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Bench Marking

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    BENCHMARKING   Submitted by: Areeba Mushtaq Date : 12th September 2013  BENCHMARKING   Introduction: Benchmarking is a process by which you can find answers to questions regarding the performance of your business, such as how your business is doing compared to other businesses, whether you are gauging your performance based on the most appropriate measures, and whether you are using the best practices. By means of benchmarking, you can collectdata that will help you answer these questions, and that will show you what you can achieve and how you can achieve it. Benchmarking is a systematic and ongoing process of identifying and understanding the best practices and processes of other businesses and organizations, in order to adapt and use them in your own business, to improve your performance. It is a continuous learning process, starting with what is happening around you and extending to the best practices in all parts of the world. The idea behind benchmarking consists of defining specific performance standards in areas such as production costs, cycle times, and the prices charged. In its beginnings, benchmarking was used as a means of systematizing information related to competitors in a certain sector of an industry, but it soon became obvious that benchmarking could be used only not only to understand and compare with competitors, but also to understand the behavior of any organization, including those in other industries, whether large or small, public or private, local or global. 1. BENCHMARKING Benchmarking is a popular method for developing requirements and setting goals. In more conventional terms, benchmarking can be defined as measuring your performance against that of best-in-class companies, determining how the best-in-class achieve those performance levels, and using the information as the basis for your own company’s targets, strategies, and  implementation. Benchmarking involves research into the best practices at the industry, firm, or process level. Benchmarking goes beyo nd a determination of the industry standard. It breaks the firm’s activities down to process operations and looks for the best-in-class for a particular operation. For example, Xerox corporation studied the retailer LL Bean to help them improve their parts distribution process. Benchmarking goes beyond the mere setting of goals. It focuses on practices that produce superior performance. Benchmarking involves setting up partnerships that allow both parties to learn from one another. Competitors can also engage in benchmarking, providing they avoid proprietary issues. Benchmarking projects are like any other major project. Benchmarking must have a structured methodology to ensure successful completion of thorough and accurate  investigations. However, it must be flexible to incorporate new and innovative ways of assembling difficult-to-obtain information. It is a discovery process and a learning experience. Types of Benchmarking Process benchmarking - the initiating firm focuses its observation and investigation of business processes with a goal of identifying and observing the best practices from one or more benchmark firms. Activity analysis will be required where the objective is to benchmark cost and efficiency; increasingly applied to back-office processes where outsourcing may be a consideration. Financial benchmarking  - performing a financial analysis and comparing the results in an effort to assess your overall competitiveness and productivity. Benchmarking from an investor perspective    –   extending the benchmarking universe to also compare   to peer companies that can be considered alternative   investment opportunities from the perspective of an   investor.   Performance benchmarking  - allows the initiator firm to assess their competitive position by comparing products and services with those of target firms. Product benchmarking  - the process of designing new products or upgrades to current ones. This process can sometimes involve reverse engineering which is taking apart competitors products to find strengths and weaknesses. Strategic benchmarking  - involves observing how others compete. This type is usually not industry specific meaning it is best to look at other industries. Functional benchmarking  - a company will focus its benchmarking on a single function in order to improve the operation of that particular function. Complex functions such as Human Resources, Finance and Accounting and Information and Communication Technology are unlikely to be directly comparable in cost and efficiency terms and may need to be disaggregated into processes to make valid comparison. PROCEDURE There is no single benchmarking process that has been universally adopted. The wide appeal and acceptance of benchmarking has led to various benchmarking methodologies emerging. The most prominent methodology is the 12 stage methodology by Robert Camp (who wrote the first book on benchmarking in 1989) .The 12 stage methodology consisted of 1. Select subject ahead 2. Define the process  3. Identify potential Partners 4. Identify data sources 5. Collect data andselect partners 6. Determine the gap 7. Establish process differences 8. Target future performance 9.Communicate 10. Adjust goal 11. Implement 12.Review/recalibrate. The following is an example of atypical shorter version of the methodology: 1.Identify your problem areas  –   Because benchmarking can be applied to any business process or function, a range of research techniques may be required. They include: informal conversations with customers, employees, or suppliers; exploratory research techniques such as focus groups; or in-depth marketing research, quantitative research, surveys, questionnaires, re-engineering analysis, process mapping, quality control variance reports, or financial ratio analysis. Before embarking on comparison with other organizations it is essential that you know your own organization's function, processes; base lining performance provides a point against which improvement effort can be measured. 2.Identify other industries that have similar processes - For instance if one were interested in   improving hand offs in addiction treatment he/she   would try to identify other fields that also have hand off    challenges. These could include air traffic control, cell   phone switching between towers, transfer of patients   from surgery to recovery rooms.  3.Identify organizations that are leaders in these areas - Look for the very best in any industry and in   any country. Consult customers, suppliers, financial   analysts, trade associations, and magazines to   determine which companies are worthy of study.  4.Survey companies for measures and practices - Companies target specific business processes using   detailed surveys of measures and practices used to   identify business process alternatives and leading   companies. Surveys are typically masked to protect   confidential data by neutral associations and   consultants.  5.Visit the best practice companies to identify leading edge practices - Companies typically agree to   mutually exchange information beneficial to all parties   in a benchmarking group and share the results within   the group.  
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