Benchmarking and outsourcing

DINESH PANT
FAR WESTEN UNIVERSITY
Abstract
This term paper discuss about the benchmarking and outsourcing and its techniques.
It has also described about the business reengineering process. Benchmarking is a
management process in which organizations compare various aspects of their
processes to best practices, usually within their own industry. Benchmarking takes
many forms, all of which contribute significantly to the overall growth of the
organization, the development of new divisions, the adaptation of new technology,
and so on. Benchmarking techniques include internal benchmarking, external
benchmarking, competitive benchmarking, performance benchmarking, and strategic
benchmarking. Similarly, outsourcing is the business practice of employing a third
party outside of a company to perform services or create goods that were previously
performed in-house by the company's own employees and staff. Outsourcing is a
practice that is commonly used by businesses to save money. Outsourcing techniques
include professional outsourcing, multi-sourcing, offshore outsourcing, and local
outsourcing.
Benchmarking
Karlof and Ostblom (1993) perceived benchmarking as a continuous and systematic
process that involves comparing the effectiveness measured by productivity, quality,
and experience to the results of those companies and organizations that can be viewed
as models of perfection. Camp (1989) defines benchmarking as an instrument steering
competitive processes. According to the author of the latter definition, benchmarking
is a search for the most effective methods for an organization to gain a competitive
advantage. Pieske (1994) describes benchmarking as a method of searching for model
solutions to gain the best results by learning from others and benefiting from their
experience. Benchmarking can also be describes as the systematic comparison of
organizational processes and performance in order to establish new standards or
improve existing ones. Benchmarking models are used to compare the performance of
a business unit division, organization, or corporation to that of other similar
organizations. Benchmarking is a management process in which organizations
evaluate various aspects of their processes in relation to best practices, typically
within their own industry. This then enables organizations to devise plans for
implementing such best practices, usually with the goal of improving some aspect of
performance.
Nature of benchmarking

Benchmarking comes in many forms, all of which contribute significantly to the

organization's overall growth, development of new divisions, new technology
adaptations, and so on. The following are the characteristics of benchmarking:

1. Good impact on customer’s needs:

Feedback is essential for any organization. The organization receives positive

customer feedback by utilizing various benchmarking methods. This helps to improve
customer needs, meet quality level expectations, and improve delivery speed.

2. Assists in raising company standards

Benchmarking helps to raise company standards by comparing it to other market

performers. For example, through the benchmarking process, the organization may be
able to improve the overall standard of the equipment used in production, etc.

3. Improvement in learning methodologies

Benchmarking works to improve the organization's various learning methodologies. It

assists the organization in learning new methods, adopting new ideas, and
implementing new work models, among other things.

4. Strengthening the weaknesses

When something is not appropriate or up to standard, benchmarking assists the

organization in recovering from the error that occurred by shedding light on the areas
that need to be changed and new ideas to improve the losses that occurred.

5. Improves the learning experience

Benchmarking collects information about other organizations' educational standards

and new learning techniques. This encourages the organization's employees to further
their education.

6. Keeps up with new technology

Benchmarking assists organizations in adopting new technologies that are prevalent in

the market and that have been successfully adopted by many organizations.

7. Benefits employee career growth

Benchmarking not only benefits organizational growth but also encourages employee
career growth by supporting and encouraging them in bringing better outputs and
eradicating mistakes made in previous product development.

Techniques of benchmarking

1. Internal benchmarking

Internal benchmarking compares metrics (performance benchmarking) and/or

practices (practice benchmarking) from different units, product lines, departments,
programs, geographies, etc., within the organization. It compare a process or task to a
similar process or task within the company. This requires the ability to track metrics
for these two comparable systems or departments. This type of benchmarking is
effective because it helps set and meet standards across the board, establishing
consistency and ensuring that each department is as efficient as possible.

2. External benchmarking

External benchmarking is comparing an internal process to that of a competitor or

even several other organizations. This approach can be a little trickier because it
requires access to industry data or specific company data, which may not be available
unless the other organization has agreed to share it with the authorized person.
External benchmarking is extremely valuable. It helps to understand where your
business fits into the wider market and identify areas of weakness that you should be
focusing on.

3. Competitive benchmarking

Competitive benchmarking is a type of external benchmarking that solely focuses on

comparing your own processes and metrics to those of direct competitors. This form
of benchmarking is significant because the company can identify exactly why a
competitor is succeeding or what drives customer satisfaction in the industry.

4. Performance benchmarking

Performance benchmarking involves gathering and comparing quantitative data (i.e.,

measures or key performance indicators). Performance benchmarking is usually the
first step organizations take to identify performance gaps. Performance
benchmarking involves gathering and comparing quantitative data (i.e., measures or
key performance indicators). Performance benchmarking is usually the first step
organizations take to identify performance gaps.

5. Strategic benchmarking

Strategic benchmarking is typically external and specifically analyzes how other

companies got to be successful. What kind of business strategies do they employ? For
example, what is successful about their marketing campaigns? Benchmarking is the
way the company strategize can help to learn from what has worked for winning
businesses in and out of the industry. This is especially helpful for new businesses or
startups.

