The document discusses benchmarking as a systematic method to measure and compare performance against high-performing organizations to facilitate continuous improvement. It covers different types of benchmarking, including internal, external, competitive, and collaborative, along with their benefits and challenges. Additionally, it outlines the steps for conducting benchmarking exercises and highlights the importance of data collection and performance metrics.

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Benchmarking
The Impact of Benchmarking on Performance and Continuous Improvement

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Benchmarking Definitions
A systematic approach for measuring products, services, processes, and
performance against high-performing organizations or other entities to
understand and adopt their successful strategies and practices.
Benchmarking 2
One of the
common
practices in
the business
world today.
Aims to learn
from the best and
continuously
improving
performance.

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Benchmarking and Continuous Improvement
Benchmarking 3
Should be viewed as one of
the primary tools for achieving
continuous improvement
Should be integrated into
quality and operational
excellence activities

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Benchmark
A benchmark typically refers to a point of reference or standard used for
comparison to assess the performance or success of something during the
benchmarking exercise.
Benchmark 1
Benchmark 2
Benchmark 3
Performance
It serves as a basis for improvement or evaluation
Benchmarking 4

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Uses and Benefits
Benchmarking 5
Companies can use such information
to develop improvement plans and
adopt specific best practices.
A valuable resource for various
purposes, including designing,
redesigning, and improving processes.
Mainly used to better understand
how outstanding companies operate.
Helps in establishing quantitative
improvement goals.

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What to Benchmark?
Benchmarking involves the measurement of their strategies, practices,
processes, and procedures and allows companies to gain valuable insights
to improve their own.
Benchmarking 6
Financials Processes Services
Strategies Operations Products Procedures
Performance Practices

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Benchmarking Types
Benchmarking 7
• Uses top-performing units within a
company as examples for
improvement.
• Relies on easily accessible internal
data, encourages collaboration, and
supports long-term continuous
improvement.
Internal Benchmarking
• Provides a broader perspective and
enables companies to stay competitive
and adopt innovative practices.
• Serves as a valuable tool for companies
seeking to enhance their strategies and
operations by learning from the
successes of others.
External Benchmarking

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Internal Benchmarking Example
Operations managers can learn from the best-performing production lines
in their facility to implement and replicate successful practices.
Benchmarking 8

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External benchmarking can further be categorized as . . .
Benchmarking 9
When the company
compares its
performance with direct
industry competitors
COMPETITIVE
If a group of companies
carry out the
benchmarking exercise
collaboratively
COLLABORATIVE
When comparing with
industry leaders or
organizations that excel
beyond direct
competitors or industries
WORLD-CLASS
World-class organizations are also referred to as best-in-class, high-performing, and outstanding
organizations.

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Competitive Benchmarking
Companies usually assess their own progress over time, which is helpful for
understanding internal improvements. However, it doesn't reveal how
competitors are doing.
There is a possibility that the company may
fall behind or be outpaced in the market.
Keep a close eye on the successes and
performance of rival companies to remain
competitive.
Benchmarking 10

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Benchmarking Types
Benchmarking 11
External Benchmarking
Competitive
Strategic*
Functional*
Financial
Process*
Product
Collaborative
Strategic*
Functional*
Financial
Process*
Product
World Class
Strategic*
Process*
Functional*
Product
Internal
Benchmarking
Process
Functional
Product
* This type is usually not industry
specific which means that one can
study other industries.

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Additional details for each type of benchmarking . . .
Benchmarking 12
Strategic
Benchmarking
• Benchmarking may be
conducted at the
higher level to assess
strategic approaches.
• Aims to enhance the
competitive
advantage,
performance, and
overall strategic
effectiveness.
Financial
Benchmarking
• Evaluates the financial
performance in
comparison with
external entities.
• Aims to evaluate the
financial health,
efficiency, and
effectiveness of the
company by assessing
key financial indicators
such as profitability
and liquidity.
Product
Benchmarking
• The assessment of a
product's competitive
position by comparing
it with industry
benchmarks.
• Normally conducted
during the design of
new products or the
upgrading of existing
products.
Functional
Benchmarking
• Focuses on a single
function, like human
resources, purchasing
or information
technology.
• Aims to compare and
analyze performance,
processes, and best
practices of the
chosen function
within a company
against external
benchmarks.
Process
Benchmarking
• Allows to streamline
and enhance
processes that may
span multiple
functions.
• Involves activity
analysis and often
focuses on aspects
such as quality,
efficiency, cost and
overall effectiveness.

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Performance Benchmarking
Benchmarking 13
Strategic
Benchmarking
• Benchmarking may be
conducted at the
higher level to assess
strategic approaches.
• Aims to enhance the
competitive
advantage,
performance, and
overall strategic
effectiveness.
Financial
Benchmarking
• Evaluates the financial
performance in
comparison with
external entities.
• Aims to evaluate the
financial health,
efficiency, and
effectiveness of the
company by assessing
key financial indicators
such as profitability
and liquidity.
Product
Benchmarking
• The assessment of a
product's competitive
position by comparing
it with industry
benchmarks.
• Normally conducted
during the design of
new products or the
upgrading of existing
products.
Functional
Benchmarking
• Focuses on a single
function, like human
resources, purchasing
or information
technology.
• Aims to compare and
analyze the
performance,
processes, and best
practices of the
chosen function
within a company
against external
benchmarks.
Process
Benchmarking
• Allows to streamline
and enhance
processes that may
span multiple
functions.
• Involves activity
analysis and often
focuses on aspects
such as quality,
efficiency, cost and
overall effectiveness.
Performance
Benchmarking
• A generic term, where
all the previous types of
external and internal
benchmarking involve
performance
benchmarking.
• Compares
performance metrics,
practices, and
outcomes and helps
identifying areas for
improvement and
adopting best
practices.

