While carrying out TQM or initiating BPR (Business Process Re-engineering) to company should have a basis of establishing performance goals. The basis which should be the best practices in the industry, are called the benchmark. Such benchmarking should lead the company to superior performance. Xerox Company, USA which was the leader in the use of benchmarking as a management technique or process terms benchmark as the continuous process of measuring our products, services, and business practices against the toughest competitors or those companies recognized as industry leaders.

Benchmarking is not a new concept. All of us do benchmarking in our usual lives. We admire some people for the way they speak, for the way they conduct themselves, or for the way they dress and eat. Many of us have some role models whom we try to emulate. This process is also called as benchmarking.

Internal Benchmarking:

One must know one’s own internal processes and compare within units, across units or dividend. This, in fact should be the first kind of benchmarking a company should do, for it is the easiest, quickest and cheapest type of benchmarking. All the information is available from within one’s own company. However, the big limitation is that is simply looking at one’s own processes. Hence there may not be any significant or radical improvements.

Competitive Benchmarking:

This involves comparison between specific competitors for the product or function of interest. Obviously not an easy thing to do; a competitor generally does not give data on his company and its processes. Nevertheless, one may collect the data through secondary sources such as newspaper and magazines, seminars, networks, industry associations, one’s suppliers, one’s own sales people, customer feedback, costing firms, clearing house and government sources such as departments of Industry and Commerce. By being informed about what one’s competitor is doing, one learns how to design, manufacturer and market in a better and planned manner.

This benchmarking could be done collaboratively between several competing companies, where there could be a limited exchange of information.

When such collaboration is not possible, companies may do shadow benchmarking i.e. doing benchmarking without one’s competitor knowledge.

Functional Benchmarking:

This involves comparison of similar functions within the same broad industry or with industry leaders. The benchmarking partners therefore, need not to be in direct competition. This analysis seeks ideas that have already succeeded in a compatible area as well as conveys that it is not necessary to concentrate solely on direct product competitors. Within the ambit of the general industry, this procedure helps a company to know how other companies follow inventory reduction, delivery timings, materials handling or packaging practices, which in fact helps the benchmarking company to suitably adapt their superior practices.

Generic benchmarking:

It is not always necessary learn only from the firms that are competing or those that fall within ones general industry. Some processes are same regardless of the dissimilarities of industries. For instance, Xerox benchmarked American Express for its process of billing and collections, American Hospital supply for automated inventory control, Ford Motor Company for their manufacturing floor layout, LL Bean for warehouse operations and Mary Kay Cosmetics for warehouse and distribution efficiency. A mining in the interiors of Thar Desert has a dust problem; it wants to eliminate dust that spoils all its in-house machinery. Where should it look for benchmarking? One should not be surprised if it looked at a reputed hospital, particularly its operation theatre for the dust prevention systems. What needs is an adaptation of these systems to suit the mining company’s operations. In fact, generic benchmarking would yield the best of best practices.

Benchmarking is a must for any good BPR exercise so that a company analyzes the what, why and how of leading companies, so that one can reengineer or change the business practices, processes as also the product that will satisfy the customers and thus generate value to the society.

A company surrenders today’s business when it gets smaller faster than it gets better.

A company surrenders tomorrow’s business when it gets better without getting different.
The message is: Be proactive, in addition to getting better. Benchmarking and BPR should serve as triggers for proactivity, in addition to help improve the existing products, services, processes and systems.

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