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Benchmarking &
Outsourcing
Prepared by
Narendra Singh Chaudhary
Benchmarking
 Benchmarking is the process of determining who
is the very best, who sets the standard, and
what that standard is. In baseball, you could
argue that seven consecutive World Series
Championships made the New York Yankees
the benchmark.
 If we were to benchmark "world conquest", what
objective measure would we use to compare
Julius Caesar to Adolph Hitler; Gengis Khan to
Napoleon? Which of them was the epitome, and
why?
What is Benchmarking?
 We do the same thing in business. Who is
the best sales organization? The most
responsive customer service department?
The leanest manufacturing operation?
And how do we quantify that standard?
 Thus, we can say that Benchmarking is a
systematic process for identifying and
implementing best or better practices
 Benchmarking is a systematic comparison
of organizational processes and
performance to create new standards or to
improve processes. Benchmarking models
are used to determining how well a
business unit, division, organization or
corporation is performing compared with
other similar organizations
 A Benchmark is often used for improving
communication, professionalizing the
organization / processes or for budgetary
reasons. Traditionally, performance measures
have been compared with previous measures
from the same organization at different times.
Although this can be a good indication of the
rate of improvement within the organization, it
could be that although the organization is
improving, the competition is improving faster.
 Benchmarking (also "best practice benchmarking" or
"process benchmarking") is a process used in
management and particularly strategic management, in
which organizations evaluate various aspects of their
processes in relation to best practice, usually within their
own sector. This then allows organizations to develop
plans on how to adopt such best practice, usually with
the aim of increasing some aspect of performance.
Benchmarking may be a one-off event, but is often
treated as a continuous process in which organizations
continually seek to challenge their practices
 There are four types of benchmarking methods:
1. internal (benchmark within a corporation, for
example between business units)
2. competitive (benchmark performance or
processes with competitors)
3. functional (benchmark similar processes
within an industry)
4. generic (comparing operations between
unrelated industries)
Typically, benchmarking models
involves the following steps
 - scope definition
- choose benchmark partner's)
- determine measurement methods, units,
indicators and data collection method
- data collection
- analysis of the discrepancies
- present the results and discuss implications /
improvement areas and goals
- make improvement plans or new procedures
- monitor progress and plan ongoing benchmark.
What is Formal Benchmarking?
 There are two types of Formal
Benchmarking –
 Performance and
 Best Practice Benchmarking.
 Performance benchmarking; this involves
comparing the performance levels of
organisations for a specific process. This
information can then be used for identifying
opportunities for improvement and/or setting
performance targets. Performance levels of
other organisations are normally called
benchmarks and the ideal benchmark is one that
originates from an organization recognized as
being a leader in the related area.
 Performance benchmarking may involve the
comparison of financial measures (such as
expenditure, cost of labour, cost of
buildings/equipment, cost of energy, adherence
to budget, cash flow, revenue collected) or non-
financial measures (such as absenteeism, staff
turnover, the percentage of administrative staff
to front-line staff, budget processing time,
complaints, environmental impact or call centre
performance).
 Best practice benchmarking; this is where
organisations search for and study
organisations that are high performers in
particular areas of interest. The processes
themselves of these organisations are
studied rather than just the associated
performance levels, normally through
some mutually beneficial agreement that
follows a benchmarking code of conduct.
 Knowledge gained through the study is taken back
to the organization and where feasible and
appropriate, these high performing or best practices
are adapted and incorporated into the organization's
own processes. Therefore best practice
benchmarking involves the whole process of
identifying, capturing, analyzing, and implementing
best practices . There are a number of best practice
benchmarking methodologies. One of which is the
TRADE Best Practice Benchmarking methodology.
Different generations of
benchmarking
Who uses Benchmarking?
 In the West most large and highly successful
organisations use best practice benchmarking as a tool
to continually learn and improve. The resources needed
to carry out repeated best practice benchmarking
projects properly and in a way that maximizes the
learning to be gained from the experiences can be
considerable, hence it is used more frequently within
large organisations.
 On the other hand, comparative or competitor
benchmarking is not affected to the same degree by
resources, and is used by organisations of all sizes, the
most basic form of this practice is simply knowing your
main competitors product price, something that is a
prerequisite to staying in business.
 Indications are that the use of
benchmarking worldwide continues to
grow since Robert Camp wrote the first
book on benchmarking in 1989.
