Benchmarking is about comparing the company to historial information and directly to its competitors

Benchmarking could be part of a case interview, for instance, as part of the solution to a profitability question (e.g. your interviewer might hand you a sheet that compares your client's cost positions with the competition). However, each time you ask the interviewer how a company has developed compared to the market, you are doing a mini-benchmarking.

Based on the benchmarking of internal processes, there are different benchmarking techniques

Generally benchmarking is understood as the process of comparing data from one’s own company (e.g. processes/ products/ services) to comparable data in order to determine whether there is an improvement potential.

Internal Benchmarking

If data of the clients’ company is used, the process is called internal benchmarking. Such data can be for instance from another department or another site involved in the same production process. For example, Company A can compare its manufacturing process from a plant in Europe with the process efficiency from a plant in the USA. The advantage of such an internal benchmarking is the sheer availability of data. The disadvantage is that it does not necessarily demonstrate the best practice of an industry.

External Benchmarking

If data from outside the company is used, the process is called an external benchmarking. An advantage of external benchmarking is the larger spread of available data points. The biggest disadvantage is the limited data availability (competitors usually don’t provide their data publicly) and data comparability (are we really comparing apples to apples?).

Finding the right data for comparison is usually the hardest part of benchmarking

One of the challenges in benchmarking is to find the right indicator to compare with each other. Common indicators include:

  • Manufacturing time, customer support time, delivery time etc.
  • Various positions of cost
  • Number of people in a department
  • Features of products (e.g. price is the easiest one to compare)
  • Quality

Once you have found a good indicator and good benchmark data, you have to make sure that the results are really meaningful. Ideally figures differ because of a better process rather than because of external factors. For example, simply comparing manufacturing costs of different plants might disguise the fact that labor cost in one plant is higher because of higher wages.

Lastly, to have a successful business and to keep up with competitors, benchmarking should be seen as a continuous process rather than a one-time task.

Do some internal benchmarking while cracking the case ChemInt

Be the first to comment on this!
Related case(s)

zeb case: Quo vadis, customer?

Solved 600+ times | Rating: (5.0 / 5.0)

The bank "His Earlship Charles", a domestic retail and private bank is in a difficult situation. Profits have been declining over the past years due to the ongoing low interest rates set by the central bank. Additionally, the bank is suffering from a decreasing number of customers. The board of directors is worried about digitalization and wondering, whether the bank is adequately prepared for it.

Please analyze the situation of the client and develop means to sustainably increase profits. Consider the worries expressed by the board of directors.


GamingHub

Solved 200+ times | Rating: (5.0 / 5.0)

Our client, GamingHub, is a large diversified entertainment corporation that received a request to approve a $200 m capital allocation from its video game manufacturing division. The division wants to triple the capacity.

The client hired us to help him decide if he should approve this capital request and have asked you what critical issues are to be looked into to decide if the division's market is attractive enough to expand.


Online travel booking

Solved 100+ times | Rating: (5.0 / 5.0)

An online travel agency earns a 10% commission on all of its bookings. Currently, their profits before taxes are $1 m, while the industry average is around $2.5 m. The client wants to know why they're making less than the industry average?


Unified Health

Solved 100+ times | Rating: (5.0 / 5.0)

Our client is Unified Health, a health care company in the US. It insures patients and provides health care services. Employers pay a premium to UH for their employees and UH covers all necessary medical costs. UH has 300,000 patients enrolled. It has 300 salaried physicians covering 6 health centers which aren't owned by UH, but UH contracts local hospitals. If a patient needs medical care not covered by a UH physician, the patient is reffered outside the network and UH pays for all costs.

Over the past 6 months UH has suffered declining profitability and you are hired to figure out what is wrong.