BENCHMARKING

A measurement of the quality of an organization's policies, products, programs,

strategies, etc., and their comparison with standard measurements, or similar
measurements of its peers.

The objectives of benchmarking are

1. to determine what and where improvements are called for.

2. to analyze how other organizations achieve their high performance levels.
3. to use this information to improve performance.

TYPES OF BENCHMARKING

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
 BENCHMARKING PROCESS FOR OUR COMPANY

Comparison between our Edrich beer with three different beers, one of them
national and the other two international.

Process / Beer Edrich Gallo Budweiser Brahma

Ingredients: Malt 33% 32% 35% 30%
Fermentation
Yeast Yeast Beechwood Yeast
process
Alcohol % vol 5 5 5 4.8
Type Lager Lager Lager Lager
Bottle, Light
version, Liter, Bottle Bottle
Variety 750 ml bottle Choop and Choop and Choop and
canned. canned canned

Improvements due to comparison using Competitive benchmarking

Process / Beer Edrich

Ingredients: Malt 33%
Fermentation process Yeast
Alcohol % vol 5.4
Type Pilsener
Bottle, Light version,
Liter, Choop and
Variety
canned.