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Analysis>Benchmarking
 

There are numerous definitions of benchmarking, but essentially it involves learning, sharing information and adopting the best practices of other companies to help increase your own company’s performance.

 

So, at its simplest, benchmarking means:

"Improving your company by learning from others".

Most companies tailor definitions of benchmarking to suit their own strategies and objectives. Two examples are given below.

"Benchmarking is simply about making comparisons with other companies and then learning the lessons that those comparisons throw up".

Source: The European Benchmarking Code of Conduct

"Benchmarking is the continuous process of measuring products, services and practices against the toughest competitors or those companies recognised as industry leaders (best in class)".

Source: The Xerox Corporation

 

For those approaching benchmarking for the first time the variation of definitions can be confusing, so it can help to focus on the learning and sharing that goes on during the process. In practice, benchmarking usually involves:

  • Frequently comparing aspects of performance (functions or processes) with best practitioners in the business
  • Identifying gaps in your performance
  • Seeking fresh approaches to bring about improvements in performance
  • Following through with implementing improvements
  • Following up by monitoring progress and reviewing the benefits

The steps to follow when benchmarking against external companies are:

Step 1 - Before you start benchmarking, you need to be clear on what it is you want to benchmark.  There may be particular interest in focusing on areas such as costs or complaints or locations. Staff training, recruitment and personnel policies may be relevant.  There may be some standard measures or quality measures in the industry. So you need to set your benchmark goals.

Step 2 - Decided on what you will benchmark, the next step is to identify whom to benchmark.    The aim is usually to find the best in the industry and where appropriate the world’s best. But don’t leave out any new comers who may have future potential to become the leaders.

Step 3Decide how to measure.  For competitive benchmarking the possibilities for finding data to measure against are, library databases, specialist industry reviews in newspapers or journals, specialist surveys, trade magazines, market research, special surveys, factory visits, annual financial reports and published accounts, trades and sales literature, quotations from the companies themselves and consultants (who may be able to disclose information). 

Step 4Measure the data and make comparisons against your practices. Then decide what process improvements you need to make.  Use the data to make comparisons with your service, product, prices etc and determine where you can make changes to your service or processes to achieve the similar service to the company you are benchmarking with.  If a factory visit has been possible, compare processes, theirs to yours.  Identify and analysis the gaps between the service you provide and the service provide with the company you are visiting to determine if it would be feasible to make any improvements. 

Step 5 – The final step is to plan the improvements to your process and implement the changes.  Following the steps in the DMAIC will help you to carry to plan, implement and carry out the changes (click to read about the DMAIC)

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