Benchmarking

What is Benchmarking?

• process of comparing one's business processes to industry bests

• Dimensions : quality, time and costs

• management identifies the best firms

• results are compared

• "best practice benchmarking" or "process benchmarking“

• used in strategic management

• purposes of comparison

• make improvements

• Aim of increasing performance

• Continuous process

Use of Benchmarking• In 2008, a comprehensive survey

was commissioned

• The results showed that use of :

SWOT analysis : 72%

Informal Benchmarking : 68%

Performance Benchmarking : 49%

Best Practice Benchmarking : 39%

Benefits of Benchmarking

• eliminates guesswork

• Builds confidence

• prioritize improvement opportunities

• Shifts internal thinking

• excellent baseline "report card"

• "raise the bar“

• real desire to improve

• "work smarter" instead of "working harder“

• Accelerates understanding

• latest practices

• Motivates synergy

• Removes emotion

Collaborative benchmarking• carried out by groups of

companies

• subsidiaries of a multinational in different countries

• Dutch municipally-owned water supply companies : since 1997

• UK construction industry : late 1990s

12 stage procedure

• Select subject

• Define the process

• Identify potential partners

• Identify data sources

• Collect data and select partners

• Determine the gap

• Establish process differences

• Target future performance

• Communicate

• Adjust goal

• Implement

• Review and recalibrate

Typical Benchmarking Methodology

• Identify your problem areas

• Identify other industries

• Identify leaders in these areas

• Survey companies for measures

• Visit the "best practice" companies

• Implementation

Benchmarking Costs

Visit Costs

Time CostsBenchmarking Database Costs

Technical/product benchmarking• compare existing corporate

strategies

• comparison of technical products

• automotive industry

• data is obtained by fully disassembling existing cars

• initially carried out in-house by car makers

Types• Process benchmarking

• Financial benchmarking

• Benchmarking from an investor perspective

• Performance benchmarking

• Product benchmarking

• Strategic benchmarking

• Functional benchmarking

• Best-in-class benchmarking

• Operational benchmarking

• Energy benchmarking

Benchmarking Tools• Matrix technology

• Comparison tables

• Graphs: Pie chart, Bar chart / Histogram

• SWOT analysis Potential/resources-analysis

• Price/performance ratio

• Potential analysis

• Life cycle analysis

• market growth/market share portfolio

• market attractiveness

• Portfolio attractiveness customer

• Technology/resource strength

• Market position

• Contribution margin

• customer satisfaction portfolio

• Revenue share

• Spider web diagram

Metric Benchmarking

• comparisons involves using more aggregative cost

• DEA : used to reward companies

• Regression analysis : firms can be rewarded firms can be penalized

Benchmarking in Xerox

• invented photocopier in 1959

• By 1981, company’s market shrank to 35%

• Horrified by Japanese companies

• “not invented here” syndrome

• instituted the benchmarking process

• productivity, cost, and quality

5 stage process

Xerox Reactions• Suppliers reduced from 5000 to 300

• “Concurrent engineering” were practiced

• Commonality of parts : 20% to 60 to 70%

• Hierarchical organization structure was reduced

• Team Xerox was introduced

Results• Quality problems cut by two-

thirds

• Manufacturing costs cut in half

• Development time cut by two-thirds

• Direct labor cut by 50%

• corporate staff cut by 35%

Quiz

• What are the three dimensions of quality?

• What is the benchmarking done by group of companies called?

• When was the Xerox photocopier invented?

• What is the full form of DEA?

• What are the three dimensions of benchmarking?

Presented By :

• Preetpal Kaur

• Amritraj Singh Sekhon

• Harpal Singh

B.Sc.ATHM – 4th sem.