1. Chapter 8
BENCHMARKING
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2. Benchmarking
The continuous process of
comparing a company's strategy,
products, and process with those of
world leaders and best-in-class
organization in order to learn how
they achieved excellence and
setting out to match and even
surpass it.
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3. The Essence Of Benchmarking
It is the Method of identifying new ideas and new
ways of improving processes and hence meeting
customer expectations. Cycle time reduction and
cost cutting and both process improvement that
can result. The traditional approach of measuring
defect rate is not enough. The ultimate objective is
process improvement that meet the attribute of
customer expectation. This improvement, of
course, should meet both strategic and operation
needs – product design, demand forecasting,
product planning, and fulfillment.
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4. Benchmarking And The Bottom Line
There are two basic points of view:
1. Maintains an initial action plan that tries to
match the techniques used by world-class
performance may actually make things worse by
doing too much too soon.
2. Measure existing financial performance by two
key measures return on assets and value added
(sales minus material cost, supplies, and work
done by outside contractors.
The bottom line: the basic objective is satisfying
the customer, so that is the limiter.
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5. The Benefits of Benchmarking
• Cultural Change: set realistic, rigorous new
performance targets, and this process helps
convince people of the credibility of these
targets.
• Performance Improvement: define specific
gaps in performance and to select the
processes to improve.
• Human Resources: employees begin to see
the gap between what they are doing and
what best-in-class are doing (through
training).
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6. Strategic Benchmarking
Concerned with the macro analysis of the environment,
the industry, and the competitors.
Key business drivers Strategies and
(key success factors) action plans
Measures and indicators
(measure market differentiation
criteria against competitors)
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7. Operational Benchmarking
Measure everything. Then… prioritize what
processes are key to the company.”
Most data collection systems are automated,
making it fast and easy.
Seeks internal measures that are predictors for
external measures. Most of the focus is on cost
and differentiation, because the customer
purchasing decision (PD) is the function of price
and differentiation,it is necessary to differentiate
through quality PD = F ( P × Q) and improve price
through cost reduction.
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8. The Benchmarking Process
The following steps involve in benchmarking:
1. Measuring the performance of the best-in-
class relative to critical performance
variable
2. Determining how the levels of
performance are achieve
3. Using the information to develop and
implement the plan for improvement.
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9. Identify The Best-In-Class
Following sources are use to identify the best-
in-class company:
• Databases are an expanding source of
comparison information.
• Cooperative sharing agreements between
companies.
• Out-of-industry
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10. Measure Your Own Performance
Determine the your own performance form best-
in-class. The trickiest part of the process is to
compare internal and external data on an
equivalent basis. This is does not mean that both
sets of data must be comparable in the same
exact form. Performing a “gap analysis” of the
variation with benchmarked process the problem-
solving process will reveal:
1. The extent, the size, and frequency of the gap
2. Causes of the gap; why it exists
3. Available methods for closing the gap and
reaching the performance level of the
benchmarked process
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11. Actions To Close The Gap
Once the cause(s) of the gap is determined,
alternative courses of action become
evident. Selecting the right alternative
among the criteria for evaluating time, cost,
technical specifications, and quality.
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