Seven Steps In The Benchmarking Process Business Essay

Seven Steps In The Benchmarking Process Business EssayBenchmarkingis the plow of comparing ones business processes andper holdance metricsto industry outstrips or dress hat bores from other industries. Dimensions typic completelyy measured argon quality, condemnation and be. In the process of benchmarking, solicitude identifies the best firms in their industry, or in another industry where similar processes exist, and compargon the results and processes of those studied (the targets) to ones own results and processes. In this way, they learn how well the targets per construct and, to a greater extent importantly, the business processes that explain why these firms be successful.Benchmarking is used to measure performance using a peculiar(prenominal)indicator(cost per unit of measure, productivity per unit of measure, troll time of x per unit of measure or defects per unit of measure) resulting in a metric of performance that is then compared to others.Also referred to as be st give benchmarking or process benchmarking, this process is used in management and particularly strategic management, in which organizations evaluate various aspects of their processes in relation to best practice companies processes, unremarkably at heart a peer group defined for the purposes of comparison. This then allows organizations to develop plans on how to make improvements or adapt special(prenominal) best practices, usually with the aim of increasing some aspect of performance. Benchmarking whitethorn be a one-off event, nevertheless is ofttimes treated as a continuous process in which organizations continually seek to improve their practices.BASICS OF BENCHMARKINGIndian organizations are fit world class both in terms of size and performance. at that placefore, there is a greater need to become superior in performance consistently. Quality is becoming the hallmark for both products and services. Indian and multinational organizations are increasingly becoming qua lity conscious and try to deliver high quality products and services to customers.Quality deli very(prenominal) which was the property of General Electric, Ford, General motors, Xerox and ATT had become the tooshiet in many corporate circles in India as well. From Software major Infosys to Automobile giant Mahindra are adopting best in class technologies, borrows and adopt best ideas, incubate and implement them as part of their corporate strategy.As individuals do swot outline, companies have to do swot analysis for their competitive advantage and for retentive term survival. The external competitive pressure on the system had made its absolutely necessary to benchmark with similar organizations or organizations of diametric breed.However, benchmarking tinnot cure all diseases of the company. Why the companies benchmark? Instead of being inward looking companies, large corporations are more outward looking nowadays. Liberalization and globalization had made the industries ve ry competitive. Equally the transfer and adoption of technologies are more easier nowadays.The other advantage of benchmarking is the lowest cost associated with the process. The companies do not invest sizeable investments in interrogation and development and there is no threat of any sunk cost. The process or practice or technology are readily available and good be plagiarized.A company that decides to undertake a bench-marking initiative should consider the following questions When? Why? Who? What? and How?WHENBenchmarking can be used at any time, but is usually performed in response to needs that arise within a company. According to C.J. McNair and Kathleen H.J. Leibfried in their bookBenchmarking A Tool for Continuous Improvement,some electromotive force triggers for the benchmarking process includequality programscost reduction/budget processoperations improvement effortsmanagement changenew operations/new venturesrethinking actual strategiescompetitive assaults/crisesWHYT his is the most important question in managements decision to begin the benchmarking process. McNair and Leibfried suggest several reasons why companies may embark upon benchmarkingto signal managements willness to watch a philosophy that embraces change in a proactive rather than reactive mannerto establish meaningful goals and performance measures that reflect an external/customer focus, foster quantum leap thinking, and focus on high-payoff opportunitiesto create early awareness of competitive disadvantage andto promote teamwork that is based on competitive need and is s realised by concrete data analysis, not intuition or gut feeling.WHOCompanies may decide to benchmark sexually, against contests, against industry performance, or against the best of the best. midland benchmarking is the analysis of real practice within various departments or divisions of the organization, looking for best performance as well as accounting baseline activities and drivers. Competitive ben chmarking looks at a companys direct competitors and evaluates how the company is doing in comparison. Knowing the strengths and weaknesses of the competition is not only important in plotting a successful strategy, but it can also suspensor prioritize areas of improvement as specific customer expectations are identified. Industry benchmarking is more trend-based and has a much broader scope. It can armed service establish performance baselines. The best-in-class form of benchmarking examines multiple industries in search of new, innovative practices. It not only provides a broad scope, but also it provides the best opportunities over that range.WHATBenchmarking can focus on roles, processes, or strategic issues. It can be used to establish the function or mission of an organization. It can also be used to examine existing practices while looking at the organization as a whole to identify practices that support major processes or critical objectives. When focusing on specific proc esses or activities, the depth of the analysis is a call issue. The analysis can take the form of vertical or horizontal benchmarking. Vertical benchmarking is where the focus is situated on specific departments or functions, while horizontal bench-marking is where the focus is placed on a specific process or activity. Concerning strategic issues, the objective is to identify factors that are of greatest importance to competitive advantage, to define measures of excellence that capture these issues, and to isolate companies that appear to be top performers in these areas.HOWBenchmarking uses diametrical sources of information, including published material, change meetings, and conversations with industry