A short History of Benchmarking

Benchmarking is not really a new approach. At the beginning of this century, the German military conducted the first known study. The military had realized that moving troops was time-consuming and costly. In a newspaper article a soldier had read, however, that a large American circus had been managing to break camp, load all goods, animals and persons on a train and move on to the next city – all within just one night. This incredible achievement induced a team of military experts to travel to the United States to have a closer look at this happening. It became clear that the circus not only employed it own logistics experts, but also that special vehicles had been developed. With this knowledge, the German military achieved considerable improvements in troop movements.

The introduction of the first assembly lines in the automotive industry in 1916 is a further example of the early application of Benchmarking techniques. Inspired by visits of a large slaughterhouse in Chicago, in which hog halves were transported from workplace to workplace by a suspension railway, Henry Ford introduced assembly lines in the automotive industry.

The Kanban system is another concept that was transferred from another branch of industry. Through the study of the organization of American supermarket chains, and especially the process of refilling shelves, Toyota developed the concept of Kanban cards, an approach that is nowadays applied in many other industries.

Creation of the Benchmarking term by XEROX

The term ‘Benchmarking’ was coined by Xerox in 1979. At this time, Xerox realized that Japanese competitors sold copy machines at a price that was well below Xerox’ production costs. As a result, Xerox conducted a market-related Benchmarking study (competitive Benchmarking) for its production department. The production costs, design and other attributes of all copy machines that were available on the market were studied and analyzed. This approach led to new, radical goals. Due to the success the manufacturing department had, Xerox conducted Benchmarking studies for all business areas. This was in 1981. In the same year, the logistics and distribution departments conducted Benchmarking projects that incorporated all industries. This was final proof that Benchmarking was also applicable to business processes outside the production department. It also showed clearly that Benchmarking partners must not belong to the same industry.

Not until the late eighties, the methodology of Benchmarking came into widespread use in the United States. This was due to two reasons. The first was the introduction of the Malcolm Baldridge Award in 1987. Only since 1991, those applicants for the award that do not use Benchmarking are excluded. The other reason was the publication of Bob Camp’s book „Benchmarking – The Search for Industry Best Practices that lead to superior Performance“ in 1989.