Explore Better Business Processes Benchmarking is a useful analytical method that compares indicators of one company with those of peer companies. Through comparisons, companies and regulators can learn from each other, explore better ways to run their business, and identify cost reduction targets. Widely Used Methodologies
Comparison methodologies differ in their mathematical nature. They may also differ in their data requirements. Regulators around the world measure the relative efficiency/inefficiency of regulated firms using benchmarking methods, including: - Data Envelopment Analysis (DEA)
- Corrected Ordinary Least Squares (COLS)
- Stochastic Frontier Analysis (SFA)
Each method has its benefits. DEA makes no assumption about the functional form of the production/cost function. COLS is straightforward to understand and implement. SFA attempts to incorporate stochastic factors. In each case the data requirements are generally similar. Effective Benchmarking
KEMA advises utilities and regulators on key economic benchmarks, including: - definition of data requirements
- data validation
- specification of benchmarking model
- derivation of efficiency scores with econometric and DEA-based models
- interpretation of benchmarking results
- integration of efficiency scores in the price control
KEMA also provides expert performance measurement services that help strengthen your quality and performance management and build sustainable improvement in shareholder value. For more information please contact us.
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