What is Process Benchmarking?

Process benchmarking is a business function that compares specific processes to a leading company or an industry standard. Rather than using full benchmarking techniques such as financial ratios or statistical analysis, process benchmarking allows companies to create a more simplified and broken down review of business operations. This business function usually consists of a mechanism selecting work procedures or business processes that could be improved by comparing it to an industry standard. Companies often use process benchmarking, since it allows them to focus their management review process on the major business functions needing to be improved.

A few specific types of process benchmarking include the comparisons of production processes, data collection procedures, performance indicators and productivity and efficiency reviews. The production process comparison allows companies to review individual processes relating to producing goods or services. These reviews may include analyzing each step of a production process or processes relating to a specific product. The benchmarking of production processes can help companies compare their production processes to another company and determine what significant differences exist. Improving the production process by limiting the waste of physical or financial resources can help companies create a competitive advantage in the economic marketplace.

Process benchmarking may also be used to review the data collection procedures of a business process. Data collection procedures reviews often include determining how quickly a company can gather information relating to specific business functions and make decisions based on this information. Companies reviewing their data collection procedures may do so if they’d need to replace an existing information collection system or implement a new system for a business process. The increasing use of business technology has forced companies to remain current on information technology and how they can use this technology for enhancing or advancing data collection procedures.

Performance indicators are calculated using statistical or mathematical business formulas. Companies often use performance indicators specific to their business industry for determining how well business processes are performing under current economic conditions. Process benchmarking may use indicators relating to financial information, number of goods produced, employee hours spent producing goods or services, and various other indicators. These indicators may be reviewed on a monthly or quarterly basis to compare against previous indicator calculations or the industry standard.

Efficiency reviews are usually an internal benchmarking process companies use to determine how well business functions may be operating compared to predetermined expectations. Companies often set various goals or objectives for their business functions. Once actual numbers are computed from business operations, companies compare the actual numbers to projected to determine how efficient the business process when performing its operations.