Benchmarking Process Explained

Presented By:
Amarjeet Gorai
Neha Albina Ekka
Tuesday, January 14, 2014

Xavier Institute of Management, Jabalpur

1

What is Benchmarking?
Benchmarking is the process of
measuring an organization’s internal processes
then identifying, understanding, and adapting outstanding practices from other
organizations considered to be best-in-class.

Definition
“measuring our performance against that of best-in- class companies,
determining how the best-in-class achieve those performance levels
and using the information as a basis for our own company’s targets,
strategies and implementation .”



2

The Essence of Benchmarking

“moving from where we are to where we want to be”



3

Why Benchmarking?
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To Obtain an External Perspective of What Is Possible
To Assist in Setting Strategic Targets
To Promote Improvements in Performance
To Establish a Competitive Edge
To Enhance Customer Satisfaction
To Reduce Costs
To Improve Employee Morale
To Achieve Quality Awards
To Survive



4

When Benchmarking?
 If the company’s QMS is not properly developed, documented and
implemented.
 If company’s great strength areas are not measured.
 If company’s great weakness areas are not measured.
 If company’s great opportunities are not measured.
 If customer needs are not assessed and rectified .



5

Benchmarking in the Context of TQM
TQM Key principles include:
Comparisons with best practice.
A Strong emphasis on meeting the needs of the customer (internal
and external).
The importance of efficient, effective business processes.

The need for continuous improvement .
Enhances a TQM program .



6

Levels Of Benchmarking In Competitive Environment
 Internal benchmarking - Within one’s org.
 Competitive benchmarking - Analysis the performance and
practices of best in class companies.
 Non-competitive benchmarking - Is learning something about a
process a company wants to improve by benchmarking.
 World class benchmarking - Ambitious and looking towards
recognized leader.



7

Benchmarking Methodology
Best Practice
Overlap

Competitive
• Industry leaders
• Top performers with
similar operating
characteristics

Functional

Internal

• Top performers
regardless of industry
• Aggressive innovators
utilizing new
technology



• Top performers
within company
• Top facilities
within company

8

Types Of Benchmarking
Performance or operational benchmarking:
It involves – pricing, technical quality, features and other quality.

Process or functional benchmarking:
It involves processes such as billing, order entry or employee training.

Strategic benchmarking:
Examines how companies compute and seeks the winning strategies that have
led to competitive advantage and market success.



9

Areas Of Benchmarking
Operational Strategies:

Supply chain management:

• Inventory management
• Inventory control

• Warehousing and distribution
• Transportation

Marketing management:

H.R. Practices:

• Customer service levels
• Purchasing
• Billing and collection
• Purchasing practices

• Talent Acquisition / Search
• Training and Development
• Compensation management etc.



10

Guidelines to Benchmarking
Do not go on a fishing expedition.

 Use company people.
 Exchange Information.

 Legal Concerns.
 Confidentiality.



11

Five Phases Of Benchmarking
 Planning: Identify the product, service or process to be benchmarked
 Analysis: Determine the gap between the firm’s current performance and that of
the firm’s benchmarked and identify the causes of significant gaps.
 Integration: Establish goals and obtain the support of managers who must
provide the resources for accomplishing the goals
 Action: Develop action plans, and team assignment, implement the plans,
monitor progress and recalibrate benchmark as improvements are made.
 Maturity: Leadership position attended, best practices fully integrated into
process.



12

Benchmarking Process
In
Motorola



13

Benchmarking Strategy
Decide what to benchmark.
 Select companies to benchmark.
 Obtain data and collect information.
 Analyze data and forms action plans.
 Recalibrate and start the process again.



14

The Seven Step Benchmarking Model
Activity

What is included

Step 1: Identify what to benchmark

 Clarify the benchmark objectives
 Decide whom to involve
 Define the process
 Consider the scope
 Set the boundaries
Agree on what happens in the process
 Flowchart the process

Step 2: Determine what to measure

 Examine the flow chart
 Establishes the process measures
 Verify that measures match objectives

Step 3: Identify who to benchmark

 Conduct general research
 Choose level to benchmark



15

The Seven Step Benchmarking Model
Step 4: Collect data

 Use a questionnaire
 Conduct a benchmark site visit

Step 5: Analyze data and determine the gap

 Quantitative data
 Qualitative analysis

Step 6: Set goals and develop an “Action
Plan”

 Set performance goals
 Develop an action plan

Step 7: Monitor the process

 Track the changes
 Make benchmarking a habit



16

Factors For Success Of Benchmarking
 Benchmarking must have the full support of senior management
and they should actively involve with this process.
 For Benchmarking, team and process training is very imp.

 Benchmarking should be a team activity.
 Benchmarking is an ongoing process.

 Benchmarking efforts must be organized, planned, and carefully
managed.
 Correct use of benchmarking can lead you to the competitive
edge in today’s business market place.


17

Advantages
 Benchmarking is a systematic method by which organizations can measure themselves
against the best Industry practices.
 It promotes superior performance by providing an organized framework through which
organization learn how the “ best in class” do things.
 Intensive studies of existing practices often lead to identification of non-value added
activities and plans for process improvement.
 It helps for continuous improvement.
 Benchmarking inspire managers (and organization) to compete.
 Through Benchmark process organization can borrow ideas, adopt and refine them to gain
competitive advantages.
 Benchmarking provides a basis for training human resources.



18

Disadvantages
 The most resistant criticism of Benchmarking comes from the idea of copying
others.
 It is not a strategy nor is it intended to be a business philosophy. Therefore, it is
a time taking technique.
 Benchmarking is not “instant pudding”. It will not improve performance if
proper infrastructure of Total Quality Management is not in place.



19

Conclusion
Now a days, more than 60% companies in the world uses this
technique for fixing their target for continuous improvement. For
them it is an important tool. But to be effective it must be used
properly. It breaks down (waste money, time and energy and some
times morale too) if process owners and managers feel threatened or
do not accept and act on the findings. Finally, benchmarking is not a
substitute for innovation; however, it is a source of ideas from
outside the organization.



20

Thank you
and
Have a Nice Day…



21

Benchmarking Process Explained

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