Another aspect of Benchmarking

Benchmarking is a business improvement technique. There are different types of benchmarking.

The aim of benchmarking is to identify where best practice lies and then to analyse what constitutes the best operational practice so this can be implemented across the business.
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Methods of Benchmarking

1. Internal benchmarking is where similar operations in different parts of the company under consideration are compared with each other and also with an internally generated target.

2. External benchmarking is where the company’s results are compared to those of other companies.
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There are different types of external benchmarking:
**one where competitors are used as comparators and
**another where a company with similar operations (eg warehousing), which is not a direct competitor, is compared.
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The main advantages and disadvantages concern the availability of benchmark information and its applicability to the business.

Internal comparison between regions in a group of companies will be easy but may not yield dramatic improvements as the regions are probably already in relatively close contact. Any improvements identified from this exercise should be easily applicable as the systems will be broadly the same.

External benchmarking in this case means comparison to competitors where the possibility of radical new ideas is greater but the difficulty will lie in obtaining sufficiently detailed information to identify the best practice business process. Of course, it will be difficult to negotiate an information sharing arrangement with a competitor due to the commercially sensitive data being exchanged. However, there exist some government schemes which require subscriber companies to supply data and then provide them with anonymised industry data in return.

It would be easier to obtain information from a company which is not in direct competition with the company but which has similar functions such as purchasing and warehousing. However, there are likely to be more significant differences in the objectives and functions of the activities being compared and so it may be harder to apply the lessons from the competitor to the company’s operations.



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