BENCHMARKING

The benchmarking process is defined as a systems way to identify superior products, services, process and practice that can be adopted into an organization to reduce costs, decrease cycle time, cut inventory and provide satisfaction to customers. According to Kehoe (1996) benchmarking can be defined as measuring the performance of the processor within your organization, comparing these performance levels with the best in class companies and where deficiencies exist, and using the information on the best practices to improve your organizations own business processes. Benchmarking involves looking outside a particular business, organization, industry, region or country to examine how others achieve their performance levels and to understand the processes they use application of Benchmarking involves four 1. Understanding in detail existing business process 2. Analyze the business processes of others 3. Compare own business performance with that of others analyzed Implement the steps necessary to close the performance gap Benefits of Benchmarking: 1. It enables the best practices from any industry to be creatively incorporated into the process of the Benchmarked function. 2. It can provide stimulation and motivation to the professionals whose creativity is required to perform and implement Benchmark findings. 3. It helps in meeting more effectively the customer requirements. 4. It support in establishing goals based on concerted view of external conditions. 5. It helps in determining true measure of productivity and effectiveness. 6. It assists in attaining a competitive position. 7. It helps in becoming aware of and searching for industry best practices.

Benchmarking process:- Starting with Xerox Corporation, many companies have attained world class status with the technique of benchmarking. Many Indian companies like HDFC, IFB, Infosys, Kirloslar, Thermax and Indal have achieved a great success in their performance with the help of benchmarking principles and practices. The benchmarking process has five generic phases and twelve steps for implementation.

Phases
Planning

Steps
1. Earmark what is to be benchmarked? 2. Indentify the best competitors. 3. Determine the data collection method and start collecting data. 4. Determine The Current Performance GAP. 5. Project future performance levels. 6. Communicate benchmark findings and gain acceptance. 7. Establish functional goals

Analysis Integration

Communicate data for analysis

Give acceptance for analysis

Action

Maturity

8. Develop action Plans 9. Implement specific actions and monitor progress. 10. Recablibrtae benchmark. 11. Attain the ledaership position. 12. Integrate practices into the process.

Phase-I Planning- Involve three basic steps: What, Who and How (i) Identify what is to be benchmark. Almost everything can be benchmarked including products and services. e.g. 1. Manufacturing methods 2. Inventory control and management.
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3. Warehousing and delivery services. 4. Production Technologies. 5. Automation technique. 6. Product performance. 7. Quality systems. 8. Product development process. 9. Understanding and collecting customer needs. 10.Design tools and techniques. 11.Marketing techniques. In this step identify the subject (product or process) to be benchmarked. Set up a team with a leader. Identify measures important to customer and to the business to be benchmarked. Identify a benchmarking team to pilot the activity within the organization. (ii) To whom or what shall we compare- Identify the world class companies that have a similar product or process. The whole idea underlying the benchmarking is comparison. Compare the use of ones assets vis--vis competitors. After the best practice (competitor) is identified its product; equipments as well as image could be benchmarked. Modi Xerox in India made its first attempt in benchmarking when the canon colour copier was launched. The marketing team was posed for the challenge of not only entering the same product area but also gathering higher market share. Within six months Modi Xerox has achieved its goal. According to B K Modi What was considered impossible was rendered feasible because we had a competitor who has shown us the ways as a benchmark. All we have to do was to find the way of doing the same thing better and faster. (iii) How will the data be collected? (Determine the data collection method and collect data) There is no one single way to conduct benchmarking investigations. There is a process. There are indefinite varieties of ways to obtain required data. Most data are readily and publicly available. Methods of data collection may include primary and secondary data sources, opinion
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surveys, examination, trial purchasing, telephone enquiries, analysis of annual reports and other published source of data. Following trade journals or trade association contacts and using consultants services are also well recognized sources of benchmarking data. Phase-II Analysis- The analysis encompasses two steps. (iv) Determine current performance GAP and (v) Project future performance levels. The benchmarking process is a comparative analysis. What is desired is an understanding of internal performance on which to assess strength and weakness. Are the benchmarking partners better? Why are they better? By how much? What best practices are being used now or anticipated. How can their practice be incorporated or adopted for implementation. Answer to these questions will be dimensions of any performance gap, negative, positive or parity. Project future performance levels - The gap is a projection of performance and therefore will be one which changes as industry practical change. What is needed is not only an understanding of todays practices but also an understanding of where performance will in the future. The benchmarking should be a continuous process so that performance is constantly recalibrated to ensure superiority. Phase-III Integration:- It is the process of using benchmark findings to get operational targets for change. It involves careful planning to incorporate new practices in the operation and ensure that benchmark findings are incorporated in all formal planning process. (vi) Communicate benchmark findings and gain acceptance. The first step is to gain operational and management acceptance of benchmark findings must be clearly and convincingly communicated to all organizational levels to obtain support, commitment and ownership. The benchmark findings are converted into statement of

principles by which the organization will improve itself to meet customer needs and to attention superiority. (vii) Establish functional goals on the basis of communicated data and acceptance of analysis. We should develop the functional goals and achieve them through the benchmarking process. Phase-IV Action- It has two steps. (viii) Implement specific action and monitor progress. After implementing the plans, one has to periodically asses and reports the progress. (ix) Recalibrate benchmarking- The updating may require the recalibration of the competitive benchmarking data. It should be sufficient to indicate what is happening as a result of your actions. It should also reflect what your competitor is doing. Phase-V Maturity Maturity would be reached when best industry practices are incorporated in all business process thus ensuring superiority. Maturity comes when it becomes an ongoing essential and self initialed process of management. Benchmarking process at PDCA cycleWhat should we Benchmark, Whom should we Benchmark

PLAN Adaption improvement & Implementation of findings Conducting the research collect primary & secondary data

ACT CHECK

DO

Analysis of Data Determine performance Gap Identify the process that improves the performance

TYPES OF BENCHMARKING 1. Internal Benchmarking one of the easiest benchmarking investigations is to compare the internal operations multi division or multi-national or large firms with similar functions in different operating units e.g. Eicher demm it is benchmarking parwanao (HP) unit with their own manufacturing units in Faridabad and Alwar to improve production methods and practices. 2. External Benchmarking a. Competitive benchmarking Direct product competitors are the most obvious to benchmark against. In this benchmarking investigations must show the comparative advantages and disadvantages between direct competitors. Though it is difficult to get information, the third party assistance may be taken such as a Tata consultancy services. b. Functional Benchmarking There is a great potential for indentifying functional competitor or industry leader firm to bench mark even if in dissimilar industries. This would involve, in the case of logistics, indentifying those firms that are recognized as having superior logistics functions wherever they exist. c. Generic Benchmarking some business functions or processes are the same regardless of dissimilarities of industry one such process is the order fulfillment process. It can be described as the order entry, customer services, warehouse order handing invoicing and collecting functions. A wide cross section of firms must perform these functions to satisfy customers. If such a process is to be benchmarked, the product or industry may not be limiting.
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