Benchmarking - Performance and Productivity Measures

Benchmarking is the practice of comparing business practice and in particular performance between companies. It has become widely used since its introduction by the Xerox Corporation in 1979. Although benchmarking was well understood prior to the introduction by Xerox it has altered in significance and approach. To benchmark derives from the comparison against a set standard. In 1979, Xerox found itself losing market share to Canon. In pursuit of the answer - why were they losing market share when they considered themselves the best company? The company decided to compare 26 of their major operational processes with the best performers.

This comparison was not directly against Canon but against other companies with similar processes. In fact they compared operational processes against service companies as well as other manufacturers. To do this they sent staff all over the world. This approach is referred to as generic benchmarking as opposed to competitive benchmarking which draws comparisons between competing companies. Xerox has claimed that they have achieved considerable benefits from this exercise: manufacturing costs reduced by 50 per cent and inventory levels reduced 40 per cent (see Xerox Corporation case study below). Since then many companies have introduced benchmarking.