Seven Steps In The Benchmarking Process Business Essay

Seven Steps In The Benchmarking Process Business renderBenchmarkingis the litigate of examine ones commerce accomplishes and operation poetic rhythmto industriousness bests orbest practices from differentwise industries. Dimensions typic every(prenominal) in ally measured atomic tour 18 quality, time and cost. In the do by of benchmarking, perplexity identifies the best firms in their industry, or in a nonher(prenominal) industry where convertible kneades exist, and comp atomic number 18 the results and processes of those studied (the targets) to ones own results and processes. In this way, they visualize how well the targets perform and, more importantly, the rail line processes that explain why these firms be successful.Benchmarking is used to measure death penalty using a specialized forefinger(cost per social unit of measure, mathematical productivity per unit of measure, cycle time of x per unit of measure or defects per unit of measure) resulting in a me tric of mathematical process that is then compargond to others.Also referred to as best practice benchmarking or process benchmarking, this process is used in management and particularly strategic management, in which organizations evaluate dissimilar aspects of their processes in relation to best practice companies processes, normally deep down a peer group defined for the purposes of comparison. This then allows organizations to ascend plans on how to make progressions or adapt specific best practices, usually with the aim of increasing some aspect of performance. Benchmarking whitethorn be a one-off event, but is very much treated as a continuous process in which organizations continually seek to change their practices.BASICS OF BENCHMARKINGIndian organizations ar becoming world class both in full frontiers of coat and performance. Therefore, there is a greater need to become superior in performance coherently. Quality is becoming the hallmark for both products and services. Indian and international organizations atomic number 18 increasingly becoming quality conscious and try to gear high quality products and services to customers.Quality delivery which was the property of planetary Electric, Ford, General motors, Xerox and ATT had become the buzzword in m either bodied 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 exhaust them as part of their corporate strategy.As individuals do swot analysis, companies lose to do swot analysis for their militant advantage and for long term survival. The outside emulous fixure on the system had do its abruptly necessary to benchmark with similar organizations or organizations of different breed.However, benchmarking cannot cure all diseases of the lodge. Why the companies benchmark? Instead of being inward looking companies, stupendous corporations are more outward looking nowadays. Liberalization and globalization had do the industries very 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 estimable investments in research and schooling and there is no threat of any sunk cost. The process or practice or technology are readily usable and easily be plagiarized.A fraternity that decides to compact 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 reply to needs that arise within a company. According to C.J. McNair and Kathleen H.J. Leibfried in their moderateBenchmarking A Tool for Continuous Improvement,some capability triggers for the benchmarking process entanglequality programscost reduction/budget processoperations expediency effortsmanagement changenew operations/new ventur esrethinking existing strategiescompetitive assaults/crisesWHYThis is the most important question in managements decision to fuck off the benchmarking process. McNair and Leibfried suggest several(prenominal) reasons why companies may embark upon benchmarkingto signal managements willingness to lease a philosophy that embraces change in a proactive kind of 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 earliest awareness of competitive disadvantage andto promote teamwork that is found on competitive need and is driven by concrete data analysis, not misgiving or gut feeling.WHOCompanies may decide to benchmark internally, a relieve oneselfst rivals, against industry performance, or against the best of the best. Internal benchmarking is the analysis of existing practice within unlike departments or divisions of the organization, lo oking for best performance as well as identifying baseline activities and drivers. belligerent benchmarking 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 help prioritize areas of utility as specific customer expectations are identified. Industry benchmarking is more trend-based and has a much commodiouser scope. It can help establish performance baselines. The best-in-class form of benchmarking catchs seven-fold industries in search of new, innovative practices. It not only pop the questions 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 incline or mission of an organization. It can also be used to examine existing practices part looking at the organization as a whole to ide ntify practices that support major processes or critical objectives. When center on specific processes or activities, the depth of the analysis is a rouge issue. The analysis can take the form of vertical or plain benchmarking. Vertical benchmarking is where the focus is placed on specific departments or pass a slipway, 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 enormousness to competitive advantage, to define measures of excellence that capture these issues, and to isolate companies that appear to be acme performers in these areas.HOWBenchmarking uses different sources of nurture, including published material, trade meetings, and conversations with industry experts, consultants, customers, and market representatives. The emergence of net profit technology has facilitated 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 resources, deadlines, and the number of alternative sources of information.ADVANTAGES OF BENCHMARKINGLowering advertise apostrophizesOne advantage of benchmarking may be lower force back costs. For example, a small manufacturing company may study how a crest competitor uses robots for several basic plant functions. These