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BENCHMARKING

Professor (Dr.) A. Chamaru De Alwis


(Ph.D. (Mgt) TBU in Zlin, Cz, M.Sc (Mgt) Sri J, B.Sc (B.Ad) Sri J.
Professor in Management
University of Kelaniya
ORCID :https://orcid.org/0000-0003-2492-9466
Google Scholar: https://scholar.google.com/citations?user=mAMWuxkAAAAJ&hl=en
ResearchGate: https://www.researchgate.net/profile/A_De_Alwis
Content
• What is Benchmarking
• Background of benchmarking
• Why benchmarking
• Level of BM
• What to Benchmark
• Types of benchmarking
• Benchmarking process
• Benchmarking for business process
• How to fill the market niche
• Success factors for benchmarking
• Benefits of benchmarking
• Benchmarking pitfall
• Example for benchmarking
Introduction
When an organization / company want to
maintain a level of quality that satisfy their
customers at the appropriate time and price then
that organization must follow some quality
management techniques for fulfil those
principles and planning
Tool and techniques
• Benchmarking
• Kaizen
• Quality Circle
• Quality Function Deployment (QFD)
• Business Process Reengineering
• Total Productive Maintenance
• Six Sigma,
• Kanban
Benchmarking
• Benchmarking is the process of
• improving performance by continuously
• identifying,
• understanding,
• and adapting
• outstanding practices and processes
• found inside and outside an organization
What is Benchmarking?
Different Definitions of benchmarking
Benchmarking is the search for those best practices that will lead to
superior performance of the company

Benchmarking is the continuous process of measuring product, services


and practices against the toughest competitors or those recognized as
leader in any field
What is going to benchmark
• Benchmarking focuses on the improvement of any given
business process by exploiting "Best practices" rather than
merely measuring the best performance.
• Best practices are the cause of best performance.
• Companies studying best practices have the greatest
opportunity for gaining a strategic, operational, and financial
advantage.
What is Benchmarking

Benchmarking is the process of comparing one’s


business processes and performance metrics to industry
bests and/or best practices from other industries.
Dimensions typically measured are quality, time and cost
improvements from learning mean doing things better,
faster and cheaper.
Background of Benchmarking

Benchmarking was originally defined by D.T.Kearns,


the CEO of the 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.
Why Benchmarking ?
Performance
improvement
Better
Meeting
prioritize and
quality
allocate
standards
resource

Innovation in
Creative
Benchmarking management
thinking
methods

Keep pace
with science Cope with
and competitive
technology markets
changes
Meeting
customer
expectation
What to Benchmark?
• Product and Services
-Finished goods
-Product & Service Features
• Work Processes
-Manufacturing
-Supplying
-Ordering
-Maintenance
Cont.…
• Support Functions
-Human Resource Management
-Financial Management
-Marketing
• Organizational Performance
-Sales
-Profitability
-Cost
-Quality
-Manpower
Cont.…
• Strategies
-Cost Leadership
-Differentiation
• Internal benchmarking – is a process in which a company or an organisation looks
within its own business to try and determine the best practice or methodology for
conducting a particular task. The aim is to find the best practice available to get
the job done with minimum effort or resources

Levels of Benchmarking in
Competitive environment:
Levels of Benchmarking in
Competitive environment:
• Competitive benchmarking – is the process of comparing
your products, services, processes and practices to a direct
competitor using standard measurements.
• This may be done to evaluate
• Your current competitive position
• Develop strategies and evaluate performance.
Levels of Benchmarking in
Competitive environment:

• Generic benchmarking

This is the benchmarking of strategic measures,


functions or processes of non-competing
companies. Frequently, surprising similarities in processes
are found between companies in different industries.
• World class benchmarking- looking towards
recognized leader
General areas of Benchmarking / where
benchmarking:
• Operational Strategies: ( Inventory management, Inventory control)
• Marketing management ( Customer service levels, Purchasing, Billing and
collection, Purchasing practices)
• Quality Improvement efforts / process ( Management of quality councils,
Overall equipment effectiveness etc.)
• H.R. Practices ( Talent Acquisition / Search, Training and Development,
Compensation management etc.)
• Supply chain management (Warehousing and distribution, Transportation)
Types of Benchmarking
Strategic Benchmarking
Performance Benchmarking
Process Benchmarking
Product benchmarking
Functional Benchmarking
Internal Benchmarking
External Benchmarking
International Benchmarking
Strategic benchmarking
• Strategic benchmarking deals with top management.
• Examines how companies compute and seeks the winning
strategies that have led to competitive advantage and market
success.
• Strategic Benchmarking involves examining long-term
strategies. This type of benchmarking is used by successful high
performance.
Performance Benchmarking
How organizations compare themselves with each other in terms
of product and service of competitors . It focuses on cost,
technical quality, service features, speed, reliability, and other
performance.
Process Benchmarking

