Advantages of Benchmarking
Benchmarking is best described as the process of comparing a business with its peers in order to establish whether its performance is terrible or good compared to that of competitors dealing in the same activities.
Through benchmarking, a company or business is able to study competitive or industry functions, products and industry in order to find ways of improving or meeting them. Businesses operating in different industries will use benchmarking as a means of gauging success and pinpointing shortcomings.
General processes used in benchmarking involve problem identification, top competitors selection to determine where the business is failing and then making necessary changes. There are different strategies of benchmarking such as internal benchmarking, external, intra-group, best practice, industry, generic or process, operational and financial benchmarking. Benchmarking offers numerous advantages and the key ones include the following:
Lowers labor costs
Through benchmarking, labor costs are lowered significantly. For instance, a manufacturing company can study how
top competitors use robots for basic activities or functions within the plants. These robots might be helping the competitor save a large amount of money. Managers of the company that wants to borrow this can idea can obtain the information from competitors’ website or by reading online articles.
Increases profits and sales
Any business that uses benchmarking for purposes of improving its products, functions, services or operations can also enjoy increased profits and sales. This is because customers are likely to note the improvements. The benchmarking business can also use its sales representatives, television ads, magazines and company brochures to promote its operations. Such efforts will undoubtedly increase sales. Also, it can lower its expenses and the savings made can increase the profits.
Improve management and product quality
Day to day operations of a business can be remarkably improved as well since benchmarking provides a format that is easy to understand and clear. In addition to this, product quality can be considerably improved as well.
For instance, engineers might purchase products from competitors in order to study them and determine how or why the products outperform or outlast similar products. Managers can compare elements that make competitors products stand out and use the same to improve the quality of their products.
Benchmarking also helps businesses to:
- Gain independent perspectives on their performance as compared to that of competitors or other companies.
- Validate assumptions
- Prioritize the improvement of opportunities.
- Manage change and monitor performance of the company.
- Identify areas of opportunity in a clear manner
- Set expectations in terms of performance.
Benchmarking can either be simple or comprehensive depending on the needs of the business in question. In addition to this, business can also draw or require as many systems and tools to effect benchmarking. It is true insight and one that provides clearer understanding about what needs to be improved.
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