Benchmarking as a Tool to Improve Business Practices

Benchmarking as a Tool to Improve trading PracticesBenchmarking( scoop practice bench marking or sue bench marking) is a process used in management and particularly strategical management, in which giving medications evaluate various sides of their processes in relation to exceed practice, usu whollyy within their own sector. Dimensions typically measured are quality, m, and cost. Improvements from learning mean doing things better, faster, and cheaper. This whence allows organizations to develop plans on how to adopt such shell practice, usually with the aim of increasing some aspect of mathematical process. Benchmarking is often treated as a perpetual process in which organizations continually seek to altercate their practices.NEEDS AND BENEFITS FOR BENCHMARKINGOrganizations use benchmarking for a variety of purposes. close to organizations plant benchmarking as part of an overall problem- resolving power process with a clear mandate for organizational feeler .Others position benchmarking more as a proactive mechanism to keep themselves aware of the secernate-of-the-art trade concern practices. Some of the reasons organizations use benchmarking processes areSTRATEGIC PLANNINGIt requires a thorough knowledge of the market place, the potential activities of the challenger, the state of the art regarding increases or services being produced, fiscal requirements for doing business in market, and the customer base. Benchmarking is recyclable to a faultls for gathering information in these areas during the process of strategic planning. This type of information hatful shape a business strategy in a more realistic contraction, or at least serve identify the risks of doing business in certain markets.FORECASTINGBenchmarking information is often used to gauge the state of the marketplace and to forecast market potentials .it also provides a source of information regarding the business directions of key players in the marketplace, trends in prod uct/service developments, patterns of consumer behaviour and so on. in m any(prenominal) industries, the business direction of a few major companies can shape the direction of an entire marketplace.forecastion the activities of these types of organizations often provides their competitors and support services companies with grand information about future implications for their businesses.NEW IDEASBenchmarking is an excellent source of new ideas. One of the primary Brobdingnagian scale benchmarking is that it exposes individuals to new products, work processes, and ways of managing high society resources.benchamarking requires that individuals establish formal contacts outside their oragainizations.the reward is moving-picture show to different ideas and approaches to conducting business. It also provides an opportunity for employees to think out of the box to consider alternative paradigms and to engage in What if thinking.PRODUCT/PROCESS COMPARISONSA common type of benchmarking involves the collection of information about the products or processes of competitors or excellent companies. This information is often collected and used as a standard of comparison for standardized products or services of the benchmarking organization. This type of benchmarking confirms more costly with traditional competitive intelligence activities. in these competitions product or service is compared feature by feature with the product or servic3e of the club performing the analysis. name and address SETTINGBenchmarking is used as a means of identifying best practices. The standards set by excellent companies in many cases define what is possible on a state of art performances scale.These goals can help organizations revivify their performance curves as they strive for continual betterment.Many small to medium size companies can non hope to achieve the levels of performance of excellent companies that have far greater access to technologies, nifty,or separate resources.Howe ver,these companies can benefit dependant on organizational resources.PERFORMANCE ASSESSMENT TOOLBenchmarking is defined as the process of identifying and learning from the best practices in the world. By identifying the best practices, organizations know where they stand in relation to other companies. The other companies can load out problem areas and provide possible solutionsBenchmarking allows organizations to better understand their administrative trading operations, and targets areas for amendment. In addition, benchmarking can resist waste and break a companys market share.CONTINUOUS IMPROVEMENT TOOLBenchmarking is increasing in popularity as a tool for continuous improvement. Organizations that faithfully use benchmarking strategies achieve a cost savings of 30 to 40 per centum or more. Benchmarking establishes methods of measuring each areas units of output and costs. In addition, benchmarking supports the process of budgeting, strategic planning, and capital plannin g.ENHANCED PERFORMANCE TOOLBenchmarking also allows companies to learn new and innovative approaches to issues facing management, and provides a primer coat for training. Benchmarking improves performance by setting achievable goals.ENHANCED LEARNING TOOLAnother reason to benchmark is to overcome disbelief and to enhance learning. For example, hearing about another companys successful processes and how they work helps employees believe theres a better way to compete.GROWTH POTENTIAL TOOLBenchmarking may cause a needed motley in the organizations culture. After a period of clipping in the industry, an organization may become too practiced at searching inside the company for growth. The company would be better off flavour outside for growth potential. An outward-looking company tends to be a future-oriented company usually hint to an enhanced organization with increased profits.JOB SATISFACTION TOOLBenchmarking is growing and changing so rapidly, benchmarkers have banded united ly and developed how-to networks to share methods, successes, and failures with each other. The process has successfully produced a high degree of job expiation and learning.HELPS OVERCOME PARADIGM BLINDNESSBenchmarking is a powerful management tool because it overcomes paradigm blindness. Paradigm blindness can be summed up as the mode of thinking, The way we do it is the best because this is the way weve eternally done it. Benchmarking opens organizations to new methods, ideas and tools to improve their effectiveness. It helps crack through resistance to veer by demonstrating other methods of solving problems than the one modernly employed, and demonstrating that they work, because they are being used by others.COMPETITIVE BENCHMARKINGSome authors call benchmarking best practices benchmarking or process benchmarking. This is to distinguish it from what they call competitive benchmarking.Competitive benchmarkingis used in competitor analysis. When researching your direct compe titors you also research the best company in the industry (even if it serves a different location) .(MichaelJ.Spendolini n.d.)BENCHMARKING PROCESS cite your problem areas Because benchmarking can be applied to any business process or function, a clip 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, reengineering analysis, process mapping, quality control variance reports, or financial ratio analysis.