Benchmarking

Resources - Benchmarking

Types of Benchmarking

A copier company has benchmarked against a camping goods store. An ammunition supplier has benchmarked against a cosmetics company, comparing shell casings and lipstick holders. An airline company looked at a racing crew to see how to perform quick equipment maintenance and repairs. Within the federal government, agencies have benchmarked their customer service lines for promptness, accuracy, and courtesy against other federal agencies as well as the private sector. The type of study undertaken is not as important as recognizing that benchmarking, both inside and outside an organization, can be enormously beneficial for different reasons and in different ways. Due to the vast differences in resource investments and possible outcomes associated with different types, management must make the decision and identify which type the benchmarking team is to use.

No one type is the best way. One type might be more appropriate for an organization than another depending on its environment, products, services, resources, culture, and current stage of TQ implementation. There are four primary types of benchmarking: internal, competitive, functional, and generic.

  1. Internal benchmarking is a comparison of a business process to a similar process inside the organization.
  2. Competitive benchmarking is a direct competitor-to-competitor comparison of a product, service, process, or method.
  3. Functional benchmarking is a comparison to similar or identical practices within the same or similar functions outside the immediate industry.
  4. Generic benchmarking broadly conceptualizes unrelated business processes or functions that can be practiced in the same or similar ways regardless of the industry.

A more detailed explanation of these four types of benchmarking follows, along with: a brief description of each type; possible outcomes; examples from DON, DOD, federal government, and private industry; and some of the pros and cons for each type.

Internal benchmarking

Internal benchmarking is a comparison of a business process to a similar process inside the organization to acquire the best internal. business practices. At the federal level, two Department of Transportation sites might prepare their budget submissions for Congressional approval. In the private sector, a retail food store chain selects its most profitable store as a benchmark for the others.

Benefits

  • most cost efficient
  • relatively easy
  • low cost
  • fast
  • good practice/training with benchmarking process
  • information sharing
  • easy to transfer lessons learned
  • common language
  • gain a deeper understanding of your own process
  • makes a great starting point for future benchmarking studies

Challenges

  • fosters mediocrity
  • limits options for growth
  • low performance improvement
  • can create atmosphere of competitiveness
  • not much of a stretch
  • internal bias
  • may not yield best-in-class comparisons

Competitive benchmarking

Competitive benchmarking is a direct competitor-to-competitor comparison of a product, service, process, or method. This form of benchmarking provides an opportunity to know yourself and your competition better; combine forces against another common competitor. An example of competitive benchmarking within the Department of Defense, might include contrasting Army and Air Force supply systems for Joint initiatives. Within the private sector, two or more American car companies might benchmark for mutual benefit against common international competitor; or, rival chemical companies benchmark for environmental compliance.

Benefits

  • comparing like processes
  • know your competition better
  • possible partnership
  • useful for planning and setting goals
  • similar regulatory issues

Challenges

  • difficult legal issues
  • relatively low performance improvement
  • threatening
  • limited by trade secrets
  • may provide misleading information
  • may not get best-in-class comparisons
  • competitors could capitalize on your weaknesses

Functional benchmarking

Functional benchmarking is a comparison to similar or identical practices (e.g., the picking process for assembling customer orders, maintaining inventory controls of spare computer parts, logistics to move operational forces, etc.) within the same or similar functions outside the immediate industry. Functional benchmarking might identify practices that are superior in your functional areas in whatever industry they may exist. Functional benchmarking would be accomplished at the federal level by comparing the IRS collections process against those of American Express. Comparing copper mining techniques to coal mining techniques is an example in the private sector.

Benefits

  • provides industry trend information
  • quantitative comparisons
  • better improvement rate; about 35

Challenges

  • diverse corporate cultures
  • great need for specificity
  • not invented here. syndrome
  • common functions can be difficult to find
  • takes more time than internal or percent
  • must be able to visualize how to adapt the best practices

Generic benchmarking

Generic benchmarking broadly conceptualizes unrelated business processes or functions that can be practiced in the same or similar ways regardless of the industry (e.g., transferring funds, bar coding, order fulfillment, admissions, replenishing inventory, warehousing, etc.). Generic means without a brand. It is a pure form of benchmarking,. (Camp, 1989). The focus is on being innovative and gaining insight into excellent work processes rather than on the business practices of a particular organization or industry. The outcome is usually a broad conceptualization, yet careful understanding, of a generic work process that works extremely well. Generic benchmarking is occurring when a Veterans Administration hospital's check-in process is contrasted against a car rental agency's check-in process. Adapting grocery store bar coding to control and sort airport luggage might be another example.

Benefits

  • high payoff; about 35 percent
  • noncompetitive/nonthreatening
  • broad,new perspective
  • innovative
  • high potential for discovery
  • examines multiple industries
  • can compare to world

Challenges

  • difficult concept
  • can be difficult to identify best-in- class
  • takes a long time to plan
  • known world-class companies are inundated with requests
  • quantum changes can bring high risk, escalate fear
  • class organizations in your process

Source: USN Benchmarking Handbook

Certisafety Section Home Page

Copyright ©2000-2016 Geigle Safety Group, Inc. All rights reserved. Federal copyright prohibits unauthorized reproduction by any means without permission. Students may reproduce materials for personal study. Disclaimer: This material is for training purposes only to inform the reader of occupational safety and health best practices and general compliance requirement and is not a substitute for provisions of the OSH Act of 1970 or any governmental regulatory agency. CertiSafety is a division of Geigle Safety Group, Inc., and is not connected or affiliated with the U.S. Department of Labor (DOL), or the Occupational Safety and Health Administration (OSHA).