Benchmarking 1

Benchmarking
Benchmarking is the search for those
best practices that lead to the superior
performance of a company. A
benchmark is a standard by which a
product, process, procedure, etc. can be
measured or judged. The benchmarking
process is a tool a company can use to
evaluate how successfully it meets its
customers' requirements by searching for
the best industry practices. In and of
itself, benchmarking is of little value;
value comes from identifying
improvement opportunities by looking at
how others perform similar functions,
and identifying and adopting their best
practices. This leads to a strengthening
of one's competitive position.
There are four different types of
benchmarking:
1. Internal - a comparison of internal
operations (e.g. one plant vs. another).
2. Competitive - a comparison between
competitors for the function or product
of interest. An example might be a
comparison of Delphi Packard's harness
assembly process with Yazaki's.
3. Functional - a comparison of similar
functions within the same industry or to
industry leaders, but not between
competitors. An example might be a
comparison of Delphi Packard's billing
function with that of American Express,
or a comparison of Delphi Packard's
surface mounting process with that of
Motorola.
4. Generic - a comparison of business
functions or practices that are the same
regardless of industry.

A distinction needs to be made between

benchmarking and successful quality
practices (a.k.a. "best practices").
Benchmarking is a proactive search for
"the standard," whereas successful
quality practices is the identification of
existing processes that will lead to
improved performance when
implemented elsewhere.
Benchmarking should be done by people
who are very knowledgeable in the
function to be benchmarked. Ideally,
they are the person or persons who can
actually change that function.
Benchmarking may be performed either
systematically or on an ad hoc basis,
depending on the need.
Why Benchmarking?
A major roadblock hindering continuous
improvement, and therefore competitive
leadership, is a mind set that is stuck in
the old way of thinking. Many examples
can be cited in which an opportunist
broke down the old paradigms which had
hampered innovation and, by stealing the
market or creating a new one, became an
industry leader and created a new set of
paradigms which became the new
standard. By continually looking to the
outside world, a company becomes more
aware of customer needs and of the
"best" solution to meet those needs.
Benchmarking is a systematic way of
looking at the outside world to see what
works the best, whether the outside
world means another department in the
plant, another plant in the company,
another company in the industry, or even
another industry. Taken to its logical
conclusion, benchmarking leads to a
more proactive environment in which
quality is seen through the eyes of the

For Reference Only. Revision date: 11 Oct 95.

Benchmarking 2
customer. Goals are objectively set
based on the actual achievements of
others, customer needs are resolved
creatively and their degree of fulfillment
measured with reliable, hard data, and
continuous improvement becomes a
provable fact instead of just a slogan.
Benchmarking Process
There are four basic steps in
benchmarking: (1) Planning; (2)
Analysis; (3) Communication; (4)
Action.
1. Planning
The first step in planning is to identify
what is to be benchmarked, and prioritize
these. Next, it must be determined
where benchmarking is to take place.
Finally, qualitative and quantitative data
are collected.

analysis should occur before quantitative

analysis:
Qualitative analysis explains why, what,
and the reasons for differences. A
qualitative definition of the benchmark is
a verbal description of the practice and a
statement of opportunities (e.g. faster
inventory throughput via bar code
scanners).
Quantitative analysis shows a numerical
effect on the operations. A quantitative
description determines the size of the
difference and measures the opportunity
(e.g. faster inventory throughput by 100
pcs/hr).
3. Communication

There are many ways and places to

collect data. Questionnaires and surveys
to customers and competitors, talking to
the customer, visiting competitors' sites,
internal experts, and public sources like
libraries, trade associations, consultants,
etc. Data usually needs to be clarified at
some time or other, so it is wise to ask
questions when the opportunity exists.
Also, it is important that if data is being
shared among competitors, that no
sensitive or confidential data changes
hands.

When a benchmarking activity is

completed, a report should be submitted
to a central location (e.g. Divisional
Quality Control Auditor) to eliminate a
duplication of effort and to provide
opportunities to build on benchmarking
activity already completed. The report
should include the following: What area
or function was benchmarked? Where
did the benchmarking activity occur?
What method was used to gather
information? What analysis technique
was used? What were the conclusions?
What are the recommendations? What
are the action plans? Who owns the
action plans? How is the action plan to
be measured?

2. Analysis

4. Action

When you analyze benchmarking

investigations, concentrate on clearly
understanding practices before
measuring the result. Qualitative

Once the decision has been made to

adopt the "best practices," operational
action plans showing specific events
must be implemented. Two factors must
be considered when developing an action

For Reference Only. Revision date: 11 Oct 95.

Benchmarking 3
plan: the activity or task, and the
behavioral aspects of implementing
change.
Task Considerations: The action plan
should be a step-by-step approach, with
a precise schedule and well-defined
milestones and an assignment of
responsibility and accountability for each
task. Also, the plan should include how
the results are to be measured to
determine effectiveness.
Behavioral Considerations: Change is
necessary for competitive and strategic
growth. Unfortunately, the reaction to
change is often underestimated or
misunderstood. The way changes are
introduced has a direct impact on how
the organization deals with changes.
Continual and repetitive communication
is important, to demonstrate commitment
and to reinforce the need for change.
Implementing change must be
recognized and rewarded appropriately;
and it must not be forgotten that people
tend to support what they help to create.
It also helps to identify those people who
are willing and able to be agents of
change.

Enthusiasm tends to wane as an activity

matures; it is up to management to
maintain or restore enthusiasm during
implementation. The payback is worth
it.
J. Sandberg, author
References:
J. Sandberg, Benchmarking: Innovation
and Continuous Improvement, Packard
Electric Div., 1994.
Camp, R.C., Benchmarking, The Search
for Industry Best Practices that Lead to
Superior Performance, ASQC Quality
Press, 1989.

After the action plan is developed, it

must be put into practice. Ownership of
the area or function to be changed must
be established; an overseer may also be
assigned if many areas or functions are
affected. In addition, milestones should
be measureable and documented as they
are reached; there should be enough
flexibility to take corrective action when
progress fails to meet the milestones.
Last but not least, benchmarking
activities must be recognized and
rewarded.

For Reference Only. Revision date: 11 Oct 95.