1 Benchmarking ETI 6134 Dr. Karla Moore

2 Today’s Lecture  Definition  Advantages  Disadvantages  Types

3 Benchmarking  New way of doing business developed by Xerox in The idea is to find another company that is doing a particular process better than the company, and then, using that information to improve the process.  Identifying best practices and comparing your practices and setting goals to meet them  Don’t have to benchmark the same industry, can benchmark similar processes. Xerox benchmarked L.L. Bean’s fulfillment processes

4 Advantages of Benchmarking  Benchmarking 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 we've always done it."

5  Benchmarking opens organizations to new methods, ideas and tools to improve their effectiveness. It helps crack through resistance to change by demonstrating other methods of solving problems than the one currently employed, and demonstrating that they work, because they are being used by others. Advantages of Benchmarking

6  Collaborative benchmarking: It is usually carried out by individual companies. Sometimes it may be carried out collaboratively by groups of companies (eg subsidiaries of a multinational in different countries). One example is that of the Dutch municipally-owned water supply companies, which have carried out a voluntary collaborative benchmarking process since 1997 through their industry association. Advantages of Benchmarking

7  Identify your problem areas: 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. Advantages of Benchmarking

8  Identify organizations that are leaders in these areas  Survey companies for measures and practices  Visit the "best practice" companies to identify leading edge practices  Implement new and improved business practices Advantages of Benchmarking

9  Disadvantages: Difficult to compare apples to apples (misleading) Difficult to get information Takes time and money Disadvantages of Benchmarking

10 Costs of Benchmarking  Cost of benchmarking: Benchmarking is a moderately expensive process, but most organizations find that it more than pays for itself. The three main types of costs are:  Visit costs: This includes hotel rooms, travel costs, meals, a token gift, and lost labor time.

11 Costs of Benchmarking  Time costs: Members of the benchmarking team will be investing time in researching problems, finding exceptional companies to study, visits, and implementation.  Benchmarking database costs: Organizations that institutionalize benchmarking into their daily procedures find it is useful to create and maintain a database of best practices and the companies associated with each best practice now.

12 Types of Benchmarking  Process Benchmarking: Specific work processes. Identifies the most effective operating practices from many companies that perform similar work functions.  Organizational Benchmarking: Comparing the current project, methods or processes with the best practices and using this information to drive improvement of overall company performance.

13 Types of Benchmarking  Performance Benchmarking: Assess their competitive positions through product and service comparisons.  Project Benchmarking: New techniques for planning, scheduling, and controlling projects.  Strategic Benchmarking: How companies compete.