What Is Benchmarking

Introduction:

Benchmarking is based on Sun Tzu’s rule of the art of good war: ‘To know yourself and your enemy’. "Benchmarking is the process of measuring an organization's internal processes then identifying, understanding, and adapting outstanding practices from other organizations considered to be best-in-class. The definition opens up the possibility that you should not only look at your toughest competitors but also to other companies from which you may learn something.

Definition of benchmarking:

Benchmarking is a systematic and continuous measurement process; a process of continuously measuring and comparing an organization’s business processes against business process leaders anywhere in the world to gain information which will help the organization take action to improve its performance.

This definition was published by the American Productivity and Quality Center in 1992.

Features of the benchmarking:

1. It is important to underline that benchmarking is not the same as copying. As W.E. Deming (1993) put it in a speech at Hewlett Packard: ‘It is a hazard to copy. It is necessary to understand the theory of what one wishes to do.’

2. Benchmarking may form the basis of a renewed development in a company as this tool helps to identify the processes in which the best possibilities of improvements lie. The solutions used in other companies, however, can only very seldom be transferred directly to the company in question. Adjustments in some form will be made but the understanding of the ‘theory’ behind the solutions should always form the basis of current improvements.

TYPES OF BENCHMARKING:

Dependent on the object of analysis, benchmarking is normally divided into the following three types:

1. Internal benchmarking

2. Competitor benchmarking

3. functional/generic benchmarking.

The objects of analysis of internal benchmarking are departments, divisions, or sister companies of the same concern in order to identify the best performance of a given activity within the company.

Internal benchmarking:

In many companies the same activity is displayed in many different places, e.g. order booking, stocking, distribution and product development. In this case, it would be natural to start seeking the ‘best practice’ internally in the company.

Advantages:

• The advantages thereof are firstly to ease the admittance to information and data.
• Secondly, this form of benchmarking opens up the possibility of a deep understanding of how benchmarking can be implemented. 
• Furthermore, experience shows that internal benchmarking improves the internal level of performance and the internal customer satisfaction through reduction of the variations of quality and productivity and it improves at the same time the ability to communicate and co-operate in the company.

Disadvantages:

By examining the disadvantages of internal benchmarking, it must be that only very rarely are ‘world class performances’ found internally in the company. The consequences thereof are that internal benchmarking cannot stand alone but is the first step on the road towards the final goal of benchmarking: to be the ‘best in class’.