BEST PRACTICE

AND
BENCH MARKING

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 BEST PRACTICE
• Doing things in the most effective manner is
considered as best practice.
• A specific success factor such as inventory
management or customer service is focused at a
time.
• Best service is identified by searching for
companies who, in similar product-market
situations, excel, and then analysing the reasons
for the success in terms of processes and
functions conducted within the business.

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 BENCHMARKING
• Benchmarking helps understand the business,
its process and performance, and identifies
‘gaps’ between ‘best practice’ and the current
operating environment.
• Benchmarking focuses on understanding how
the ‘best practice’ companies achieve superior
performance as well as understanding their
objectives. (DHL, Delhi Metro, Wipro, Reliance)
• Consider the level at which the benchmarking is
to be undertaken. (Inventory level, Cost of
production, service level like Maruti).
• Whom and which of their activities should be
benchmarked?
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 CHARACTERISTICS OF A
WORLD CLASS ORGANIZATION
• Creative human resource management.
• Customer focus.
• Adoption of latest technology.
• Continuous improvement.
• Flexibility / Responsiveness.

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 WHAT IS BENCHMARKING? - 1
• It is a method for continuous improvement
that involves an ongoing and systematic
evaluation and incorporation of external
products, services and processes
recognized as representing best practices.
• It is management method or tool for
performance enhancement.
• It is a vital component in permitting
flexibility for rapid response to opportunity.
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 WHAT IS BENCHMARKING? - 2
• Benchmarking is a systematic, structured
approach to search for the best practice.
• The principle of the benchmarking is
evaluation.

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INGREDIENTS OF BENCHMARKING
• Measurement and understanding of the
company’s performance.
• Identifying, measuring and understanding
external best practices.
• Ability to direct the search for the best
practice.

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 TYPES OF BENCHMARKING
• Product benchmarking
• Functional or process benchmarking
• Best practices benchmarking
• Strategic benchmarking

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‘PRODUCT’ BENCHMARKING
• It has been a part of the practice of
competitive evaluation.
• Automobile manufacturers have practiced
benchmarking by:
– Identifying the performance differences in
competitor’s product.
– Dismantling the competitor’s product to
understand design and production methods.
– Understanding the design tradeoffs.
– Learning new ways to satisfy a customer’s
need from a non-competitive product.
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 ‘FUNCTIONAL OR PROCESS’
BENCHMARKING
• Emphasis is on order entry, assembly, set-
up activities, and so on.
• Nature of the process.

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‘BEST PRACTICES’ BENCHMARKING

• Extends functional benchmarking by:

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 ‘STRATEGIC’ BENCHMARKING
• To understand the strategic directions of
the targeted benchmark company.
• To have clear view of company’s own
strategic intents.

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 STEPS IN STRATEGIC
BENCHMARKING -1
• Identify the function (or best practice) to
benchmark.
• Identify the best-in-class company.
• Identify the key performance variables to
measure and collect the data.
• Analyse and compare the data to what
happens in your own company.
• Project future performance levels of the
benchmarked company.
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 STEPS IN STRATEGIC
BENCHMARKING - 2
• Establish functional goals.
• Communicate benchmark findings.
• Develop action plans.
• Implement specific actions and monitor
progress.
• Recalibrate benchmarks.

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CRITICAL SUCCESS FACTOR (CSF)
• Critical Success Factors (CSF) are those
characteristics , conditions or variables
that when properly sustained, maintained
or managed can have a significant impact
on the success of a firm competing in a
particular industry.
• CSF can be a price advantage, a condition
such as capital structure or advantageous
customer mix.

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 CRITICAL SUCCESS FACTORS
USED IN AUTOMOBILE INDUSTRY

• Styling
• Strong dealer network
• Manufacturing cost control.
• Ability to meet EPA standards.

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 TIME BEST PRACTICE CRITERIA
FOR SUPPLY CHAIN MANAGEMENT
• Time from order to delivery.
• Response to customer order progress
enquiries.
• Advice on non-availability.
• Stock turnover rate

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 COST BEST PRACTICE CRITERIA
FOR SUPPLY CHAIN MANAGEMENT
• Order processing cost per order.
• Order progressing (follow up) cost.
• Cost of transportation per tonne-km.
• Cost per transaction.
• Cost per tonne / warehouse throughput.

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QUALITY BEST PRACTICE CRITERIA
FOR SUPPLY CHAIN MANAGEMENT
• Picking accuracy.
• Availability, orders filled completely.
• Reliability of delivery.
• Frequency of delivery.
• Emergency response.

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