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Editor's Note: Happy's columns will be published every Wednesday for the next two months.
Benchmarking is a process that measures how a company is performing against those industry leaders. It is used to better understand how outstanding companies perform, and then helps your company develop plans to improve or adapt specific best practices. Benchmarking is used to measure performance using a specific indicator (cost per unit of measure, productivity per unit of measure, cycle time of x per unit of measure or defects per unit of measure) resulting in a metric of performance that is then compared to others. A subset of benchmarking is the activity of ‘teardown.’ Many universities, as a few companies do this for profit. The most known is Portelligent[1]. David Carey, president of Portelligent. The Austin, Texas company produces teardown reports and related industry research on wireless, mobile and personal electronics and writes teardown articles for EETimes magazine. An example is seen in Figure 1.
Figure 1: Teardown benchmarking performed by Portelligent[1].
At HP, benchmarking was a very serious activity. All product lines conducted benchmarking on competitors’ products. For instruments, this was a lot easier than for a complex computer system. But in all cases, the detailed process was the same:
- Document all benchmarking activities by narrated video, high resolution camera, X-ray and microscopes
- Benchmark advertised performance using industry standards. Discover the maximum or minimum performance metrics
- Benchmark physical parameters: size, energy usage, heat produced, etc.
- Benchmark electrical parameters: power supply, number of PCBs, special electrical devices, etc.
- Benchmark the product disassembly and calculate the D&B DFM/A metrics
- Benchmark each PCB assembly: solder type, conformal coatings, heat sinks, number of parts, different part types, ICT
- Benchmark each printed circuit board: size, layers, design rules, wiring efficiency, special features-distributed capacitance
- Benchmark custom integrated circuits from each PCB, including silicon type, number of gates, design rules, etc.
- Collect all the benchmarking metrics, photos, videos and analysis into a multi-volume report from each HP organization
HP was very humble about benchmarking. It was always looking for better ideas, or exceptional performance and putting to work what it learned. Most of the time, HP exceeded other competitors’ performance, but it wanted to know how close the competitors were coming.
Benchmarking Process
The management use of the term is related to both of these, and a working definition is “the search for industry best practices that lead to superior performance.” Benchmarking is a process that aims to change operations in a structured way to achieve superior performance, based on an understanding of a company’s performance and how it compares with the best in the world. The basic philosophical steps of benchmarking, which are fundamental to success, are:
Know your operation—you need to assess the strengths and weaknesses of the internal operation, keeping in mind that competitors will in turn be analyzing your operation, and that if you don’t know your own strengths and weaknesses you will not be able to defend yourself. You need to know your strong points, to be able to promote them in the market place, and to identify areas that require strengthening.
Know the industry leaders or competitors—this helps you both to compare yourself with industry best practices and also to differentiate you from the competition.
Incorporate the best—learn from the companies who are leaders in your industry or who are particularly good in functions that are important to your operation. For example, you should compare your distribution operation with the best available mail order or service company.
Gain superiority—install the best of the best practices found, capitalize on your existing strengths and bring your weaknesses up to strength.
Benchmarking is the formalized and disciplined application of these basic steps to improving operations, as described in Figure 2. Table 1 shows some of the key reasons for benchmarking. The contrasting approaches ‘with benchmarking’ and ‘without benchmarking’ are detailed.
Figure 2: Benchmarking process steps.
Table 1: Some of the key reasons for benchmarking and the contrasting approaches with and without a benchmarking view.
