Benchmarking: Benchmarking is the practice of comparing business processes and performance metrics to industry bests and best practices from other companies.
It was begun in the late 1970s by Xerox Corporation. That time, Xerox was losing market share and feeling a lot of pressure from its competitors. In an attempt to try and “get back into the game”, Xerox decided to compare its operations to those of its competitors.
After finding quality standards with which to compare itself, Xerox began one of the greatest trends in the business world today (McNair and Leibfried, 1992). source.
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Benchmarking is the process by which companies look at the “best” in the industry and try to imitate their styles and processes.
This helps companies to determine what they could be doing better.
A company’s competitors may be stuck in the same rut as the company deciding to benchmark. It would be possible to get a jump on competitors by using new-found strategies.
It is overcoming disbelief and enhancing learning.
It may cause a necessary change in the culture of an organization.
Benchmarking is defined as “the process of identifying and learning from best practices anywhere in the world” (Allan, 1997). By identifying the “best” practices, organizations know where they stand in relation to other companies.
It is increasing in popularity as a tool for continuous improvement. Organizations that faithfully use benchmarking strategies achieve a cost savings of 30 to 40 percent or more.
It acts as a vehicle to improve performance by assisting in setting achievable goals that have already been proven successful.
There are four different types of benchmarking which consist of –
Before deciding to benchmark, a company needs to determine what it is they want to benchmark.
A new organization or factory with a short capital base may substantially develop its productivity and efficiency by following strategy, management, techniques, technology, etc. of the topmost and advanced organization under this sector.
An advanced organization generally possesses vast experience, resource, capital, research base, technology, technical and managerial human resource base which a new or domestic organization may seriously lack.
A topmost or foreign-based organization may have enough resources to spend on research and innovation in different spheres of work. This a new or domestic organization may not afford. Experience and expertise of the topmost organization can’t be assimilated within a short span of time except by benchmarking.
It said to assimilate by an organization the best practices of the most advanced and successful organizations in the same or relevant field. This is very commonly known as “follow the leaders in your field”.
Assimilating the best practices from leaders in the field is the easiest and cheapest way of gathering technique, technology, management practice, know-how, strategic planning, quality & production management, cost management, etc.
The local organization suffers, from intrinsic limitations. Examples –
All the above-mentioned factors may make a competitive edge in the most competitive era of modern business. On all this factor organizations have a good chance to follow the most advanced and successful organization in the respective field. This method delivers in a very short time.
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