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Beyond Industry Boundaries
Some types of benchmarking are not limited to a particular industry, which means
that one can consider other industries when conducting a benchmarking study.
Benchmarking 14
Benchmarking can go beyond industry boundaries allowing companies to adopt successful practices
from different sectors to improve their operations.
An electronic company can improve its
inventory and supply chains processes by
looking at how a logistics company
handles its processes.
A healthcare facility can
enhance patient appointment
scheduling by exploring airline
reservation systems.

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Benchmarking Can be Implemented at the national level
In recent years, Chinese businesses have actively adopted benchmarking to
learn from global best practices and improve their own operations.
This allows them to identify successful strategies, adopt cutting-edge
technologies, and optimize their business models.
Benchmarking 15

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Data and Data Collection
Data collection in benchmarking activities is essential as it . . .
Benchmarking 16
DATA
Allows for a thorough comparison with the selected
benchmarks
Provides valuable insights into the performance among
the different entities

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Data Collection Challenges
Collecting data can sometimes be challenging due to various reasons . . .
Benchmarking 17
Difficulties in accessing relevant information
Complexities in data sources
Limitations in the availability of accurate and
comprehensive data
Data privacy concerns

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Professional
Researchers
Consulting
Firms
Internal
Teams
Benchmarking
Agencies
The
Internet
There are many organizations who
facilitate and provide benchmarking
information for the public or for sale in
a business setting
The Internet is also considered a
valuable and free source of
benchmarking data
Data Sources
Benchmarking data are typically gathered by:
Benchmarking 18
Internal teams within
an organization
Professional
researchers
Consulting firms with
expertise in the field

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Performance Metrics
Identifying performance metrics before starting the benchmarking activity
is important to ensure a focused, relevant, and measurable approach.
Benchmarking 19
Typical performance metrics often considered include . . .
Defect level
Cycle time
Service response time
Return on investment
Cost per unit
Customer satisfaction

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How to Conduct a Benchmarking Exercise
While there is no universally adopted benchmarking approach, the
following four stages can assist in conducting a benchmarking exercise.
Planning
Data
Collecting
Analyzing Acting
Note: Benchmarking can be performed as a one-time effort, but it is ideally conducted on a continuous
basis. In such ongoing process, companies should continually strive to enhance their performance and
practices, especially in the face of growing competition.
Benchmarking 20

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How to Conduct a Benchmarking Exercise
Benchmarking 21
Form a dedicated benchmarking team
• Determine the specific function, product, or process to be benchmarked.
• Identify relevant performance metrics for the benchmarking analysis.
• Identify data sources, partners, or companies for comparison.
Planning
Data Collecting
Analyzing
Acting

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How to Conduct a Benchmarking Exercise
Benchmarking 22
Utilize appropriate methods to collect benchmarking data
• Collect data from data sources.
Planning
Data Collecting
Analyzing
Acting

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How to Conduct a Benchmarking Exercise
Benchmarking 23
Determine current performance gaps and their root causes
Planning
Data Collecting
Analyzing
Acting
Our
Performance
World Class
Competitor 1
Competitor 2
• Bar charts simplify benchmarking data presentation by visually comparing
performance metrics.

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How to Conduct a Benchmarking Exercise
Benchmarking 24
Set goals and develop plans based on the analysis findings.
• Put plans into action to fill the performance gaps.
• Monitor progress continuously.
Planning
Data Collecting
Analyzing
Acting

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Benchmarking Identification Template
This template can be used to identify companies for comparison as a
preliminary step before starting an in-depth benchmarking exercise.
Benchmarking 25
Feature or Metric →
 Benchmark
1 2 3 4 5
Company 1
Company 2
Company 3
Company 4

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Further Information – Useful Tools
A range of useful tools and research techniques may be required to
conduct a benchmarking study . . .
Benchmarking 26
Informal conversations KPIs review
Financial ratio analysis
Interviews Focus groups
Surveys & questionnaires
Process mapping Observations
Re-engineering analysis
Quantitative research QC variance reports
Marketing research

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Further Information – Benchmarking and Six Sigma
Within the DMAIC framework of Six Sigma projects,
benchmarking can play an important role across
the various phases.
Benchmarking 27
Define Phase
Benchmarking supports the selection
of the improvement project and helps
in establishing a performance baseline.
Measure Phase
Benchmarking evaluates the possibility
of improving the existing process.
Improve Phase
Benchmarking helps in identifying
successful strategies and practices to
serve as a foundation for the intended
improvement.
DEFINE
MEASURE
ANALYZE
IMPROVE
CONTROL

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Further Information - Cost of Benchmarking
Benchmarking is only useful if the study's cost doesn’t exceed
the expected benefits.
If the benchmarking is to be conducted by an internal team
within the company, costs may involve:
Benchmarking 28
Time costs
Such as research time and
time of visits
Data costs
Such as maintaining a
database of best practices
Visit costs
Such as travel and lost
labor time
Utilizing internet resources can significantly reduce costs.

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Further Information - Limitations of Benchmarking
1. The benchmarking process is time-consuming and costly.
2. Selecting the target company to be benchmarked may be challenging.
3. Successful benchmarking requires significant commitment.
4. Variations in metric definitions may vary among companies.
5. Companies may be reluctant to share information due to
fear of revealing competitive advantages.
6. Some projects may face obstacles due to the 'they are
different from us' syndrome
7. Benchmarking is viewed as a study or research without
providing ready-made solutions.
Benchmarking 29

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