Benchmarking



Introduction

Benchmarking is the process of comparing performance of one entity (the subject railway) to the performance of other entities (the benchmark companies) to identify best practices and opportunities for improvement. Often, benchmarking begins with a high-level comparison to identify areas of greatest potential, followed by detailed analysis of these high-potential areas. In the railway industry, benchmarking may compare financial measures such as operating ratio and revenue per ton-km, or productivity measures such as traffic units per employee, and traffic units per track-km.

During benchmarking, after comparison of statistics identifies the high opportunity areas, the business processes of the subject and benchmark railways are compared to identify changes necessary to close the performance gap. Next, an implementation plan is developed for the subject railway to adopt improved business processes. For example, the high-level analysis may identify a gap in locomotive operating costs. The detailed analysis might reveal that the subject railway’s locomotives work fewer hours per day than the benchmark railways and



that the subject railway’s staff have lower productivity, which is partially offset by lower wages (Figure 1). The business process analysis would reveal a difference in locomotive assignment practices—the subject railway restructure changes the locomotives every 150 km, while the benchmark railways change every 2,500 km—which affects staff and locomotive productivity. A performance improvement plan would be implemented to change locomotive assignment practices and adjust staffing. This would subsequently be evaluated by whether costs and locomotive productivity had improved.

Benchmarking against both railways and companies outside the railway industry can be useful. Railway comparisons are more useful for operational issues. External comparisons are useful to examine how competing transport providers and logistics companies handle their markets, corporate culture, and strategic issues. This section focuses on benchmarking using statistical comparisons between railways. It explains the steps for statistical analysis, provides definitions, highlights data issues, and explains the typical ratios used.

The statistical analysis for benchmarking starts with selecting benchmark railways and indicators.128 Next, data are collected and adjusted to improve comparability. Then indicators are calculated. Finally, results are interpreted.

    


128 The annex draws heavily on the World Bank Railways Database Update 2007, Users Guide.
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