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Benchmarking is a way of discovering what is the best performance being achieved – whether in a particular company, by a competitor or by an entirely different industry. This information can then be used to identify gaps in an organization's processes in order to achieve a competitive advantage.
Why to benchmark
 It helps the company to focus on most important performance gaps

 Organizations can bring in ideas from the external organizations and then spot the opportunities from those organizations

 Coming to an agreement by collecting all the results in the organization to move forward and then making people in the organization aware of the ideas that else would not clear political barriers

 Companies then implement the ideas into their procedure to get better quality of products and services and therefore they can make their choice from a large base if facts
Types of benchmarking
Strategic Benchmarking
Concerned with comparing different companies' strategies and assessing the success of those strategies in the marketplace.
Analyses the strategies with particular reference to:
• strategic intent
• core competencies
• process capability
• product line
• strategic alliances
• technology portfolio
Should begin with the needs and expectations of the customers. This can be achieved through surveys to measure customer satisfaction and the gaps between a company's performance and its customers' standards.
Ensures a co-coordinated strategic direction regarding benchmarking and reduces the possibility that one improvement project will cancel out the effect of another. Benchmarking candidates are normally direct competition.
The main difficulty is persuading the benchmark partner to discuss their strategy. However, there is a great deal of information which can be obtained from customers, common suppliers and public domain information.
Functional Benchmarking
• Investigates the performance of core business functions.
• Does not need to focus on direct competition but, depending on the function to be benchmarked, the benchmark partner may need to be in a similarly characterized industry for useful comparisons to be made.
Best Practices Benchmarking
• Applies to business processes.
• It breaks the function down into discrete areas that are the targets for benchmarking and is therefore a more focused study than functional benchmarking.
• Some business processes are the same regardless of the type of industry.
• Attempts to benchmark not only work processes, but also the management practices behind them.
Product Benchmarking
• Commonly known as reverse engineering or competitive product analysis.
• Assesses competitor costs, product concepts, strengths and weaknesses of alternative designs and competitor design trade-offs, by obtaining, stripping down and analyzing competitors' products.
The four different types of benchmarking are evolutionary beginning with product, through to functional, process and strategic. For the purposes of this document and the corresponding document 'Guide to Benchmarking' best practice benchmarking will be used due to its focus on processes. As benchmarking is becoming more widespread and companies are more proficient in its use, best practice benchmarking is becoming increasingly popular. This is also reinforced by the move away from functionality in organizations towards business processes.






When to use benchmarking
Benchmarking can be done prior to embarking on a new process or reengineering an existing one.

Eight steps are typically employed in the benchmarking process.
1. Identify processes, activities, or factors to benchmark and their primary characteristics.
2. Determine what form is to be used: generic, functional, competitive, or internal.
3. Determine who or what the benchmark target is: company, organization, industry, or process.
4. Determine specific benchmark values by collecting and analyzing information from surveys, interviews, industry information, direct contacts, business or trade publications, technical journals, and other sources of information.
5. Determine the best practice for each benchmarked item.
6. Evaluate the process to which benchmarks apply and establish objectives and improvement goals.
7. Implement plans and monitor results.
8. Recalibrate internal base benchmarks.