DEFINITION OF BENCHMARKING

According to L. S. Pryor, "Benchmarking is measuring performance against that of

best-in-class organizations, determining how the best in performance levels, and
using the information as the basis for goals, strategies, and implementation.

Essential in this definition are two elements. First measuring performance requires
some sort of unit of measure. These are called metrics and are usually expressed
numerically. The numbers realized by the best- in-class benchmark are the target.
The organization looking for improvement then plots its own performance against
the target. Second, benchmarking requires that managers understand why their
performance differs. Benchmarking is about setting goals and objectives, and about
meeting them by improving processes.

REASONS TO BENCHMARK

Benchmarking is a tool to attain business and competitive objectives. It is powerful

and effective when used for the right reasons and aligned with organizational
strategy. It is not a remedy that can replace all other quality efforts or Management
processes. Business organizations must still determine which markets to serve and
decide the strengths that will enable them to gain competitive advantage.
Benchmarking is one tool to help business organizations develop those strengths
and lessen weaknesses.

Benchmarking is time and cost efficient. Because the process involves imitation and
adaptation rather than pure invention time and money are saved. Benchmarking
partners provide a marking model of an improved process, which reduces some of
the planning, testing, and prototyping effort. As the old saying goes, why reinvent
the wheel?

The major weakness of benchmarking is the fact that bet- in-class performance is a
moving target. New technology, in particular, can create quantum leap performance
improvements.

Example: The uses of Electronic Data Interchange (EDI). Car manufacturers no

longer use paper to purchase parts from supplier. A computer inventory and
transmits orders directly to a suppliers computers. The supplier delivers the goods
and payment is electronically transmitted to the suppliers bank. SM and Robinsons
uses bar-code scanners and satellite data transmission to restock its stores, often in
a matter of hours. These application of EDI save tens of thousands of worker hours,
as well as help to meet the customer requirements
PROCESS OF BENCHMARKING

Business organizations that benchmark adapt the process to best fit their own
needs and culture. Although the number of steps in the process may vary from
organization to organization, the following six steps contain the core techniques,
such as:

1. Decide what to benchmark.

2. Understand current performance

3. Plan.

4. Study others.

5. Lead from the data.

6. Use the findings.

BENCHMARKING PLANNING

Benchmarking planning is a learning process. In other words, the entire purpose of

benchmarking is to learn. There is a tendency to want to call several business
organizations immediately and schedule visits. This activity is usually a waste of
time. It is better first to find appropriate benchmarks partners.

There are three types of benchmarking, namely: Internal, comparative, and

process. In most big business organizations, the same tasks are performed in
different operating divisions. Internal comparisons have several advantages. Data
are easy to obtain because problems of confidentiality don't exist. Often dialog with
internal groups generates immediate improvement ideas or defines common
problems that help to focus external inquiries.

Process benchmarking is also known as a fictional or generic benchmarking. The

idea is that many processes are common across industry boundaries, and
innovations from other types of business organizations can be applied across
industries. Example, ever industry has a payroll and accounts receivable functions.
All kinds of business organizations design new products and have material
management