 The 2008 study by the Global Benchmarking
Network showed the improvement tools that are
likely to increase in popularity the most over the
next three years are Performance
Benchmarking, Informal Benchmarking,
Strengths, Weaknesses, Opportunities, and
Threats, and Best Practice Benchmarking.
Current use of Informal benchmarking is 68% of
organisations, Performance benchmarking,
49%, and Best practice benchmarking, 39%.
 The growth from year to year in membership of the
Global Benchmarking Network which now has
representatives from over 20 countries
 The growth in the number of countries that have a
business excellence award to more than 70 (the growth
in business excellence is likely to be correlated to the
growth in benchmarking as a central part of business
excellence is benchmarking with as much as 50% of the
points associated with these models attributed to
benchmarking) and
 The continuing popularity of benchmarking within the
academic community as the number of papers written on
the subject continues to grow.
What are the common challenges
associated with benchmarking?
 There are several main issues that both inhibit
organisations actively involved in benchmarking
and prevent others from attempting active
involvement.
 organisations findings indicated that among
some of those involved in benchmarking there
were difficulties encountered during the process.
These difficulties included:
 finding suitable partners
 difficulties in comparing data (50% of
organisations found this)
 resource constraints (time, finance and
expertise)
 staff resistance
 Benchmarking is a tough process that needs a lot of
commitment to succeed. More than once benchmarking
projects end with the 'they are different from us'
syndrome or competitive sensitivity prevents the free
flow of information that is necessary. However
comparing performances and processes with 'best in
class' is important and should ideally be done on a
continuous basis (the competition is improving its
processes also).
Historically, benchmarking is based on Kaizen and
competitive advantage thinking.
Outsourcing
 The word outsourcing is often heard in the world of
business today. It is something which has affected THE
BUSINESS of almost every nature and every nation.
Outsourcing is occurring in almost every country of this
world to some extent. There are some leader countries
in this field of outsourcing such as India and China.
 What is Outsourcing?
 When discussed in simple words outsourcing is simply a
formal agreement with a third party to perform a service
for an organization. A more comprehensive definition for
outsourcing would be that outsourcing is the concept of
taking internal company functions and paying an outside
firm to handle them
 It is basically done for the following major reasons:
-To save money in terms of lowering costs
-To improve quality
-To free company resources for other activities such as
focusing more on competencies
The concept of outsourcing began with the data-
processing industry and today it has spread to vase
areas which comprise of tele-messaging and call
centers. It would not all be wrong to say that outsourcing
is the surge of the next generations. Another name used
for outsourcing is off shoring which has the same
meaning as outsourcing.
 Technically speaking, outsourcing is not merely
the contract with a third party to perform a
service for an organization, but it also involves
transferring a significant amount of management
control and decision-making to the external
supplier. The process of outsourcing is very
much formal like other business processes and
it always includes a considerable degree of two-
way information exchange, coordination, and
trust.
Different Techniques of
Outsourcing
 The concept of outsourcing was adopted by different
organizations in different methods such as in some
cases the companies who desired to outsource their
customer service:
-Hired technical writers in order to write simplified usage
instructions of their products
-Index the key points of information
-Contracted with temporary employment agencies to
search for, train and hire generally low-skilled workers to
answer their telephone technical support and customer
service calls
 The most wide spread method of outsourcing
being adopted throughout the world is of call
centers. The people employed at the call centers
answered the query calls of the customers,
where the information needed to assist the
calling customer was indexed in a computer
system. In most cases the agents were not liable
to tell the customers that they were not directly
associated with the original manufacturer.
Outsourcing: Business in the 21st
Century
 Almost every country and almost every
organization is outsourcing a part of its tasks or
some tasks. The reason that has been found for
the increase in the trend of outsourcing for
businesses is it increases profit and lower costs,
and business focuses most on these aspects.
 For instance if we consider the example of IBM ,
which in the year 2003, decided to outsource the
jobs of almost 5000 programmers to India and
China. Similarly, Microsoft, Dell, American
Express, and virtually every major multinational
from Accenture to Yahoo has already
outsourced work or is taking decisions to do so.
 From the studies of the outsourcing of these
companies it has been found that the savings
due to outsourcing are spectacular as
companies can reduce around 20% to 70% of
their labor costs by outsourcing jobs to low-wage
nations considering that the work is of same
quality.