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. check up on companies for measures and practices Companies target specific business processes using detailed surveys of measures and practices us ed to identify business process alternatives and leading companies. Surveys are typically masked to protect confidential data by neutral associations and consultants.Visit the best practice companies to identify leading edge practices Companies typically agree to mutually exchange information honest to all parties in a benchmarking group and share the results within the group.Implement new and amend business practices Take the leading edge practices and develop implementation plans which include identification of specific opportunities, funding the job and selling the ideas to the organization for the purpose of gaining demonstrated value from the process.THE ETHICAL ASPECTS OF BENCHMARKINGIn benchmarking, ethics is defined as principles, guidelines, or standards that determine a protocol of interaction between individuals and organizations.Many ethical questions may elevate in the course of a benchmarking procedure. Two of the main questions which Johnson deals with are* Can th e recipient take acknowledgement for developing the idea, approach, and so forth?* If the benchmarking partner received information of tremendous value, can they take faith for it in their advertising?These questions cannot be answered quickly or easily. Partners in the benchmarking process need to communicate their expectations and feelings on these issues, and to follow some basic guidelines. They should establish specific and detailed ground rules. This includes the notion that ideas are not shared to gain competitive advantage, but are shared so both partners can improve or benefit. Questions should not be asked about a companys sensitive data partners shouldnt be pressured to divulge this information to continue the benchmarking process. Data should be treated as confidential it shouldnt be used to limit competition or to gain business. (MichaelJ.Spendolini. THE BENCHMARKING BOOK. AMERICAN MANAGEMENT ASSOCIATION-AMACOM.)COST OF BENCHMARKINGBenchmarking is a moderately expensi ve process, but some organizations find that it more than pays for itself. The three main types of costs areVisit costs This includes hotel rooms, travel costs, meals, a token gift, and lost labour time.Time costs Members of the benchmarking team will be investing time in researching problems, finding exceptional companies to study, visits, and implementation. This will take them away from their regular tasks for part of each daytime so additional staff might be required.Benchmarking Database Costs Organizations that institutionalize benchmarking into their daily procedures find it is reusable to create and maintain a database of best practices and the companies associated with each best practice now.TYPES OF BENCHMARKINGProcess benchmarking The initiating firm focuses its reflectivity 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 t o benchmark cost and efficiency progressively 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 indus tries.Functional Benchmarking A company will focus its benchmarking on a single function to improve the operation of that particular function. Complex functions such as Human Resources, Finance and Accounting and Information and converse Technology are unlikely to be directly comparable in cost and efficiency terms and may need to be disaggregated into processes to make valid comparison.Best-in-class Benchmarking Involves studying the leading competitor or the company that best carries out a specific function.Operational Benchmarking Embraces everything from staffing and productivity to office flow and analysis of procedures performed. heartiness Benchmarking Developing an accurate model of a buildings energy consumption with the purpose of measuring reductions in usage.As mentioned earlier, many companies use the benchmarking process Avon Products, Exxon Chemical, Microsoft, crosswalk, and General Motors. photocopy is known as the pioneer of benchmarking. By benchmarking, Xerox cut quality problems by two-thirds, cut manufacturing costs in half cut development time by two-thirds and while increasing volume cut direct labor by 50 percent and corporate staff by 35 percent. All improvements were not a direct result of benchmarking The improved process and climate indirectly improved the rest of the organization.General Motors (GM) compares itself to the best-in-class company. This benchmarking shows GM where they are going price and that it is possible to do it better. The company compared its labor hours per vehicle to Fords GM had 30 labor hours per vehicle Ford only had 19 a dramatic gap. GM also benchmarked from Toyota. Toyota was superior in four areas defects per vehicle, guarantee cost per vehicle, order response time, and fasteners per car. GM needed to improve in all these areas for future success. The company also looked at Suzuki, regarded as a leader in properly painting vehicles the first time. Finally, GM looked at NUMMI in three areas exte rnal JIT parts, internal JIT parts, and fastener part numbers.Due to the suffering self-propelling market in the early 1980s, Ford needed to change its operations to cut costs. Ford managers believed they could improve processes in the accounts payable department. After gathering, analyzing, and comparing data with Mazdas accounts payable operations, Ford retooled its own accounts payable operations and reduced costs by 5 percent. (DEAN ELMUTI 1997)CONCLUSIONBenchmarking has consequences which are beyond the process itself it reforms all the levels of the company. modifies the process of manufacture of the product leads(drives) also reforms the hierarchical organization of the company, the product itself, and the state of mind of the employeesThere is no motion that benchmarking is here to stay. Any company should benchmark if it wants to attain world-class competitive capability, prosper in a global economy, and above all, if it wants to survive. These trends are not an option fo r companies anymore they should be done by all who want to remain competitive. All companies strive to be profitable, competitive, and successful. Benchmarking can help any company succeed-as big as it is applied correctlyABSTRACTBenchmarking is the search for industry best practises. Improvements from learning mean doing things better, faster, and cheaper. This then allows organizations to develop plans on how to adopt such best practice, usually with the aim of increasing some aspect of performance. Benchmarking is often treated as a continuous process in which organizations continually seek to challenge their practices.Benchmarking is a way to move away from tradition and one of the major strategic management tools. It conservatively dissects the organization into segments, and then removes and inserts pieces to account for changing environments. Changes occur once the process has started, and will continue to change and mold the organization for as long as individuals are cont inuously striving to make it better.