Assessing your products, services and your business processes against your “best practice” peers and competition can provide an insight into where business improvement activity needs to be focused targeting improvements in both effectiveness and competitiveness.

What is benchmarking?

Benchmarking is a business management tool that facilitates the gap analysis of selected operational activity or outputs or variables between the operating business and a single or group of peers. Benchmarking is often used strategically to review the position of the measuring organization within the market place. Benchmarking often encompasses the review of products but using benchmarking to analyze business processes can be a powerful motivator for change and can facilitate developing a roadmap from current state to best practice.

Where an industrial association exists that offers expectations of “best practice” – benchmarking activity is often focused around measuring internal results against the industry “ideal”.

How to benchmark

While there is no set process for Benchmarking there is some agreed common practice :

1/ When carrying out any benchmarking its important to start out with a clear scope of what your comparing – try and avoid generalization and looks for specific (and quantifiable) characteristics to analyze (this could be anything from reject rates, lead times to prices staff turnover).

2/ Now establish your field of comparison this could be an individual organization, or group of companies (I.e. industrial sector). The most important thing to remember is that you need to compare specifics (for example if measuring lead times ensure that the variable is measured between the two organizations in the same way). Where your looking to measure yourself against best practice you will need to identify those organizations which operate to this standard. A good place to start is industry associations for example CIPS operate as an organizational group for Supply Chain and can offer members who are considered best practice – consider your industry and what associations you can utilize. Large organizations often employ benchmarking to review performance between business units or departments – this can be an excellent motivator to drive improvement.

3/ Gather data around the scope of interest and make your comparisons. Again ensure that you remain in scope and compare like for like.

Benchmarking and Continuous improvement

As with any analysis you shouldn’t just stop at assessing your position once you’ve completed your first benchmarking activity – consider it’s place in a continuous improvement plan with regular review. Why undertake regular reviews? Changes in the market, innovation, new entrants to the market can all influence best practice and your market will be driven by continuous change.

Benchmarking and competitiveness

Benchmarking is an essential element in remaining competitive – understanding the market and how your peers operate within it provides an excellent way of developing an effective business strategy – while for many this might take into account the breadth of product and services offered benchmarking should also incorporate QCD (Quality, Cost and Delivery).

Benchmarking can operate under many departmental guises from financial benchmarking, product benchmarking to process benchmarking. While there is a cost associated in the resources required to carry out benchmarking effectively the benefits greatly outweigh this initial outlay.

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One Response to “Business best practice exploiting the benefits of benchmarking”

  1. Benchmarking: How to Improve your Business « Business Spring on January 3rd, 2012 12:57 am

    […] and services offered. Benchmarking should also incorporate QCD (Quality, Cost and Delivery) (Business best practice exploiting the benefits of benchmarking, […]

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