Outsourcing

Outsourcing is a management tool with numerous benefits. As organizations seek to

reduce costs and specialize in a number of core areas, it has become a strategic
imperative (Gerbl, Mclvor, Loane, & Humphreys, 2015). Outsourcing is a business
practice in which a company hires a third party to perform tasks, manage operations,
or provide services. Outsourcing is the process of obtaining semi-finished products or
services from a third party when these activities were previously performed internally
(Dolgui & Proth, 2013).

Nature of outsourcing

To effectively outsource responsibilities, a company must focus on the business

partnership as well as the logistics. Outsourcing is a partnership, not a purchasing
project, and it is about managing relationships rather than service-level agreements.
The nature of outsourcing are as follows:

1. Outsourcing processes may be outsourced to a captive unit or a third party. A

captive unit is a service provider set for providing a specific type of service to
only one firm. 
2. In general, outsourcing entails the outsourcing of non-core business activities. 
3. Quality assurance through specialized outside agencies is an important aspect of
outsourcing. 
4. Every outsourcing relationship involves standardized reporting processes and
procedures. However, there is some room to negotiate to ensure its success.
5. The outsourcer charges a fee for his services on contract basis.
Techniques of outsourcing

1. Professional outsourcing

Accounting, purchasing, administration, legal, CAD, digital marketing, and anything

else that is too complex for your team fall under the category of professional
outsourcing. Many of the services covered by professional outsourcing necessitate a
license or several years of training. With professional outsourcing, the company can
gain access to a wide range of services while only paying for those that are required.
This is ideal for expanding the business as well as receiving one-time services.

2. Multi-Sourcing

Another way to combine services is to outsource them. Multi-sourcing typically

provides a mix of IT and other business functions. It is typically more appropriate for
large corporations that want to outsource a variety of IT operations and infrastructure
to various vendors. However, multi-sourcing is a good option for any company that
wants access to top specialists, an outcome-based approach, and transparency in its IT
projects.

3. Offshore outsourcing

Working with a provider located a long distance away is referred to as offshore

outsourcing. It is frequently the most cost-effective method of reducing labor and
material costs. Furthermore, offshore outsourcing allows access to a specific skill set
that is better in one country than anywhere else in the world. The issue with offshore
outsourcing is a lack of dependability, especially when the company chooses a low-
cost provider. This can be avoided by reading the provider's reviews before signing a
contract. However, the company may discover and end up paying more for the
services than the initial low rates.

4. Local outsourcing

Local outsourcing or onshore outsourcing refers to hiring a provider in your own

country. The engaged units speak the same language, have the same cultural
background, and are in a similar (if not the same) time zone, which is a benefit of this
option. It is also far more convenient to meet in person on occasion. Local
outsourcing or onshore outsourcing refers to hiring a provider within the country. This
option has the advantage of people speaking the same language, having the same
cultural background, and living in a similar (if not the same) time zone. It is also far
more convenient to meet in person on occasion.

Business reengineering process

Business process re-engineering is the radical redesign of business processes to

achieve dramatic improvements in critical aspects such as quality, output, cost,
service, and speed. Business process reengineering (BPR) aims to drastically reduce
enterprise costs and process redundancies. Stakeholders must gain a better
understanding of the key steps involved in business process reengineering in order to
keep it fair, transparent, and efficient. Although the process varies from organization
to organization, the steps listed below summarize the process:

1. Define business processes

The first step in the BPR process is to map the current state (work activities,
workflows, roles and reporting relationships, supporting technology, business rules,
etc.). It must collect data from all resources, including software tools and
stakeholders. This is required to understand how the process is currently performing.

2. Analyze the business process

Following the definition of the business process, the next step is to identify gaps, root
causes, strategic disconnects, and so on in the context of improving organizational
effectiveness, operational efficiency, and achieving organizational strategic goals.
This step identifies all errors and delays that are impeding the free flow of the process
and ensures that all details are available in the respective steps for stakeholders to
make quick decisions.

3. Identify and evaluate opportunities for improvement.

This step identifies, analyses, and validates opportunities to address the gaps and root
causes discovered during the analysis. This step also includes identifying and
validating forward-looking improvement opportunities, which are frequently strategic
transformational opportunities that are not tied to the current state process.

4. Decide future state process

Following the evaluation of opportunities, the next step is to select the above-
mentioned improvement opportunities that will have the greatest impact on
organizational effectiveness, operational efficiency, and achievement of
organizational strategic objectives. This procedure Select opportunities for which the
organization has the budget, time, talent, and so on to implement within the project
timeframe. Create a forward-looking future-state map that includes the opportunities
you've chosen.

5. Develop future state changes

Sometimes there is times where business process is frequently ignored (and a key root
cause in failed BPR initiatives). This is where the aforementioned opportunities are
operationalized before they are implemented. New workflows and procedures must be
designed and communicated, new/improved functionality must be developed and
tested, and so on. Changes and opportunities cannot be put into action unless they are
operationalized.

6. Implement future state changes

This step entails traditional implementation based on the interdependence of

changes/opportunities, change management, project management, performance
monitoring, and so on and inform all stakeholders about the new process. This step is
analyze fruitful only after everyone has been trained and educated on how the new
process works, and constantly monitor the key performance indicators.
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