Operations Management - Benchmarking

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Benchmarking: Definition and Process

Transcript of Operations Management - Benchmarking

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Benchmarking:Definition and Process

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Benchmarking:Definition and Process

Benchmarking is a systematic method by which organisations can measure themselves against the best industry practices

Benchmarking is a search for best practices, innovative ideas and highly effective operating procedures through using the experience of others

Benchmarking is a powerful tool to achieve business and competitive objectives when used correctly and aligned with organisation strategy

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Benchmarking:Deciding What to Benchmark

Organisations that benchmark, adapt the process to best fit their own needs and culture through deciding what to benchmark, understanding their current performance and through planning

In deciding what processes to benchmark, one may ask:

Which processes are causing the most trouble?Which processes contribute most to customer

satisfaction and which are not performing up to expectations?

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Benchmarking:Deciding What to Benchmark

What are the competitive pressures impacting the organisation the most?

What processes or functions have the most potential for differentiating our organisation from competition?

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Benchmarking:Understanding Current Performance

In order to compare practices to outside benchmarks, organisations must thoroughly understand and document the current processes

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Operations Management:What is Benchmarking

Benchmarking is a systematic process for identifying and implementing best or better practices

Benchmarking is a self-improvement tool for organisations

It allows them to compare themselves with others, to identify their comparative strengths and weaknesses and learn how to improve

It is a way of finding and adopting best practices

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Operations Management:What is Benchmarking

Although experts break benchmarking into several types, there exist two main types of benchmarking:

Performance benchmarking:This involves comparing the performance

levels of organisations for a specific processThis information can then be used for

identifying opportunities for improvement and/or setting performance targets

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Operations Management:What is Benchmarking

Performance levels of other organisations are normally called benchmarks and the ideal benchmark is one that originates from an organisation recognised as being a leader in the related area

Benchmarks are also often used in the form of indexes such as the American and European Customer Satisfaction Indexes

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Operations Management:What is Benchmarking

Best practice benchmarking:This is where organisations search for and

study organisations that are high performers in particular areas of interest

The processes themselves of these organisations are studied rather than just the associated performance levels, normally through some mutually beneficial agreement that follows the benchmarking code of conduct

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Operations Management:What is Benchmarking

Knowledge gained through the study is taken back to the organisation and where feasible and appropriate, these high performing or best practices are adapted and incorporated into the organisation’s own processes

Therefore best practice benchmarking involves the whole process of identifying, capturing,

analysing, and implementing best practices

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Operations Management:Who Uses Benchmarking

In the West most large and highly successful organisations use best practice benchmarking as a tool to continually learn and improve

The resources needed to carry out repeated best practice benchmarking projects properly and in a way that maximises the learning to be gained from the experiences can be considerable, hence it is used more frequently within large organisations

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Operations Management:Who Uses Benchmarking

Indications are that the use of benchmarking worldwide continues to grow since Robert Camp wrote the first book on benchmarking in 1989

Support for this comes from: The Benchmarking Exchange which has been

monitoring Google search hits on benchmarking over many years,

The growth from year to year in membership of the Global Benchmarking Network which now has representatives from over 20 countries

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Operations Management:Who Uses Benchmarking

The growth in the number of countries that have a business excellence award to more than 70 (the growth in business excellence is likely to be correlated to the growth in benchmarking as a central part of business excellence is benchmarking with as much as 50% of the points associated with these models attributed to benchmarking) and

The continuing popularity of benchmarking within the academic community as the number of papers written on the subject continues to grow

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Operations Management:Who Uses Benchmarking

Different research studies have placed UK company involvement in benchmarking at 78%, 85%, and 60%, and a European study suggested that 88% of companies were involved in benchmarking

In the US a similar level of involvement was recorded by Bain & Company’s international management tools survey (of which 60% of respondents were US), it indicated that 84% of organisations used benchmarking

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Operations Management:Challenges in Benchmarking

There are several common challenges associated with the benchmarking approach.

There are several main issues that both inhibit organisations actively involved in benchmarking and prevent others from attempting active involvement

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Operations Management:Challenges in Benchmarking

These difficulties included: Finding suitable partners Difficulties in comparing data (50% of

organisations found this) Resource constraints (time, finance and

expertise) Staff resistance

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Operations Management:Challenges in Benchmarking

The main reasons given by respondents for not being involved in benchmarking at all were:

Ignorance Resource constraints Data comparability Too small to gain Not appropriate

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Operations Management:Business Performance Improvement Resource (BPIR)

How can the BPIR help? Membership of the BPIR simplifies the whole process

of benchmarking so that all organisations whatever their size and level of resource can benefit from this powerful technique of "learning from the experience of others“

The BPIR will assist you in finding suitable benchmarking partners, measuring performance, and directly shares good ideas and best practices from leading organisations through the hundreds of case studies provided  

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Operations Management:Track Record of benchmarking Use

Because benchmarking is so closely linked to business excellence, many of the benefits attributed to one can also be attributed to the other

For organisations to reach performance levels judged as "world-class" the various business excellence models indicate clearly, through their scoring systems, the importance of benchmarks and the process of benchmarking

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Operations Management:Track Record of benchmarking Use

Business excellence models include, among others:

The Balanced Scorecard (BSC) and the EFQM's Business Excellence Model (BEM) which are tools that use measures of an organisation's performance to drive organisational improvement - generally by highlighting current shortfalls in performance to management teams

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References and Further Reading

http://www.acu.ac.uk/policyandresearch/benchmarking/whatisbenchmarking.html

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References

Besterfield, D.H., Besterfield-Michna, C., Besterfield, G.H and Besterfield-Sacre, M. (2006). Total Quality Management, 3rd ed. New Delhi: Prentice-Hall of India Private Ltd.

Zeithaml, V.A and Bitner, M.J.O. (2003). Services Marketing: Integrating Customer Focus Across the Firm: McGraw-Hill, Boston.

Hashmi, K. (n.d.). Introduction and Implementation of Total Quality Management (TQM). Retrieved November 18, 2006, from http://www.isixsigma.com/library/content/c31008a.asp.

http://www.destinationcrm.com/articles/default.asp?ArticleID=5129 http://www.workz.com/content/view_content.html?section_id=487&content_

id=4996 http://www.acu.ac.uk/policyandresearch/benchmarking/whatisbenchmarkin

g.html