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

Visit Costs

Benchmarking Costs

Benchmarking Database Costs

Time 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/resourcesanalysis

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, companys 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 twothirds Manufacturing costs cut in half

Development time cut by twothirds 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.