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Benchmarking in a business and its Advantages

Updated on March 26, 2013
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Benchmarking Simplified in less than 5 minutes

Introduction to Benchmarking


Benchmarking can be defined as “the process of comparison of a particular organization, plant or process with its “peers”, in other words it is an effort to discover whether the performance is good or terrible when contrasted to its competitors carrying out the same activities. Benchmarking is also used in discovering and targeting ‘best practice’ from the different comparators, and utilizes that as the foundation of improvement. Benchmarking can be of extreme advantage when the peer organizations are chosen on a global scale.



Types of Benchmarking


  • Internal Benchmarking

Benchmarking can be done in different ways, for example through internal benchmarking a firm can learn internally in order to improve current practices and implements new ones. In short, Internal benchmarking looks at past performance or performances attained by different branches or divisions.


  • External Benchmarking

External Benchmarking on the other hand is concerned with performance comparison with associates from other business units of the same corporation, or with different organizations.


  • Best Practice Benchmarking

Best practice benchmarking or best in class is concerned with the comparison of individual activities of a firm to others firms where those other activities are performed in a better way.


  • Industry Benchmarking

Industry Benchmarking on the other hand is related with setting benchmarks by glancing the achievements of similar other industry type organizations, Industry Benchmarking can further be divided into two sub categories for example, non competitor benchmarking and competitor benchmarking.


  • Intra-group Benchmarking

In Intra-group Benchmarking a set of companies agree that similar units within participating corporation will pool data on their processes which will later be benchmarked at an operational level, and enhanced tasks forces are established to spot and transmit finest practices to the group members.


  • Process or Generic Benchmarking

Process or Generic Benchmarking is responsible for benchmarking generic processes like order receipt and dispatch process against best functions or leaders in any business.


  • Operational Benchmarking

Operational benchmarking is done to analyze office flow processes and procedures, productivity and staff analysis.


  • Financial Benchmarking

This particular type of Benchmarking process analyses finances to determine overall competitiveness and productivity.



Benchmarking Surveys


France

A survey in France was done by Chambre de Commerce et d’Industrie estimated that almost fifty percent of the one-thousand companies use benchmarking regularly, and eighty percent of the companies believe it as an constructive medium of revolutionizing the companies.


India

NPC-IFC Group (1994) conducted a survey which showed that almost around 70 organisations were using benchmarking.



Benchmarking - Useful for Organisations

Benchmarking is an approach to chase finest practices creating excellent services, products, and processes. An organization which has established a system of benchmarking among its employees makes more revenue and succeeds in attaining productivity at a maximum level. Corporations who rely on benchmarking reap the rewards of creativity, process improvement, cost savings, and other advantageous benefits. Benchmarking approach is helpful in the growth of an organization, knowledge transfer, cost effective solutions, and use of knowledge to improve process performance.


Improving Business Processes Through Benchmarking

Benchmarking also helps to improve business/manufacturing processes that helps in reducing waste, streamline manufacturing cycle time, and increases product quality.

In order to know how effective an organization is one must always consider and weigh that organisation on its operational level practices such as quality functional deployment, outsourcing, and employee-motivational practices. Cost, quality, delivery, integration, and innovativeness are helpful in measuring operational practices. In order to boost organisational competitiveness firms have taken benchmarking as a critical business model through which they concentrate on the organisational factors such as strategy deployment, culture, leadership styles and their impact on the overall success of the corporation.

Organisational-level best practices such as, Manufacturing practices, six sigma are broadly studied in order to improve the competitiveness of the corporation in the market. Organisational financial performance is derived and interpreted from such competitiveness, and is used as a tool to classify, and market the firm in comparison with other competitors in the market. Supply chain entities, traditional manufacturing firms and small to medium sized firms are concerned with such performance measures.




Organisations Involved In Benchmarking - A Real World Example


Dell

Dell is a world’s renowned company dealing with computers especially laptops and other relevant devices, they have a sophisticated performance benchmarking system, their performance benchmarks provide objective information which can help in comparing the performance of computer systems such as computer platforms, performance, components, operating systems, and distinct system configuration. Dell also participates in standard bodies such as, Standard Performance Evaluation Corporation (SPEC), Business Applications Performance Corporation (BAPCo), Transaction Processing Performance Council (TPC), and Storage Performance Council, and they use benchmarks on technology assessment and system development process in order to make certain that the performance of client systems and dell servers is appropriate; they make certain that they make available suitable balance of performance, cost, features, quality, and reliability.


Dell's Benchmarking Philosophy

Dell’s Benchmark philosophy is based on three parts, first method of benchmark is to resemble how companies utilise applications on Dell systems, and second method is to make certain that anyone can replicate outcomes with a system shipped straightaway from Dell, using publicly available drivers, and promote benchmarks and run-rule modifications that reveal this approach to benchmarking.


Judging Computer Systems Through Benchmarking

Computer systems are judged through the standard of computer performance benchmark. Many of the benchmarks are developed and regulated by SPEC and BAPCo which helps administrators evaluate system performance on a single, critical application such as Pro/E or Microsoft Exchange. Benchmarks which are regulated by boards have clearly and eloquently defined documented methods, and the results are documented and reproduced. For example SPEC® CPU2000 benchmark, SPEC’s mission is to establish, maintain, endorse a standardized set of benchmarks, and their benchmarks are considered reputable. SPEC CPU2000 is responsible for providing performance measurements which is then utilized to compute intensive workloads on different computer systems. Through these benchmarks system’s processor performance is measured, and also memory architecture and compiler. Some instructions are provided by SPEC, these instructions make certain that hardware and software configurations of tested system are appropriate to run real world applications. A full disclosure report is required by the organization. SPEC also encourages submission of reports for publication on their website. Reports are then peer reviewed before publication. While BAPCo, TPC, and the storage performance Council are responsible for providing industry standards benchmarks which is used to evaluate the performance of client, server, and storage systems. Some of the workload types and benchmarks are, workload type Database and its benchmarks are online transaction processing (OLTP): TPC-C, Decision Support: TPC-H and TPC-R, and Java™: SPECjbb.


To sum it up benchmarks can provide information of good value which can help in assisting administrators compare and contrast systems and Processes. But some critics believe that sometimes Benchmarking provides too much information which creates irrelevancy for organisations in terms of pursuing their long or short term goals. Cons of Benchmarking will be discussed extensively in the upcoming articles.



Benchmarking in Dell

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Benchmarking in Dell II

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