Industry 4.0 Glossary

Performance Benchmarking In Manufacturing

Performance benchmarking is a comparative assessment exercise that helps manufacturers understand and measure their performance relative to their competitors and industry standards. Periodical performance benchmarking exercise can establish a consistent feedback loop that can help optimize performance and efficiency. It enables the manufacturer to make business critical decisions regarding areas for focus and prioritization of resources.

There is never just one way to manufacture a product. This fact translates to several possibilities for processes, systems, and skills in a manufacturing environment. Benchmarking allows the manufacturer to determine how the process stack up against internal and external frames of references. When used in combination with gap analysis, it can help clearly identify the areas and the scope for improvement. This can result in valuable insights into areas of improvement across productivity, efficiency and quality.

What Is Benchmarking In Manufacturing?

Benchmarking in the manufacturing industry has evolved over the past half a century. The focus in benchmarking has expanded from the product, to the process and even to the business. As practices matured, manufacturers started measuring and comparing hundreds of indicators that became available through both published data and professional experience.

Benchmarking also comes with its fair share of challenges in the manufacturing industry. One of the difficulties in arriving at a benchmark is because of the difference in definition of key measures across the organization. While geometry deviations are in-line waste in some companies, they are end-of line rejects in others. The definition of unscheduled downtime can also vary depending on the circumstances of failure. So selecting the right metrics for benchmarking will define the success or failure of the effort.

Types Of Benchmarking

There are several types of benchmarking, each relating to a particular aspect of the business. The four most common in manufacturing are performance, competitive, functional and internal benchmarking.

Performance Benchmarking

Performance benchmarking is applied in two different contexts. It can be applied to benchmarking the product or offerings of the company against competitors and alternatives. It could also be done internally within product families or product variants. It compares all parameters influencing the man, machine, and material. It also includes factors, the method and money involved in making and taking the product to market.

When applied at the business level, it involves comparing business performance indicators with industry standards and competitors. Depending on the findings, performance benchmarking helps to identify areas of excellence or areas of concern, which in turn define priorities for initiatives and investments.

Competitive Benchmarking

Competitive benchmarking focuses all analysis in regards to the measures of a competitor. The main objective is to evaluate competitive edge and use the findings to define strategies to compete in a common market. It could be around driving manufacturing efficiency or agility in response to fluctuating market demands or feature richness. Identifying the right initiative and defining the gap-to-goal will help achieve competitive advantage.

Functional Benchmarking

Functional benchmarking allows industries to focus on the best practices of other unrelated industries in specific shared functions. It allows manufacturers to learn from the successes and mistakes of other industries. An example of this type of benchmarking is the adoption of total quality management (TQM) that started in the automotive industry in Japan, which is used across industries around the globe. The concept of digital twins that started in the aerospace industry is now finding applications in almost all domains. The key challenge in using a functional benchmark is understanding the reference industry well enough to draw parallels needed for cross-domain expertise.

Internal Benchmarking

Internal benchmarking is an exercise within the organization. It compares practices and performances across departments, product lines or even geographies. The areas benchmarked against each other must have shared metrics or practices. Internal benchmarking is a good starting point to understand the current standard of business performance. Continuous and sustained benchmarking of this type is highly suitable for large organizations where certain areas of the business are more efficient than others. It can also be relevant in case of new acquisitions or mergers allowing different business units to learn from one another.

How Benchmarking Improves Performance

Benchmarking processes provide aid for the continuous performance improvement in a variety of ways. For instance, it offers comprehensive drill down post benchmarking analysis that can reveal weak links, performance gaps, and also deliver accountability. It provides insights that can drive competitive advantage, improve efficiency and drive profitability. Depending on the areas of benchmarking, it can also help shape the organization’s short and mid-term goals.

Benchmarking In The Digital Era

The advent of data aggregation consultancies have made benchmarking easily available. Neutral data that is clear of identifiable information can now be bought from consulting companies and advisory service providers. Many manufacturing companies have also started publishing such information to their members to empower them with business-critical intelligence. Benchmarking data thus obtained combined with the power of modern analytics platforms have placed valuable intelligence in the hands of manufacturing decision makers.