experts, consultants, customers, and tradeing representatives. The emergence of Internet technology has availd the bench-marking process. The Internet offers access to a number of databases-like Power-MARQ from the nonprofit American Productivity and Quality Center-containing performance indicators for thousands of different companies. The Internet also enables companies to conduct electronic surveys to collect bench-marking data. How a company benchmarks may depend on available imaginativenesss, deadlines, and the number of alternative sources of information.ADVANTAGES OF BENCHMARKINGLowering childbed CostsOne advantage of benchmarking may be lower labor costs. For example, a small manufacturing company may study how a top competitor uses robots for several basic plant functions. These robots may help the competitor save a significant amount of money on labor costs. Company managers may obtain information on these robotics systems through the competitors website or online articles. They may also identify the company that sold the competitor the robots. Subsequently, the company using benchmarking may list the robot manufacturer to help set up its own system. up(p) Product QualityCompanies may also use benchmarking to improve product quality. Engineer s sometimes purchase leading competitors products. They may then take them apart, study them and determine how the competitors products outlast or outperform others in the industry. Chemical engineers may study victuals or cleaning products in a similar manner. They can then compare various elements contained in competitive products to their own product line. Subsequently, improvements can be made to product quality.Increasing Sales and ProfitsA company that uses benchmarking to improve its functions, operations, products and services may enjoy increases in sales and profits. Customers are presumable to notice these improvements. The benchmarking company may also promote is improvements through company brochures, its sales reps, magazine and television ads. These efforts are likely to increase sales, especially among event customers. Companies that operate more efficiently due to benchmarking can drastically lower their expenses. These savings can be lead to greater profits.Consi derationsSome organizations use inseparable benchmarking to improve performance in different departments. Department managers may study and emulate the best practices of one particular department. These changes may spark improvements among all departments. Internal benchmarking has its limitations, however. The companys top department may not be functioning as efficiently as others in the industry. This means the other departments were not truly benchmarking against the best departments out there.PROCESS OF BENCHMARKINGWhen it comes to Competitive Intelligence, there are a hardly a(prenominal) simple tools that can provide for sophisticated comparisons of business functions between organizations that can help firms benchmark the constituent processes of the company with direct or indirect competitors, allowing a company to gain the upper hand in a marketplace. But, what is the process for mount the metrics, methodologies, milestones and comparisons which efficiency be used to me asure the success of a CI/benchmarking function, or the success of a Strategic Planning department as a whole?Benchmarking is best used and described as a framework for strategic planning in that, once elements of study are identified, metrics can be applied to the key success factors (KSFs) of the industry or marketplace and these measures or benchmarks are then used to develop future quality and market initiatives for the firm to lift its overall competitive position.It is generally considered that there are seven steps to this process, as explained below. However, this analysis of intra- and sometimes inter-industry competitors can form the invention for future competitor analysis when the emphasis is placed upon the goals and financial capabilities of the competitor.Seven Steps in the Benchmarking Process1. Determine which functional areas within your operation are to be benchmarked those that will benefit most from the benchmarking process, based upon the cost, importance an d potential of changes following the study.2. Identify the key factors and variables with which to measure those functions usually in the general form of financial resources and product strategy.3. Select the best-in-class companies for to each one area to be benchmarked those companies that perform each function at the lowest cost, with the highest degree of customer satisfaction, etc. Best-in-class companies can be your direct competitors (foreign or domestic), or even companies from a different industry (parallel competitors with replacement or substitute products or services latent competitors which might backwards- or forwards-integrate into your market or,out-of-industry firms with whom you do not compete, but which have best-in-class areas to be studied such as FedEx or Wal-Mart in logistics).4. Measure the performance of the best-in-class companies for each benchmark being considered from sources such as the SEC, companies themselves, articles in the press or trade journ als, analysts in the market, credit reports, clients and vendors, trade associations, the government or from interviews with other organizations willing to share their prior research or swap it with you.5. Measure your own performance for each variable and begin comparing the results in an apples-to-apples format to determine the gap between your firm and the best-in-class examples. Always feel free to estimate results, as exact measures are usually disproportionately difficult to obtain and often do not significantly add value to the study.6. Specify those programs and actions to meet and surpass the competition based on a plan developed to enhance those areas that show potential for compliment. The firm can choose from a few different approaches from simply trying harder, to emulating the best-in-class, changing the rules of the industry or leapfrogging the competition with introduction or technology from outside the industry.7. Implement these programs by setting specific impro vement targets and deadlines, and by development a monitoring process to review and modify the analysis over time. This will also form the basis for monitoring, revision and recalibration of measurements in future benchmarking studies.DIFFERENT MEASURES OF BENCHMARKINGOne of benchmarkings cardinal questions is that of what to measure. That depends on the nature of the business. The portend is that you cannot chase 50 benchmarks at the same time. One macro benchmark