Benchmarking

Benchmarking is a concept that is now widely accepted. It is an approach for setting goals and productivity measures based on best industry practices. Benchmarking developed out of the need to have data against which performance can be measured. What should the criteria be? If a company needs six days to fill a customer's order and the competitor in the same industry needs only five days, five days does not become the standard if a firm in an unrelated industry can fill orders in four days. The four-day criterion becomes the benchmark even when at first this seems to be an unachievable goal. The process involved in filling the orders is then carefully analyzed, and creative ways are encouraged to achieve the benchmark.
• There are three types of benchmarking.
First, strategic benchmarking compares various strategies and identifies the key strategic elements of success.
Second, operational benchmarking compares relative costs or possibilities for product differentiation.
Third, management benchmarking focuses on on support functions such as market planning and information systems, logistics, human resource management, and so on.
• The benchmarking procedure begins with the identification of what is to be benchmarked. Them superior performers have to be selected. Data need to be gathered and analyzed, which become the basis for performance goals. During the implementation of the new approach, performance is periodically measured and corrective actions are take at that time.
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Fundamentals of Management : Controlling [BBA 2305]