Benchmarking

Defining Benchmarking

“Benchmarking is a systematic process of comparing an organization’s products,

services and practices against those of competitor organizations or other industry
leaders to determine what it is they do that allows them to achieve high levels of
performance.” - Society for Human Resource Management

“A reference point or standard of excellence against which similar or subsequent

marks are compared.” - Barker

Origination and Application of Benchmarking

The term “Benchmarking” was initially used by the cobblers in shoe manufacturing
process where the legs of the customers were marked on the bench to take the size of the
shoe required. Later on, this concept was adopted in an organized manner by Rank Xerox
Corporation between Rank Organization of U.K and Xerox from U.S.A. In 1984, Xerox
faced the problem when the photocopier industry was taken over by the market leader
Canon, Xerox being the third largest player after Canon and Sharp Corporation of Japan.
Xerox was wondering how Canon and Sharp could offer a product at lower prices. A
team of six people was appointed by the company who studied the machines of Canon
and Sharp disassembling and deconstructing them to find out the components used and
whether there was some difference in product quality. To the surprise of this team, there
was no difference between the quality of Canon and Xerox photocopiers but still Canon
could keep their products at lower prices. The reason for this lied in the process used by
the company and Xerox started studying the process used by the competitors rather than
Xerox that led to lower costs. Besides studying the competitor processes, the company
also learned across different industry. Xerox benchmarked L.L Bean (Leon Leonwood
Bean’s company), a catalogue retailing company in U.S in terms of the best warehousing
practices.

Another example on Cross Industry Benchmarking involves HP (Hewlett Packard). HP,

an IT company studied the best practices of Benetton in managing its supply chain.
Benetton earlier used to manufacture the sweaters first by dying the yarn, then knitting
sweaters and then shipped sweaters to the retail stores. It was identified by the company
that in each winter season, there was demand for different colours of sweaters and it was
not known in advance that which colours are in demand until the start of the season and
so the company decided to reverse their supply chain where plain wool was knitted into
the sweaters first and after getting the feedback from the retail stores, the company dyed
them into colours. This practice hugely benefitted Benetton. HP learned about this
practice and identified that they also have requirement for customization of products in
different regions. Since the company had 3 distribution center each in U.S, Europe and
Far-East, instead of sending a final product to these centers, HP decided to first
manufacture a generic printer in its factory in U.S and then send it to the distribution
centers where the customization was done according to the consumer requirements in
each region.
Steps in Benchmarking Process
I. Identify the problem areas
II. Identify other industries having similar processes
III. Identify organizations that are leaders in these specific areas
IV. Survey companies for measures and practices
V. Visit Best Practice companies to identify leading edge practices
VI. Implement new and improved business practices