is required which then might be broken down into a serial publication of supporting micro measures.Although it is fine to circulate such a measure, the most worthwhile aspect of the benchmarking process can be the opportunity for people in an organisation to see at first hand how other organisations go about their business. It is the process itself which is valuable the voyage that is more educational than the reaching of the destination. Nevertheless, mensural performance falls into the three broad areas time cost an d quality.Time measures should incorporate the process from start to finish. For example, from when a customer places an order to the time of pass of goods and payment, thereby accounting for total lead time, product development time and productive time.Cost measures are the traditional basis of comparison between firms and, because of this, we are often most comfortable with these measures. Two which can be useful in benchmarking are total process cost per unit of output and exit on assets.Quality measures should capture the errors, defects and waste attributable to processes. Some measures which should be used in achieving this include process variability, defects, process yields, customer perceived quality, cost of quality and quality improvement efforts.TYPES OF BENCHMARKINGThere are a number of different types of benchmarking, as summarised belowTypeDescriptionMost Appropriate for the adjacent PurposesStrategic BenchmarkingWhere businesses need to improve overall performance by examining the long-term strategies and general approaches that have enabled high-performers to succeed. It involves considering high level aspects such as core competencies, developing new products and services and improving capabilities for dealing with changes in the external environment.Changes resulting from this type of benchmarking may be difficult to implement and take a long time to materialiseRe-aligning business strategies that have become inappropriatePerformance or Competitive BenchmarkingBusinesses consider their position in relation to performance characteristics ofkey products and services.Benchmarking partners are drawn from the same sector. This type of analysis is often undertaken through trade associations or third parties to protect confidentiality.Assessing relative level of performance in key areas or activities in comparison with others in the same sector and finding ways of closing gaps in performanceProcess BenchmarkingFocuses on improving specificcritic al processes and operations. Benchmarking partners are sought from best practice organisations that perform similar work or deliver similar services.Process benchmarking invariably involves producing process maps to facilitate comparison and analysis. This type of benchmarking often results in short term benefits.Achieving improvements in key processes to obtain quick benefitsFunctional BenchmarkingBusinesses look to benchmark with partners drawn from different business sectors or areas of activity to find ways of improving similar functions or work processes. This sort of benchmarking can lead to innovation and dramatic improvements.Improving activities or services for which counterparts do not exist.Internal BenchmarkingInvolves benchmarking businesses or operations from within the same organisation (e.g. business units in different countries). The main advantages of internal benchmarking are that access to sensitive data and information is easier standardised data is often readil y available and, usually less time and resources are needed.There may be fewer barriers to implementation as practices may be relatively easy to transfer across the same organisation. However, real innovation may be pretermiting and best in class performance is more likely to be found through external benchmarking.Several business units within the same organisation exemplify good practice and management want to spread this expertise quickly, throughout the organisationExternal BenchmarkingInvolves analysing outside organisations that are cognise to be best in class. External benchmarking provides opportunities of learning from those who are at the leading edge.This type of benchmarking can take up significant time and resource to ensure the comparability of data and information, the credibility of the findings and the development of sound recommendations.Where examples of good practices can be found in other organisations and there is a lack of good practices within internal busin ess unitsInternational BenchmarkingBest practitioners are identified and analysed elsewhere in the world, perhaps because there are too few benchmarking partners within the same country to produce valid results.Globalisation and advances in information technology are increasing opportunities for international projects. However, these can take more time and resources to set up and implement and the results may need careful analysis due to national differencesWhere the aim is to achieve world class position or simply because there are insufficientnational businesses against which to benchmark.SUCCESSFUL BENCHMARKINGThere are several keys to successful benchmarking. Management commitment is one that companies frequently name. Since management from top to bottom is responsible for the continued operation and evaluation of the company, it is imperative that management be committed as a team to using and implementing benchmarking strategies. A buckram network of personal contacts as wel l as having an open mind to ideas is other keys. In order to implement benchmarking at all stages, there must be a well-trained team of people in order for the process to work correctly and efficiently. Based on the information gathered by a well-trained team, there must also be an effort toward continuous improvement. Other keys include a benchmarking process that has historical success, sufficient time and staff, and complete perceptiveness of the processes to be benchmarked.In almost any type of program that a company researches or intends to implement, there must be goals and objectives set for that specific program. Benchmarking is no different. Successful companies determine goals and objectives, focus on them, keep them simple, and follow through on them. As in any program, it is always imperative to gather accurate and consistent information. The data should be understood and able to be defined as well as measured. The data must be able to be interpreted in order to make comparisons with other organizations. Lastly, keys to successful benchmarking include a thorough follow-through process and assistance from consultants with experience in invention and establishing such programs.