Friday, 22 March 2013

BENCHMARKING





Benchmarking is the concept of discovering what is the best performance being achieved, whether in your company, by a competitor, or by an entirely different industry. 

It is an improvement tool whereby a company measures its performance or process against other companies’ best practices, determines how those companies achieved their performance levels, and uses the information to improve its own performance. 

Benchmarking is a continuous process whereby an enterprise measures and compares all its functions, systems and practices against strong competitors, identifying quality gaps in the organization, and striving to achieve competitive advantage locally and globally. 

If you don't know what the standard is you cannot compare yourself against it. If a customer asks "What is the MTBF on your widget?" it is not enough to know that your Mean Time Between Failures is 120 hours on your standard widget and 150 for your deluxe widget. 

You also have to know where your competitors stand. If the company against whom you are competing for this order has a MTBF of 100 hours you are probably okay. However, if their MTBF is 10,000 hours who do you think will get the order?Most of the early work in the area of benchmarking was done in manufacturing, like the example above. Now benchmarking is a management tool that is being applied almost anywhere. 

Once we decide what to benchmark, and how to measure it, the object is to figure out how the winner got to be the best and determine what we have to do to get there. 

Benchmarking is usually part of a larger effort, usually a Process Re-engineering or Quality Improvement initiative. The Westinghouse Quality Management System shows one way of fitting it all together. 

Benchmarking involves looking outward (outside a particular business, organisation, industry, region or country) to examine how others achieve their performance levels and to understand the processes they use. In this way benchmarking helps explain the processes behind excellent performance. When the lessons learnt from a benchmarking exercise are applied appropriately, they facilitate improved performance in critical functions within an organisation or in key areas of the business environment. 




Application of benchmarking involves four key steps: 
  1. Understand in detail existing business processes. 
  2. Analyse the business processes of others. 
  3. Compare own business performance with that of others analysed. 
  4. Implement the steps necessary to close the performance gap. 

Benchmarking should not be considered a one-off exercise. To be effective, it must become an ongoing, integral part of an ongoing improvement process with the goal of keeping abreast of ever-improving best practice. 

Benchmarking is recognised as a valuable tool for the evaluation and contextualisation of organisational performance. It helps to formulate and frame the right questions and this enables greater focus on priorities for further assessment and better use of scarce resources. 

The UK industrial sector face a period of unprecedented change with major shifts in patterns of funding. To respond effectively the sector will need accurate, timely and insightful business intelligence to support strategic planning, operational optimisation and to drive out inefficiencies. Benchmarking is a relatively untapped resource with significant potential to support the delivery of genuine business benefits for the sector. 

— Sources: Isixsigma, About, QAA, Westington House Nuclear.


HF

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