Benchmarking
Introduction
After analyzing the organization’s and market competitor’s positions, new and
promising enterprise strategies can be developed. To make profits a company is
constantly forced by today’s buyers’ market to supply competitive products and
services. This only succeeds if a company acts effectively and orientates its processes
according to value streams or value chains. Otherwise, company results decrease and
investment benefits are not realized.[2]
To be a global active company means not only overcoming cultural or logistic
barriers but also integrating company and product requirements. The pharmaceutical
industry ranks world-wide among businesses with the largest regulation and
information density. Millions of documents and strict guidelines must be followed,
which are issued by regulatory authorities; for example in the US by the Food and Drug
Administration (FDA). The FDA’s mission includes ensuring that human and
veterinary drugs are safe and effective. The security and effectiveness of devices
intended for human use must be ensured. In order to sell food and medications in the
USA, production plants must correspond with FDA regulations. Enterprises wanting to
enter the US market not complying with FDA requirements can learn from other US
companies by benchmarking – the search for solutions based on industry best methods
and procedures used by leading and top performing companies.
Fig 1:-Benchmarking strategy
Benchmarking helps goal-oriented staff to use new ideas, methods, procedures and
processes. The method answers questions about strategic adjustment by companies
outside the company’s organization or exterior to its business. The benchmarking
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project helps staff understand business procedures, strengthens competitive ability and
supports continuous improvement processes. This enables staff to offer superior
services with a competitive advantage to the customer’s benefit (Figure 1). For that
reason, benchmarking is an interesting business process management method.[2]
Benchmarking was one of the most popular and widely adopted management
techniques of the 1980s and 1990s and it gained a lot of credit for helping organisations
to improve their competitive advantage. Twenty-five years after the prominence of
benchmarking in the mid-1980s the Global Benchmarking Network (GBN) initiated a
project, undertaken by researchers in universities in New Zealand and the UK, to
evaluate the current status of benchmarking worldwide. The GBN is a membership-
based association consisting of benchmarking competency centres from 21 countries.
This project included a multinational survey of benchmarking awareness, use and
effectiveness, representing views of respondents from more than 40 countries. It is often
stated that those who benchmark do not have to reinvent the wheel. By following others
one can make improvements and not focus on stale ideas. Benchmarking at first glance
may be mistaken for a copycat form of developing strategic plans and for making
improvements within an organization. This is not true. Benchmarking is a process that
allows organizations to improve upon existing ideas. In order to eliminate myths and
misconceptions about benchmarking it is important to know exactly what
benchmarking is, the different types of benchmarking, the criticisms of benchmarking,
and the ethical practices concerning benchmarking.[4]
What is Benchmarking?
“Benchmarking is simply the process of measuring the performance of one's
company against the best in the same or another industry”. Benchmarking is not a
complex concept but it should not be taken too lightly. Benchmarking is basically
learning from others. It is using the knowledge and the experience of others to improve
the organization. It is analyzing the performance and noting the strengths and
weaknesses of the organization and assessing what must be done to improve.[3]
Or
Benchmarking is the practice of comparing business processes and performance matrics
to industry bests and best practices from other companies. Dimenssions typically
measured are quality, time and cost.[7]
Reasons of Benchmarking
1. Efficiency and Effectiveness
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2. Improves Performance Potential
3. Expanding Your Business’s Horizons
4. Helps to Motivate Staff
5. Instigates Innovation from Inspiration
6. Understanding the Competition
7. Insight into Present Performance
Efficiency and Effectiveness
Benchmarking is a more efficient way to make improvements. Managers can
eliminate trial and error process improvements. Practicing benchmarking focuses
on tailoring existing processes to fit within the organization. [5,3]
Improves Performance Potential
Benchmarking speeds up organization’s ability to make improvements. [5,3]
Expanding Your Business’s Horizon
If every organization has excellent production and total quality management
skills then every company will have world class standards. [5,3]
Helps to Motivate Staff
One of the reasons to benchmark is that it helps get businesses and their staff
out of the comfort zone. When you’re benchmarking individual departments against
the competition, the result good or bad can be used as a source of motivation. It
helps to set goals and then its everyone’s to job to work towards achieving those
goals. [5]
Instigates Innovation from Inspiration
However, generally speaking, you can learn a lot from how the competition is
achieving a certain goal. That is your source of inspiration. Combining that with
your unique methods and human resource is what will lead to innovation. [5]
Understanding the Competition
Once you understand the competition’s methods, it becomes possible to outdo
them. Benchmarking allows you to learn and expand on what you’re currently doing
with that knowledge. [5]
Insight into Present Performance
Benchmarking is not just making changes and improvements for the sake of
making changes, benchmarking is about adding value. No organization should
make changes to their products, processes, or their organization if the changes do
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not bring benefits. When using benchmarking techniques, an organization must
look at how processes in the value chain are performed. [5]
Types of Benchmarking
Internal
Benchmarking
Cooperative
and Performance
Collaborative Benchmarking
Benchmarking Types of
benchmarking
Competitive Strategic
Benchmarking Benchmarking
Fig. 2: -Types of Benchmarking
Internal Benchmarking
Benchmarking against internal operations is one of the simplest forms of
benchmarking since most companies have similar functions inside their business units.