robots may help the competitor save a monumental amount of money on crusade 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 call the robot manufacturer to help p ractise up its own system.Improving Product QualityCompanies may also use benchmarking to improve product quality. Engineers sometimes purchase go alonging competitors products. They may then take them apart, study them and descend how the competitors products outlast or beat out others in the industry. Chemical engineers may study food or change 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 in all likelihood 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 liable(predicate) to increase sales, curiously among core customers. Companies t hat operate more efficiently due(p) to benchmarking can drastically lower their expenses. These savings can be lead to greater profits.Considerations many organizations use internal benchmarking to improve performance in different departments. subdivision 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 gist the other departments were not truly benchmarking against the best departments out there.PROCESS OF BENCHMARKINGWhen it comes to Competitive Intelligence, there are a few simple tools that can provide for sophisticated comparisons of business functions between organizations that can help firms benchmark the section 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 circumstancesting the metrics, methodologies, milestones and comparisons which dexterity be used to measure 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 modeling for strategic planning in that, once elements of study are identified, metrics can be applied to the light upon success factors (KSFs) of the industry or marketplace and these measures or benchmarks are then used to develop incoming quality and market initiatives for the firm to enhance its overall competitive function.It is mostly 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 foundation for future competitor analysis when the fury is placed upon the goals and financial capabilities of the competitor.Seven Steps in the Benchmarking Process1. fall which functional areas with in your operation are to be benchmarked those that will profit most from the benchmarking process, based upon the cost, importance and 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 each 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 office backwards- or forwards-integrate into your market or,out-of-industry firms with whom you do not compete, but which arouse best-in-class areas to be studied such as FedEx or Wal-Mart in logistics).4. Measure the performance of the best-in-class c ompanies for each benchmark being considered from sources such as the SEC, companies themselves, articles in the press or trade journals, 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 flip 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. continuously 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 merely trying harder, to emulating the best-in-class, changing the rules of the industry or leapfrogging the competition with innovation or technology from outside the industry.7. Implement these programs by setting specific improvement targets and deadlines, and by developing a monitoring process to review and modify the analysis over time. This will also form the basis for monitoring, rescript 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 record of the business. The point is that you cannot chase 50 benchmarks at the homogeneous time. One big benchmark is required which then might be broken down into a series 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 foremost hand how other organisations go about their business. It is the process itself which is valuable the sail that is more educational than the reaching of the destination. Nevertheless, measurable performance falls into the tierce broad areas time cost and quality.Time measures should incorporate the process from source to finish. For example, from when a customer places an order to the time of receipt of goods and payment, thereby explanation 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 replication on assets.Quality measures should capture the errors, defects and waste attributable to processes. Some measures which should be used in achieving this take on process variability, defects, process yields, customer comprehend quality, cost of quality and quality improvement efforts.TYPES OF BENCHMARKINGThere are a number of different types of benchmarki ng, as summarised belowTypeDescription more or less Appropriate for the Following 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 go across 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 base 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 specificcritical 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. busine ss units in different countries). The main advantages of internal benchmarking are that access to crude data and information is easier standardised data is often readily available and, usually less time and resources are needed.There may be fewer barriers to implementation as practices may be relatively diffuse to transfer across the same organisation. However, real innovation may be lacking 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 indirect request to spread this expertise quickly, throughout the organisationExternal BenchmarkingInvolves analysing outside organisations that are known 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 findi ngs 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 business unitsInternational BenchmarkingBest practitioners are identified and analysed elsewhere in the world, peradventure because there are too few benchmarking partners within the same rustic 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 status 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 strong network of personal contacts as well as having an have 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 accurately 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 understanding of the processes to be benchmarked.In to the highest degree 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 alw ays 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 designing and establishing such programs.