Continuous improvement tool
Benchmarking is increasing in popularity as a tool for continuous
improvement. Organizations that faithfully use benchmarking strategies
achieve a cost savings of 30 to 40 per cent or more. Benchmarking establishes
methods of measuring each area in terms of units of output as well as cost. In
addition, benchmarking can support the process of budgeting, strategic
planning, and capital planning (Lyonnais, 1997).
In the early 1980s, Ford Motor Company needed to change many aspects of
its operations to cut costs due to the suffering automotive market. Management
believed it could improve processes in the accounts payable department. After
gathering data on Mazda’s accounts payable operations, Ford analyzed and
compared its own accounts payable operations. As a result, Ford reduced costs
by 5 per cent