A FEW WORDS ABOUT BENCHMARKING

Benchmarking involves comparing a company's performance with that of other organizations that are believed to be more effective. If the other organizations are found to operate more effectively, the company can try to understand how they work and why they are better. It can then set itself realistic performance targets, and will be able to start to improve its own operations.

The organizations that are benchmarked may be direct competitors, suppliers, or even companies in other sectors. Direct competitors would probably be benchmarked to understand their performance in many functions. Companies in other sectors would be benchmarked to understand their performance in one particular function where they are believed to excel.

Typical performance measures addressed by benchmarking include:

lead times	financial ratios
order processing times	training
scrap rates	customer satisfaction
computer systems	first pass yield
engineering productivity	on-time delivery ratio

A company will often carry out a benchmarking project for the first time when it realizes that it must make major improvements to its performance. (There is nothing like a financial crisis, a management change, a reduced budget, or a corporate TQM initiative to get benchmarking going.) For example, a company that is losing market share might learn from its customers that some of its competitors were bringing products to market much faster. Rumours of this kind would not tell the company if it should reduce its product development time of 24 months by 5% or 10%. However, a benchmarking exercise might show that the four major competitors had product development times of 12 months, 14 months, 18 months and 21 months, demonstrating that a change of a few per cent would not make much difference to competitive positioning. As a result of the exercise, the company would be aware that its own performance is poor, and would have a very clear target to aim for.

Once a company has introduced benchmarking, it should carry it out regularly, as part of a continuous improvement program, both to check internal progress and to keep up-to-date with the progress of competitors, suppliers and those companies that are acknowledged to be leaders in particular functions.

The benefits of benchmarking include:

• reminding everybody in the company of the need to be competitive
• making the company's relative performance very clear
• providing clear quantitative targets to management
• providing targets that are not just visions of the future, but reality in other companies
• providing the impetus for management to start behaving proactively, and to look for ways of working which will bring significant improvements.

Benchmarking is applicable to EDM/PDM. Among the performance parameters most frequently benchmarked are product development lead-time and order engineering cycle time. The results often show that competitors are much more effective. Potential routes for improvement include concurrent engineering (to improve the engineering process) and EDM/PDM (to improve the use, flow and quality of engineering information).

Copyright 1998 by John Stark