OLYMPIA COLLEGE IPOH                NOTTINGHAM TRENT UNIVERSITY

1. INTRODUCTION

1.1 History of Benchmarking

G.H. Watson outlines the development of benchmarking in five phases:

        Phase 1 1950-1975       Reverse Engineering
        Phase 2 1976-1986       Competitive Benchmarking
        Phase 3 1982-1988       Process Benchmarking
        Phase 4 1988+              Strategic Benchmarking
        Phase 5 1993+              Global Benchmarking

Reverse engineering was tearing things apart, examining them, improving them, and putting them back together.  Benchmarking really began in its modern form with the introduction of competitive benchmarking began with Rank Xerox, and its implementation of benchmarking in beginning around 1976.  This was followed by process benchmarking which included looking for ideas outside of the direct competition.  Strategic benchmarking involves fundamentally changing the business, not just the process.  Global Benchmarking is the newest and involves comparing your organization on a global scale.

Benchmarking started out in the corporate sector. It was originally started when Xerox corporation realized it was losing a lot of money and market share to its Japanese competitors. Its competitors were able to sell photocopiers for the same price that it cost Xerox to make them. Benchmarking was started by Xerox’s Manufacturing unit when it analyzed its photocopier manufacturing compared to Fuji-Xerox, an affiliate Xerox’s Logistics and distribution unit benchmarked with L.L. Bean in the way it handled its materials handling and warehouse operations. This is a very famous study that became part of the first book on Benchmarking by Robert C. Camp. (Benchmarking: The Search for Industry Best Practices that Lead to Superior Performance). This book was not published until 1989, but in the meantime benchmarking was becoming indoctrinated in the Xerox system. Bear in mind that most people did not know about benchmarking at this time.

1.2 Definition of Benchmarking

The term benchmark originally meant a surveyor’s mark cut in a rock used as a point of reference or comparison.  In a general sense, benchmarking means setting standards which act as point of reference.  Gregory Watson (1993) quotes Roger Milliken (CEO of Milliken Company, one of America’s best known ‘quality organizations) as calling benchmarking ‘stealing shamelessly’.  He goes on to describe how Motorola used the code name ‘Bandit’ for its pocket pager which incorporated all the best practices of many companies into a single product design and production capability.

The International Benchmarking Clearing- house IBC at their Benchmarking Week conference in 1992 define benchmarking as:

  • Benchmarking is a continuous search for and application of significantly better practices that lead to superior competitive performance.
  • Benchmarking is a systematic and continuous measurement process; a process of continuously measuring and comparing an organization’s business processes against business process leaders anywhere in the world to gain information which will help the organization take action to improve its performance.

Robert Camp the best known book writer on benchmarking uses the Japanese word dantotsu which means ‘striving to be the best of the best’ as being the very essence of benchmarking.

 

As for conclusion from all these definition on benchmarking, it is more than a simple measurement activity and can become a dynamic process which enables a business to deliver superior competitive performance.

2. TYPES OF BENCHMARKING

2.1 Internal Benchmarking

 Internal benchmarking is one of the three main types of benchmarking in which organizations learns from fellow companies, divisions, business units or operation locations.  In the internal benchmarking process, it avoids the barriers involve when trying to compare competitor’s business activity.  Before an organization to implement this internal benchmarking, it must be the best or specialists in the industry and it also must employ high skillful experts to work with them.  Internal benchmarking is not sufficient for small organizations because of their small comparison scope.  Example of company practicing internal benchmarking is Hewlett-Packard (H-P) and it is the well known and successful organization which using internal benchmarking as strategy for new business development.  

This type of benchmarking is used when an organisation searches for best practices within its own boundaries. When best practices are identified, each department or location is encouraged to adapt it to their own environment and bring their performance up to the level of the internal benchmark, thereby raising the performance of the organisation as a whole.

Internal benchmarking has the advantage that the data is easier to collect because there are fewer barriers to the open sharing of information. It is particularly appropriate where a number of sites within an organisation do similar work.

2.2 Competitive Benchmarking

Aim: ‘To be better than the best competitor’

 Means: By benchmarking the following:

 Products: products and services delivered to external and internal customers.

 Processes: business processes in all departments or functions.

 People: organization, business culture and competence of people.

Competitive benchmarking is a continuous management process that helps organization assess their competition and themselves and use that knowledge in designing a practical plan to achieve dominance power in the market-place. To try hard to be better than the best competitor is the target in doing this Competitive Benchmarking.  The measurement takes place along the three components of a total quality program including products, services, business processes and procedures, and people.

      Competitive benchmark not only to benchmark performance with one’s direct competitors, but also with other firms as well to discover best practice and bring that practice back to one’s own company.  Accordingly competitive benchmarking can be defined as the continuous systematic process for evaluating companies recognized as industry leaders to develop business and working processes that incorporate best practice and establish global performance measures.

        Seven reasons for using the Competitive Benchmarking technique are to:

  1. Define customer requirements.
  2. Establish effective goals and objectives.
  3. Develop true measures of productivity.
  4. Become more competitive.
  5. Determine industry best practice.
  6. Foster proactive change.
  7. Encourage collaboration, information sharing and relationship building with other companies on a regional, national or global basis for mutual benefits.
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The most appropriate example to explain about this competitive benchmarking is Pepsi and Coca Cola.  For many years Pepsi has been used competitive benchmarking against the soft drink market leader Coca Cola.  Pepsi still able to compete in the market because of their benchmarking strategy against Coke and it gives them valuable guidance in planning their business strategy and product enhancement.

2.3 Best-Practice Benchmarking

Best Practice Benchmarking is used to identify and learn from best practices in other organizations using similar processes but achieving superior performance. This requires firstly a thorough understanding of your ...

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