Benchmarking - An Effective Business Tool

Let us just imagine you are into a business with a wide range of products and huge variety of product lines. How would you get to know you are profitable in the market compared to your rivals or not. For a firm to be profitable they should have either more sales than their rivals, or relatively less cost of production compared to their rivals. Well both the options have their own pros and cons. However, for a firm to survive in the market and to compete successfully, they need to identify, understand and adapt the best practices followed by the other companies and also the rival firms in some cases.

So, in order for the firm to do things faster, better and cheaper they use a business strategy called Benchmarking.

Benchmarking is an effective business tool used by the present day companies to compare its business processes or performance metrics to the industry bests and/or best practices from other industries. The performance metrics would basically include quality, time and cost. Typically, benchmarking helps the management in identifying the best firms in the industry and their best practices. For instance, a company which cannot assemble desired number of engines can benchmark itself to its rival's every process of engine assembly keeping in mind the time and cost incurred within

Have you ever wondered how the term came into practice in day to day life? It was first used by cobblers who used a bench to measure a person's feet for stitching their shoes. There are different types of benchmarking for a firm to adopt from.

Internal: Here the comparison is among similar operations within one's own organization is made.

Competitive: Here the comparison is done with the best practices of head-to-head rivals

Functional: Here the comparison is done between two companies with similar processes and functions

Generic process: Here the comparison between two companies where the work processes are pretty innovative.

Global: Comparison with the global companies across the world as a whole

Cost: Comparison of the cost of production of a particular unit of product with other companies.

Performance: Comparison between two companies by looking at revenue or growth.

With these many types, one can say the benchmarking process can be effectively used in various industries ranging from technology, manufacturing, management, training, supplier selection, business, marketing to other operations. Some of the benefits of benchmarking strategy for an manufacturing company would be as listed below:

• Helps in improving the supplier relations.

• Enhances the productivity of a manufacturing firm.

• Serves a way to achieve higher Return on Investment.

• Helps in Low cost inventory management.

• Builds Customer satisfaction.

• Helps in improving own current performance against the past

• Helps to compare with the rivals.

• Helps the employees to understand the importance of "working smarter" than "working harder".

So generally, benchmarking is just more than a comparative analysis that helps the company to become open to new ideas, methodologies, processes and practices to improve the effectiveness, efficiency and its performance. With the current business scenario, benchmarking is just the right tool to succeed by

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