table VIII). Financial benchmarking among airlines is reported by
Feng and Wang (2000) and Doganis (2002). Benchmarking applied to operational
practices being found to be roughly equally prevalent, and is interesting as relatively few
examples of this are covered by the literature (Zairi, 1998). Evidence from interviews
with managers showed that competing airlines were sharing engineering and maintenance
data and met regularly to share knowledge, particularly when new aircraft types were
being introduced into service (Francis et al., 1999). Several competing airlines undertake
maintenance for each other by agreement in different geographical regions. The
competitive rhetoric of marketing departments is put aside in favour of the commercial
sense of pooling maintenance resources. There was one example of airlines within the
same alliance sending personnel to check third party maintenance by partner airlines to
ensure quality was being maintained and to share lessons learned from the airlines’ own
maintenance experience elsewhere in the world. A case study of Britannia Airlines
revealed how they selected benchmarking partners who operated in different parts of the
world (Francis et al., 1999).

The significance of understanding the implications of work processes and activities of

other airlines, particularly competitors, was further highlighted by comments made in
response to the questionnaire survey. Airline management saw it as “critical to measure
how we are performing, particularly against our competitors” and “with a main
competitor we find it [benchmarking] a very valuable tool”. Historic comparisons had
been exploited by one airline in the wake of a merger to try and capture the best work
processes and practices from the acquired airline: “having merged two airlines we are
able to use historic benchmarking to a high degree.”

Nowadays, many benchmarking best practice examples come from the highly
competitive and innovative airline industry. According to Jackie Fry, Ian Humphreys and
Graham Francis (2005), benchmarking is considered to be the most commonly used
performance tool for increasing performance both for airline companies and airports
worldwide.

The main reasons for adopting benchmarking as a performance increasing technique

mainly consist of usability and financial aspects.

Southwest airlines is one of the most profitable airline companies nowadays. One of the
reasons why it is considered a top company is its “on time” performance. Southwest
airlines was founded in 1960’s, by Herb Kelleher and Rolling King.
Benchmarking is one of the strategies that facilitated Southwest Airlines to design a
successful model in the airlines industry, one that was further considered to be a
benchmark for the entire world.

For process improvement and increasing organizational performance, companies need to

switch their focus onto customers. Moreover, the general procedures and the activity flow
that lead to service delivery play a crucial role in setting up strategies for improving
performance results.

Southwest Airlines time management strategy has its roots in a dismal record registered
in the past. In their effort to improve the situation, Southwest Airlines implemented a
benchmarking process – they started comparing themselves against other similar
companies in the industry. When it comes to benchmarking, one has to make sure they
benchmark against better performers in the industry.

The novelty in Southwest Airlines’ approach was taking into consideration non-airline
organizations and industries which had a good on time performance, in order to get an
insight into how they could improve their own performance in this specific area.
An example of on time management for Southwest Airlines’ study was NASCAR, a
group with a top performant pit crew in the area of time management. But what was their
success based on? The NASCAR pit crews’ performance came from the employees’
excellence and their clearly defined tasks. Performance was determined both by the
singular focus of each employee, or unique assignments, and by a great approach towards
teamwork.

Southwest Airlines implemented a strategy that allowed them to significantly optimize

and improve their turnaround time, which made them a benchmark for the entire industry.
The main variables that contributed to the company’s success were related to the limited
amount of checked luggage, a “near-uniform” configuration for their aircrafts and a high
speed boarding process.

All in all, by thinking outside the box and not limiting their benchmarking opportunities
solely to the airlines industry, Southwest Airlines became themselves a benchmark and a
top performer.8

Benchmarking in airports

The benchmarking of airports is quite comparable with sea- or inland ports. However
since airports are often private institutions more emphasis is aimed at OPEX and other
financial indicators than with seaports. Overall in the last 15 years privatization and
commercialization of an increasing number airports have contributed to a substantial
number of benchmarking studies. The majority of the focus is on a national level.

8 https://www.performancemagazine.org/southwest-airlines-from-benchmarking-to-benchmarked/
However international studies are increasingly common. Next to the financial aspect of
airports the capacity utilization is also one of the major subjects of analysis. A third
aspect surrounds the need for better public policy assessment and aims at the main
question if privatized airports operate more efficiently than publicly owned airports. This
last point can be translated to the port setting, which we are attempting to benchmark.

1. BOOZ European Airport Benchmarking Study 2012

This document was commissioned by BAA to benchmark OPEX performance in
particular of one of the major airports in Europe against a variety of European
comparators. The study uses a selection process to identify several European
airports that could be considered comparable to Heathrow on a specific set of
infrastructure indicators. The study is particular in the way that it does not include
any Asian or American airports and is therefore restricted to a specific range of
competing airports. This is an important aspect to take away for the benchmarking
process in ports where competition is also partially based on a geographical and
infrastructural scale.

Throughout the study there are several adjustment in order to make the OPEX and
CAPEX comparable for all investigated entities. This is a problem we will also face when
comparing seaports. For example in order to allow for the rail and NATS utility costs at
Heathrow an econometric model has been developed to account for these differences.
The model furthermore uses a “residual’ approach whereby costs are separated into
controllable and non-controllable.

The conclusions of the study go further than pure benchmarking results. Each analysis
links the results with ongoing macro-economic changes or country-specific variables (the
uncontrollable variables mentioned earlier). A special note is included in the assessment
about sample size, which is smaller than other benchmark studies, but according to the
authors more relevant due to the geographical range scope. The results of the exercise are
also compared to other studies and datasets in order to validate aggregated data. Within
the seaport setting this can for example be done between the PORTOPIA RES system
and Eurostat data.

4.1.3 Lessons from airline benchmarking

 Classification into valid geographical regions is a necessity;
Next to geographical ranges attention must be directed to the directly competing
entities;
 A clear set of rules is needed to describe entities (size, capabilities, ...);
 Aggregate analyses are common and useful, not everything can be benchmarked
one on one.