 The concept of outsourcing is applied to a vast
area of business processes or tasks. Every
organization outsources some particular tasks to
a vendor. The task that was outsourced mostly
when outsourcing began, was customer support,
later with the advancement in technology and
knowledge this limited area included IT, data
analysis, Medicare, engineering and a few more
Thank you

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Introduction to Research ,Need for research, Need for design of Experiments, ...
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Benchmarking and outsourcing

  • 2. Benchmarking  Benchmarking is the process of determining who is the very best, who sets the standard, and what that standard is. In baseball, you could argue that seven consecutive World Series Championships made the New York Yankees the benchmark.  If we were to benchmark "world conquest", what objective measure would we use to compare Julius Caesar to Adolph Hitler; Gengis Khan to Napoleon? Which of them was the epitome, and why?
  • 3. What is Benchmarking?  We do the same thing in business. Who is the best sales organization? The most responsive customer service department? The leanest manufacturing operation? And how do we quantify that standard?  Thus, we can say that Benchmarking is a systematic process for identifying and implementing best or better practices
  • 4.  Benchmarking is a systematic comparison of organizational processes and performance to create new standards or to improve processes. Benchmarking models are used to determining how well a business unit, division, organization or corporation is performing compared with other similar organizations
  • 5.  A Benchmark is often used for improving communication, professionalizing the organization / processes or for budgetary reasons. Traditionally, performance measures have been compared with previous measures from the same organization at different times. Although this can be a good indication of the rate of improvement within the organization, it could be that although the organization is improving, the competition is improving faster.
  • 6.  Benchmarking (also "best practice benchmarking" or "process benchmarking") is a process used in management and particularly strategic management, in which organizations evaluate various aspects of their processes in relation to best practice, usually within their own sector. This then allows organizations to develop plans on how to adopt such best practice, usually with the aim of increasing some aspect of performance. Benchmarking may be a one-off event, but is often treated as a continuous process in which organizations continually seek to challenge their practices
  • 7.  There are four types of benchmarking methods: 1. internal (benchmark within a corporation, for example between business units) 2. competitive (benchmark performance or processes with competitors) 3. functional (benchmark similar processes within an industry) 4. generic (comparing operations between unrelated industries)
  • 8. Typically, benchmarking models involves the following steps  - scope definition - choose benchmark partner's) - determine measurement methods, units, indicators and data collection method - data collection - analysis of the discrepancies - present the results and discuss implications / improvement areas and goals - make improvement plans or new procedures - monitor progress and plan ongoing benchmark.
  • 9. What is Formal Benchmarking?  There are two types of Formal Benchmarking –  Performance and  Best Practice Benchmarking.
  • 10.  Performance benchmarking; this involves comparing the performance levels of organisations for a specific process. This information can then be used for identifying opportunities for improvement and/or setting performance targets. Performance levels of other organisations are normally called benchmarks and the ideal benchmark is one that originates from an organization recognized as being a leader in the related area.
  • 11.  Performance benchmarking may involve the comparison of financial measures (such as expenditure, cost of labour, cost of buildings/equipment, cost of energy, adherence to budget, cash flow, revenue collected) or non- financial measures (such as absenteeism, staff turnover, the percentage of administrative staff to front-line staff, budget processing time, complaints, environmental impact or call centre performance).
  • 12.  Best practice benchmarking; this is where organisations search for and study organisations that are high performers in particular areas of interest. The processes themselves of these organisations are studied rather than just the associated performance levels, normally through some mutually beneficial agreement that follows a benchmarking code of conduct.
  • 13.  Knowledge gained through the study is taken back to the organization and where feasible and appropriate, these high performing or best practices are adapted and incorporated into the organization's own processes. Therefore best practice benchmarking involves the whole process of identifying, capturing, analyzing, and implementing best practices . There are a number of best practice benchmarking methodologies. One of which is the TRADE Best Practice Benchmarking methodology.
  • 15. Who uses Benchmarking?  In the West most large and highly successful organisations use best practice benchmarking as a tool to continually learn and improve. The resources needed to carry out repeated best practice benchmarking projects properly and in a way that maximizes the learning to be gained from the experiences can be considerable, hence it is used more frequently within large organisations.  On the other hand, comparative or competitor benchmarking is not affected to the same degree by resources, and is used by organisations of all sizes, the most basic form of this practice is simply knowing your main competitors product price, something that is a prerequisite to staying in business.
  • 16.  Indications are that the use of benchmarking worldwide continues to grow since Robert Camp wrote the first book on benchmarking in 1989.