The immediate benefit comes from identifying the best internal procedures, and
subsequently transferring them to other parts of the organization. [1]
Performance Benchmarking
Performance benchmarking focuses on assessing competitive positions through
comparing the products and services of other competitors. When dealing with
performance benchmarking, organizations want to look at where their product or
services are in relation to competitors on the basis of things such as reliability, quality,
speed, and other product or service characteristics. [3]
Strategic Benchmarking
Strategic benchmarking deals with top management. It deals with long term results.
Strategic benchmarking focuses on how companies compete. This form of
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benchmarking looks at what strategies the organizations are using to make them
successful. [3]
Competitive Benchmarking
Competitive benchmarking is the most difficult type of benchmarking to practice.
For obvious reasons, organizations are not interested in helping a competitor by sharing
information. This type of benchmarking is used against direct competitors. Performed
externally, its objective is to compare companies offering competing products, services
or processes in the same markets. With direct competitors, information is not easy to
obtain. Public domain information is the most accessible. If some key customers in the
market have experience with more suppliers (competitors) they may be willing to give
their evaluation of these suppliers. But this method often involves high costs.[1]
Cooperative and Collaborative Benchmarking
“Cooperative and collaborative benchmarking are the most widely used types of
benchmarking because they are relatively easy to practice”. These forms of
benchmarking are a more accommodating way of getting information. In cooperative
benchmarking, organizations invite best in class organizations to meet with their
benchmarking team to share knowledge. During this process information flows one
way. From the "best in class" organization to the benchmarking team organizations.
Collaborative benchmarking does the opposite, information flows many ways. With
collaborative benchmarking, information is shared between groups of firms. It is
important to realize that not all collaborative efforts are considered benchmarking. It is
sometimes called “data sharing." [3]
Process of Benchmarking
Identify the focus
Plan and Research
Gather the data
Analyze the data
Develope recommendations
Develope recommendations
Implement changes
Review regularly
Fig. 3: - Process of Benchmarking
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Identify the focus
Determine the specific aspect to benchmark, such as a process, project, or
outcome. [1]
Plan and research
Gather necessary resources, such as surveys, databases, and collaboration
with other organizations, to implement the benchmarking project. [1]
Gather data
Collect relevant data from chosen companies or entities, including
numerical information, observations, and reports. [1]
Analyze the data
Compare the collected data to pinpoint gaps and opportunities for
enhancement. [1]
Develop recommendations
Based on the analysis, propose actionable suggestions for improvement
[1]
Implement changes
Put the proposed changes into practice and establish new standards. [1]
Review regularly
Continuously monitor and benchmark to maintain a competitive edge. [1]
Advantages of Benchmarking
1. Increase efficiency
2. Set clear business goal
3. Provide new opportunities for discovery
4. Increase sales performance
5. Better understand the competition
6. Improve product quality
Increase efficiency
Performing regular benchmarks contributes to a company's overall effectiveness
and efficiency by allowing it to identify potential areas of improvement internally.
