benchmarking and outsourcing

Benchmarking & Outsourcing: 

Benchmarking & Outsourcing Prepared by Narendra Singh Chaudhary

Benchmarking: 

Benchmarking Benchmarking is the process of determining who is the very best, who sets the standard, and what that standard is. In baseball, you could argue that seven consecutive World Series Championships made the New York Yankees the benchmark. If we were to benchmark "world conquest", what objective measure would we use to compare Julius Caesar to Adolph Hitler; Gengis Khan to Napoleon? Which of them was the epitome, and why?

What is Benchmarking? : 

What is Benchmarking? We do the same thing in business. Who is the best sales organization? The most responsive customer service department? The leanest manufacturing operation? And how do we quantify that standard? Thus, we can say that Benchmarking is a systematic process for identifying and implementing best or better practices

What is Formal Benchmarking? : 

What is Formal Benchmarking? There are two types of Formal Benchmarking – Performance and Best Practice Benchmarking.

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Performance benchmarking; this involves comparing the performance levels of organisations for a specific process. This information can then be used for identifying opportunities for improvement and/or setting performance targets. Performance levels of other organisations are normally called benchmarks and the ideal benchmark is one that originates from an organization recognized as being a leader in the related area.

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Performance benchmarking may involve the comparison of financial measures (such as expenditure, cost of labour, cost of buildings/equipment, cost of energy, adherence to budget, cash flow, revenue collected) or non-financial measures (such as absenteeism, staff turnover, the percentage of administrative staff to front-line staff, budget processing time, complaints, environmental impact or call centre performance).

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Best practice benchmarking; this is where organisations search for and study organisations that are high performers in particular areas of interest. The processes themselves of these organisations are studied rather than just the associated performance levels, normally through some mutually beneficial agreement that follows a benchmarking code of conduct .

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Knowledge gained through the study is taken back to the organization and where feasible and appropriate, these high performing or best practices are adapted and incorporated into the organization's own processes. Therefore best practice benchmarking involves the whole process of identifying, capturing, analyzing, and implementing best practices . There are a number of best practice benchmarking methodologies. One of which is the TRADE Best Practice Benchmarking methodology .

Who uses Benchmarking? : 

Who uses Benchmarking? In the West most large and highly successful organisations use best practice benchmarking as a tool to continually learn and improve. The resources needed to carry out repeated best practice benchmarking projects properly and in a way that maximizes the learning to be gained from the experiences can be considerable, hence it is used more frequently within large organisations. On the other hand, comparative or competitor benchmarking is not affected to the same degree by resources, and is used by organisations of all sizes, the most basic form of this practice is simply knowing your main competitors product price, something that is a prerequisite to staying in business.

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Indications are that the use of benchmarking worldwide continues to grow since Robert Camp wrote the first book on benchmarking in 1989.

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The 2008 study by the Global Benchmarking Network showed the improvement tools that are likely to increase in popularity the most over the next three years are Performance Benchmarking, Informal Benchmarking, Strengths, Weaknesses, Opportunities, and Threats, and Best Practice Benchmarking. Current use of  Informal benchmarking is 68% of organisations,  Performance benchmarking, 49%, and Best practice benchmarking, 39%.

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The growth from year to year in membership of the Global Benchmarking Network which now has representatives from over 20 countries The growth in the number of countries that have a business excellence award to more than 70 (the growth in business excellence is likely to be correlated to the growth in benchmarking as a central part of business excellence is benchmarking with as much as 50% of the points associated with these models attributed to benchmarking) and The continuing popularity of benchmarking within the academic community as the number of papers written on the subject continues to grow.

What are the common challenges associated with benchmarking? : 

What are the common challenges associated with benchmarking? There are several main issues that both inhibit organisations actively involved in benchmarking and prevent others from attempting active involvement. organisations findings indicated that among some of those involved in benchmarking there were difficulties encountered during the process. These difficulties included:

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finding suitable partners difficulties in comparing data (50% of organisations found this) resource constraints (time, finance and expertise) staff resistance

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Outsourcing

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The word outsourcing is often heard in the world of business today. It is something which has affected THE BUSINESS of almost every nature and every nation. Outsourcing is occurring in almost every country of this world to some extent. There are some leader countries in this field of outsourcing such as India and China. What is Outsourcing? When discussed in simple words outsourcing is simply a formal agreement with a third party to perform a service for an organization. A more comprehensive definition for outsourcing would be that outsourcing is the concept of taking internal company functions and paying an outside firm to handle them

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It is basically done for the following major reasons: -To save money in terms of lowering costs -To improve quality -To free company resources for other activities such as focusing more on competencies The concept of outsourcing began with the data-processing industry and today it has spread to vase areas which comprise of tele-messaging and call centers . It would not all be wrong to say that outsourcing is the surge of the next generations. Another name used for outsourcing is off shoring which has the same meaning as outsourcing.

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Technically speaking, outsourcing is not merely the contract with a third party to perform a service for an organization, but it also involves transferring a significant amount of management control and decision-making to the external supplier. The process of outsourcing is very much formal like other business processes and it always includes a considerable degree of two-way information exchange, coordination, and trust.

Different Techniques of Outsourcing : 

Different Techniques of Outsourcing The concept of outsourcing was adopted by different organizations in different methods such as in some cases the companies who desired to outsource their customer service: -Hired technical writers in order to write simplified usage instructions of their products -Index the key points of information -Contracted with temporary employment agencies to search for, train and hire generally low-skilled workers to answer their telephone technical support and customer service calls

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The most wide spread method of outsourcing being adopted throughout the world is of call centers. The people employed at the call centers answered the query calls of the customers, where the information needed to assist the calling customer was indexed in a computer system. In most cases the agents were not liable to tell the customers that they were not directly associated with the original manufacturer.

Outsourcing: Business in the 21st Century : 

Outsourcing: Business in the 21st Century Almost every country and almost every organization is outsourcing a part of its tasks or some tasks. The reason that has been found for the increase in the trend of outsourcing for businesses is it increases profit and lower costs, and business focuses most on these aspects. For instance if we consider the example of IBM , which in the year 2003, decided to outsource the jobs of almost 5000 programmers to India and China. Similarly, Microsoft, Dell, American Express, and virtually every major multinational from Accenture to Yahoo has already outsourced work or is taking decisions to do so.

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From the studies of the outsourcing of these companies it has been found that the savings due to outsourcing are spectacular as companies can reduce around 20% to 70% of their labor costs by outsourcing jobs to low-wage nations considering that the work is of same quality.

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The concept of outsourcing is applied to a vast area of business processes or tasks. Every organization outsources some particular tasks to a vendor. The task that was outsourced mostly when outsourcing began, was customer support, later with the advancement in technology and knowledge this limited area included IT, data analysis, Medicare, engineering and a few more

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Thank you