The term "benchmarking" was coined by Xerox in 1979. Xerox has now performed over 400 benchmark studies, and the process is totally integrated at all levels as part of the business planning process. The approach has actually been in use for a number of years ” although it was often called by different names . (Reverse engineering is an approach used to study the design and manufacturing characteristics of competitive products. Benchmarking of computer hardware and software is a very common practice.)
Benchmarking extends the concept to consider administrative and all management processes. There is a conscious attempt to compare with the "best of the best" even ” especially ” if that is not a direct competitor.
The fundamental process in starting benchmarking is to think about the area to be benchmarked, which can be just about anything, and ask yourself, "Who is especially good at that? What can I creatively imitate?" A typical process for doing a benchmarking is shown in Figure 3.1.
Benchmarking is a methodology that can be used along with other systematic, comprehensive management approaches to improve performance. It is not an end unto itself. Some examples of applications of benchmarking include:
Broad management focus
Cost reduction
Profit improvement
Business strategy development
Total quality management
Individual management processes
Improving customer service
Reducing product development time
Market planning
Product distribution
Highly specific focus
Invoice design
Sales force compensation
Fork lift truck maintenance
The critical questions to ask are:
What are the areas that potentially could be benchmarked?
How do you prioritize and focus the efforts?