Components that benchmarking can help improve upon include sales, marketing,
support and advertising. [6]
Set clear business goal
Performing regular benchmarks can allow you to set clearer business goals for your
employer. Understanding why the competition is successful can also give you insight
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that may help create measurable goals by defining success, developing innovative
strategies and effectively monitoring your progress towards each goal. [6]
Provide new opportunities for discovery
Another reason benchmarking in business is important is that it gives you a way to
discover opportunities for increased growth and success. This is especially important if
your company is stuck or not moving forward the way you want. Performing
benchmarks allows you to identify areas for improvement to get the company on par
with the growth and success of other businesses in your industry. [6]
Increase sales performance
Strong sales significantly increase a company's overall success, but not having the
appropriate insight to understand your sales performance can create a barrier.
Benchmarking allows you to assess your sales figures and compare them to the most
successful businesses in your or industry. [6]
Motivate employees
Strong sales significantly increase a company's overall success, but not having the
appropriate insight to understand your sales performance can create a barrier.
Benchmarking allows you to assess your sales figures and compare them to the most
successful businesses in your niche or industry. [6]
Better understand the competition
An apparent reason why benchmarking in business is important is that it allows
you to understand your competition better. Understanding their methods of operation
and what contributes to their overall success will let you expand your current operations
and increase overall productivity and performance. [6]
Improve product quality
You can also use benchmarking to assess your current product quality and improve
it. You might analyze how durable a competing product is or measure the customer
satisfaction of the competitor's consumer base. From there, you can source the
appropriate materials for your items and revise your approach to customer service to
increase overall satisfaction. [6]
Limitations of Benchmarking
1. Focus on Numbers
2. Customer Neglect
3. Employee Burnout
4. Over-Reliance on Data
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5. Challenges with Competitor Data
6. Copying Competitors
7. Service Benchmarking
8. Poor Implementation
9. Not a One-Time Task
10. Not Invented Here Syndrome
11. Exposing Weaknesses
12. Limited Scope
13. Cultural Barriers
Focus on numbers
Companies may prioritize data over the processes behind it. [1]
Customer Neglect
Self-evaluation can cause organizations to lose sight of customer needs. [1]
Employee Burnout
Pushing for better results may overwork employees, leading to mistakes. [1]
Over-Reliance on Data
Focusing too much on numbers can ignore the deeper reasons behind performance.
[1]
Challenges with Competitor Data
Competitors may not share information, and collecting it can be costly, time-
consuming, or ethically questionable. [1]
Copying Competitors
Imitating rivals might only provide short-term advantages. [1]
Service Benchmarking
Services are harder to benchmark than products due to intangible factors like
skills.[1]
Poor Implementation
Lack of employee involvement can lead to resistance to change. [1]
Not a One-Time Task
Benchmarking requires ongoing effort, not a single project. [1]
"Not Invented Here" Syndrome
Some companies reject ideas not developed in-house. [1]
Exposing Weaknesses
Benchmarking can reveal flaws, discouraging some companies. [1]
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Limited Scope
Focusing only on the same industry can miss valuable insights from other sectors.
[1]
Cultural Barriers
Multinational firms face challenges adapting best practices due to cultural
differences. [1]
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Reference
1. Freytag PV, Hollensen S. The process of benchmarking, benchlearning and
benchaction. The TQM magazine. 2001 Feb 1;13(1):25-34.
2. Jochem R, Landgraf K. Quality management benchmarking: FDA compliance
in pharmaceutical industry. International Journal of Health Care Quality
Assurance. 2010 Oct 5;23(8):690-8.
3. Lankford WM. Benchmarking: Understanding the basics. The Coastal Business
Journal. 2002;1(1):8.
4. Adebanjo D, Abbas A, Mann R. An investigation of the adoption and
implementation of benchmarking. International Journal of Operations &
Production Management. 2010 Oct 19;30(11):1140-69.
5. [Link]
compare2compete?utm_source=share&utm_medium=member_android&utm_
campaign=share_via
6. [Link]
business.
7. Benchmarking - Wikipedia [Link]
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