Benchmarking is the process of identifying best practice in conjunction to both the product and the processes by which the products are created and delivered. The function of benchmarking is to understand and evaluate the current position of an organization in relation to best practices and to identify areas and means of performance advancement.
Benchmarking entails looking outside a specific organization, industry or region to investigate how others accomplish their performance levels and better understand processes they use. In other words, benchmarking helps explain the methods behind exceptional performance.
Benchmarking involves these steps:
- Determine the functional areas in your organization you want to benchmark
- Identify key factors and variables to measure those functions
- Select the best organizations for each area to be benchmarked
- Measure the performance of the best organizations for each benchmark you have considered
- Measure your own performance for each variable and compare the results
- Specify the programs and actions to meet and surpass the competition based on a plan to enhance those areas
- Implement these programs by setting specific improvement targets and deadlines
There are several advantages for your organization to start benchmarking. One key advantage of benchmarking is lower labor costs. Analyzing how your competitor cuts costs can help you do the same. Companies can also improve product quality by comparing various elements of competitive products to their own products. Additionally, organizations will likely operate at more efficient levels thanks to benchmarking, leading to dramatically lowered expenses and increased savings and profits.