Benchmarking is the process of finding a company that is superior in a particular area, studying what it does, and gathering ideas for improving one’s own operation in that area. The worst thing for a company is a weak competitor.
Critically discuss this statement with reference to benchmarking procedures and types as well as the seven primary purposes for benchmarking.
Benchmarking is the process of comparing yourself to the competition based on some indicators of performance and deciding who's the best and how to get there (if you are not the best). This strategy is typically used as a management tool to improve the operation and productivity of an organization. The benchmarking is done against the available competition and it gives an idea of how far you have to go in terms of improving operational efficiency. In the absence of competition, a company will not know how much more improvement is possible to make its operation the leanest and most productive (and hence profitable). Thus, lack of a competition (or weak competitor) is the worst thing for a company.
The benchmarking procedure involves the following steps (according to Wikipedia):
- select the subject
- define process
- identify potential partners
- identify data sources
- collect data and select partners
- determine the gap
- establish process differences
- target future performance
- adjust goal
- review and recalibrate
Here the process or unit or subject (say production time, machine idle time, failure rate, etc.) is selected and competition is also selected. The data is collected and analyzed to determine the values of the measured parameters for all the partners/competitors and to determine why someone is lagging behind (area of improvement). The improved strategy is implemented and the results are reviewed. The various types of benchmarking includes process benchmarking, financial benchmarking, product benchmarking, strategic benchmarking, functional and energy benchmarking, etc.
The purpose or benefits of benchmarking are:
- establishing the best practices
- provision of shared management information
- identify and implement positive changes and improvement to benefit service
- evaluation of opinions, views and needs of a customer
- identification of trends, validated by comparison between the competitors
- better resource management, leading to operational savings
- ensuring best quality practices
The benchmarking can help us improve our functions, process, resource management, energy consumption, etc. and a lack of competition or partner to compare/benchmark against will lead to lack of information about how much further improvement we can make and hence would be a non-desirable scenario.