  • 17.  The 2008 study by the Global Benchmarking Network showed the improvement tools that are likely to increase in popularity the most over the next three years are Performance Benchmarking, Informal Benchmarking, Strengths, Weaknesses, Opportunities, and Threats, and Best Practice Benchmarking. Current use of Informal benchmarking is 68% of organisations, Performance benchmarking, 49%, and Best practice benchmarking, 39%.
  • 18.  The growth from year to year in membership of the Global Benchmarking Network which now has representatives from over 20 countries  The growth in the number of countries that have a business excellence award to more than 70 (the growth in business excellence is likely to be correlated to the growth in benchmarking as a central part of business excellence is benchmarking with as much as 50% of the points associated with these models attributed to benchmarking) and  The continuing popularity of benchmarking within the academic community as the number of papers written on the subject continues to grow.
  • 19. What are the common challenges associated with benchmarking?  There are several main issues that both inhibit organisations actively involved in benchmarking and prevent others from attempting active involvement.  organisations findings indicated that among some of those involved in benchmarking there were difficulties encountered during the process. These difficulties included:
  • 20.  finding suitable partners  difficulties in comparing data (50% of organisations found this)  resource constraints (time, finance and expertise)  staff resistance
  • 21.  Benchmarking is a tough process that needs a lot of commitment to succeed. More than once benchmarking projects end with the 'they are different from us' syndrome or competitive sensitivity prevents the free flow of information that is necessary. However comparing performances and processes with 'best in class' is important and should ideally be done on a continuous basis (the competition is improving its processes also). Historically, benchmarking is based on Kaizen and competitive advantage thinking.
  • 23.  The word outsourcing is often heard in the world of business today. It is something which has affected THE BUSINESS of almost every nature and every nation. Outsourcing is occurring in almost every country of this world to some extent. There are some leader countries in this field of outsourcing such as India and China.  What is Outsourcing?  When discussed in simple words outsourcing is simply a formal agreement with a third party to perform a service for an organization. A more comprehensive definition for outsourcing would be that outsourcing is the concept of taking internal company functions and paying an outside firm to handle them
  • 24.  It is basically done for the following major reasons: -To save money in terms of lowering costs -To improve quality -To free company resources for other activities such as focusing more on competencies The concept of outsourcing began with the data- processing industry and today it has spread to vase areas which comprise of tele-messaging and call centers. It would not all be wrong to say that outsourcing is the surge of the next generations. Another name used for outsourcing is off shoring which has the same meaning as outsourcing.
  • 25.  Technically speaking, outsourcing is not merely the contract with a third party to perform a service for an organization, but it also involves transferring a significant amount of management control and decision-making to the external supplier. The process of outsourcing is very much formal like other business processes and it always includes a considerable degree of two- way information exchange, coordination, and trust.
  • 26. Different Techniques of Outsourcing  The concept of outsourcing was adopted by different organizations in different methods such as in some cases the companies who desired to outsource their customer service: -Hired technical writers in order to write simplified usage instructions of their products -Index the key points of information -Contracted with temporary employment agencies to search for, train and hire generally low-skilled workers to answer their telephone technical support and customer service calls
  • 27.  The most wide spread method of outsourcing being adopted throughout the world is of call centers. The people employed at the call centers answered the query calls of the customers, where the information needed to assist the calling customer was indexed in a computer system. In most cases the agents were not liable to tell the customers that they were not directly associated with the original manufacturer.
  • 28. Outsourcing: Business in the 21st Century  Almost every country and almost every organization is outsourcing a part of its tasks or some tasks. The reason that has been found for the increase in the trend of outsourcing for businesses is it increases profit and lower costs, and business focuses most on these aspects.  For instance if we consider the example of IBM , which in the year 2003, decided to outsource the jobs of almost 5000 programmers to India and China. Similarly, Microsoft, Dell, American Express, and virtually every major multinational from Accenture to Yahoo has already outsourced work or is taking decisions to do so.
  • 29.  From the studies of the outsourcing of these companies it has been found that the savings due to outsourcing are spectacular as companies can reduce around 20% to 70% of their labor costs by outsourcing jobs to low-wage nations considering that the work is of same quality.
  • 30.  The concept of outsourcing is applied to a vast area of business processes or tasks. Every organization outsources some particular tasks to a vendor. The task that was outsourced mostly when outsourcing began, was customer support, later with the advancement in technology and knowledge this limited area included IT, data analysis, Medicare, engineering and a few more