Focuses on improving critical processes and operations


through comparison with best practice organizations
performing similar work. This often results in short term
benefits.
• Ex ; Centers on work processes such as billing, order entry
or employee training.
(It identifies the most effective practices in companies that
perform similar functions, no matter in what Industry.)
Product Benchmarking
• Many firms perform product benchmarking when
designing new products or upgrades to current products.
• Providing an external perspective on opportunities to
improve products, technology and support processes, the
product development process and engineering practices
are core activities of product benchmarking.
Functional benchmarking
A company will focus its benchmarking on a single function to
improve the operation of that particular function.
• This type of benchmarking can lead to innovation and dramatic
improvements
Internal Benchmarking
Comparing similar functions / processes with the best within the
organization.
External Benchmarking
Analyses best in class outside organizations, providing the
opportunity to learn from those at the leading edge.

International Benchmarking
Identifies and analyses best practitioners elsewhere in the world
Benchmarking Process

Planning

Implement Collecting
ation Data

Analysis
Planning
• Determine the purpose and scope of the project
• Select the process to be benchmarked
• Generally be core activities that have the potential to give the business in question a
competitive edge.
• Such processes would generally command a high cost, volume or value
• Performance can be measured
• Conduct honest appraisal of the company's strengths, weaknesses and
problem areas would prove to be of immense use when fine-tuning such a
process
• Choose an appropriate benchmark against which their performance can be
measured.
• Set the objectives of the benchmark
Collecting Data
• Conduct background research to gain thorough understanding on the
process and partnering organizations

• Use questionnaires to gather information necessary for benchmarking

• Conduct site visits if additional information is needed

• Conduct interviews if more detail information is needed


Analysis

• Analyze quantitative data of partnering organizations and your


organization
• Analyze qualitative data of partnering organizations and your
organization
• Determine the performance gap
Implementation
• Report findings and brief management
• Develop an improvement implementation plan
• Implement process improvements
• Monitor performance measurements and track progress
• Do changes to the process as needed
Benchmarking for business process
Output with
Customer
Business process competitive
differentiation
advantage

Increased competitive
Improved advantage Grater
process + Customer
Increased profitability satisfaction
Benchmarking leads to fill the market niche

Benchmarking
Market Organizatio and
Needs nal Continuous
capabilities
improvements

Market space
Success Factors for Benchmarking

•Top Management Support and guidance.


•Aligning benchmarking with the vision and mission of the organization .
•Thorough process mapping and documentation of one’s own practices.
•Committed Benchmarking team with creative and innovative thinking .
•Integrating benchmarking with other improvement initiatives in the
organization.
•Selection of right benchmarking partner.
•Willingness to learn and experiment .
•Flexible mindset to accept change and findings.
Benefits of benchmarking
It helps to improve organizational performance.
Increased customer satisfaction
Cultural changes
Improve product quality
Increase the quality of Human Resource.
Benchmarking Pitfalls
Mission, goal, Objectives Unconnected
Not relating to other improvement initiatives
Lack of sponsorship.
Unengaged process owner
Over emphasizing measures.
Time and resources overlooked.
Notion that we are unique.
XEROX ‘s twelve steps of benchmarking
(1980):
• Phase 1: Planning
• Identify what to benchmark;
• Identify comparative companies;
• Determine data collection method & collect data.
• Phase 2: Analysis
• Determine current performance gap;
• Project future performance levels.
• Phase 3: Integration
• Communicate finding and gain acceptance;
• Establish functional goals.
XEROX ‘s twelve steps of benchmarking
(1980):

• Phase 4: Action
• Develop action plans;
• Implement specific actions & monitor progress;
• Recalibrate benchmarks.
• Phase 5: Maturity
• Attain leadership position
• Fully integrate practices into processes.