Industry benchmarks are used by companies to compare their financial performance, inventory turnover, and defect rate against competitors. Benchmarks can be commercial, market, manufacturing, or production. Companies must consider specific circumstances or strategies when comparing against competitors. Manufacturing benchmarks include materials, cut speeds, and weld deposit. Production parameters are available for different sectors.
Industry benchmarks are the comparison points of companies within the same industry. Common points of comparison include financial performance, inventory turnover, and defect rate. Companies use industry benchmarks to assess their position against the competition and identify potential weaknesses and areas for improvement. Industry benchmarks can be divided into commercial, market, manufacturing and production categories. When industry benchmarks are unavailable, a company may rely on benchmarking itself against its historical performance.
Business benchmarks refer to reports and figures based on sales, inventory and customers. These industry benchmarks are important for companies to evaluate their performance in areas such as cost per sale, inventory turnover and customer retention. When examining benchmarks set by industry competitors, a company must keep in mind specific circumstances or strategies that impact the numbers being compared. For example, if a competitor has a higher inventory turnover ratio, it could be because they sell products at significantly lower price points or offer a newer model in higher demand. The key is to find out why the differences exist, to determine whether the company should pursue a different strategy to be more competitive.
Market benchmarks are the comparative data used to compare something to the market average. For example, investors use them to compare the performance of a financial instrument with the overall performance of the Dow Jones Industrial Average (DJI). Other markets used as benchmarks include the Standard and Poor’s 500 (S&P 500), National Association of Securities Dealers (NASDAQ), and the Toronto Stock Exchange 300 Composite Index (TSE 300).
Manufacturing benchmarks are generally meant for specific types of jobs or equipment within the industry. This type of benchmark can include numbers on materials, cut speeds, and weld deposit. Since numbers may not be readily available at times, companies can use their own benchmarks to compare their current performance against that of various periods. In the United States, manufacturing benchmarks are provided by the Society of Manufacturing Engineers (SME), Fabricator magazine, and a select number of other manufacturing publications.
Manufacturing benchmarks are useful for determining how a manufacturer’s benchmarks compare to others within the industry. For example, the North Dakota Beef Cattle Improvement Association provides the average performance of some producers to help these companies compare their herd numbers and evaluate their performance. Production parameters are available for different production sectors, from farmers to horticulturists.
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