CBMC 1 OPERATIONS MANAGEMENT WITH TQM

HANDOUT #10
Benchmarking

Introduction:
Benchmarking is a strategic process used to compare an organization’s practices,
performance, or processes against industry standards or leading organizations. This handout
defines benchmarking, looks at the positive aspects of benchmarking, lastly, it outlines some
of the issues or problems that might be associated with benchmarking. Furthermore, it
emphasizes on the concept of process benchmarking, lays down pointers on why and how to
benchmark and expounds on how it is possible to determine which process aspect to
benchmarking. Based on these areas, it becomes easier for organizations to apply
benchmarking for constant improvement and gain a competitive edge.

Date and Time Allotment:

Week 16 & 17 (6 hours)

Objectives:
 Understand the need for Benchmarking
 Understanding the process of benchmarking
 Discuss the types of benchmarking
 Analyze and identify the common pitfalls of Benchmarking

Lecture:

Benchmarking is a systematic method by which organizations can measure

themselves against the best industry practices. It promotes superior performance by providing
an organized framework through which organizations learn how the "best in class" do things,
understand how these best practices differ from their own, and implement change to close the
gap. The essence of benchmarking is the process of borrowing ideas and adapting them to
gain competitive advantage. It is a tool for continuous improvement.

Two Key Elements of Benchmarking:

1. Measuring performance requires some sort of units of measure. These are called
metrics and are usually expressed numerically. The numbers achieved by the best-in-
class benchmark are the target. An organization seeking improvement then plots its
own performance against the target.

2. Benchmarking requires that managers understand why their performance differs.

Bench markers must develop a thorough and in-depth knowledge of both their own
processes and the processes of the best-in-class organization. An understanding of
the differences allows managers to organize their improvement efforts to meet the
goal. Benchmarking is about setting goals and objectives and about meeting them by
improving processes.

Reasons to Benchmark

Benchmarking allows you to dive in deep to find out why top performers in your industry
are so successful. You will be able to analyze the key behaviors and ingredients for success,
so that you can emulate them.
  Benchmarking enables you to identify the strengths and weaknesses in your own
business. Without this insight, you could be traveling blind and making business
decisions without the right information.

 Benchmarking provides objectivity, so that you can take an objective view of your
business. It is difficult to do this otherwise — you may be just too close and emotionally
invested in your business so making it difficult to stand back and be unbiased. The
most successful businesses take off the rose-tinted spectacles and make realistic
assessments about their performance.

 Benchmarking empowers you to understand personnel productivity in detail, and

subsequently, set reasonable expectations for staff productivity. There is no benefit in
setting expectations that simply cannot be met by humans. Likewise, it is foolish to set
expectations that are too low to drive real value in your business. Comparing your staff
productivity to more successful players will help you identify your productivity gaps.

 Benchmarking can also help you assess performance in the area of finance. A wide
range of expenditure questions can be answered to help you make strong conclusions
— on anything from average industry salaries, to the cost of office supplies.

Benchmarking Process
1. Select the process and build support
2. Determine current performance
3. Determine where performance should be
4. Determine the performance gap
5. Design an action plan

Types of Benchmarking

1. Process benchmarking — Focuses on the observation and investigation of business

processes with a goal of identifying and observing the best practices from one or more
benchmark firms.

2. Financial benchmarking — involves performing a financial analysis and comparing the

results in an effort to assess your overall competitiveness and productivity.

3. Performance benchmarking — is usually focused on assessing a firm's competitive

position by comparing products and services with those of target firms (usually their
direct competitors).

4. Performance benchmarking is the hardest process to improve as it involves learning

about competitor performance metrics and procedures, and also making changes to
processes within your business on the lower levels.

5. Product benchmarking — this is the process of assessing a firm's current or designed

products to current ones from competitors.

6. Strategic benchmarking — is usually undertaken as part of an effort to improve overall

business performance by examining the long-term strategies and general approaches
that have made other firms successful.

7. Functional benchmarking - comparison against organizations that are not necessarily

competitors, but that performs related tasks within the same technological area.
 8. Internal benchmarking. Comparison against the best within the same organization or
corporation, often called benchmarking within your own class.

9. Competitive benchmarking, comparison against the best direct competitors, which

then can be termed benchmarking against someone in the parallel class.

10. External benchmarking, is involves seeking outside organizations that are known to be
best in class. It Provides opportunities of learning from those who are at the leading
edge, although it must be remembered that not very best practice solution can be
transferred to others.

11. International benchmarking - is involves benchmarking businesses or operations from

within the same Organization (e.g. business units in different countries).

12. Energy Benchmarking - This is the process of collecting, analyzing and relating energy
performance data of comparable activities with the purpose of evaluating and
comparing performance between or within entities.

5 Common Pitfalls in benchmarking

1. Skipping the definition of clear objectives
2. Choosing the wrong benchmarks
3. Benchmarking too many KPls
4. Ending the benchmark analysis with a variance report
5. Assuming that numbers and performance stay stable for long periods

Activity:
Discussion on the Definition of Benchmarking, Pitfalls and criticism of Benchmarking, Reason
to Benchmark Process, Deciding what to Benchmark.

Assessment:
The students will take a 20-point multiple-choice quiz to gauge their understanding of
benchmarking.

References:
 J.R. Evans. And W.M. Lindsay, Total Quality Management, Cengage Learning Asia,
2013.
 J. Heizer, B. Render, Operations Management, 10th Global Edition, New Jersey:
Pearson Education, 2011.
 S. Kale, Production and Operations Management, New Delhi, McGraw-Hill education,
2013.
 W.J. Stevenson, Operations Management 12th Edition. New York: McGraw-Hill
education, 2015.
 W.J Stevenson and S.C. Chuong, "Operations Management". 2nd Edition. New York:
McGraw-Hill education, 2014.
 Slack, N., Chambers, S., & Johnston, R. (2023). OPERATIONS MANAGEMENT (10th
ed.). Pearson Education Limited, 2023
 David Alan Collier, James R. Evans, William Lindsay (2020) Operations Management
and Total Quality Management, Cengage Learning Asia Pte Limited, 2020
 Facility Planning and Management Retrieved from:
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Learning/Sample%20PPT_Facility%20Location%20and%20Layout.pdf
 https://www.pmi.org/about/learn-about-pmi/what-is-project management
 https://www.projecttimes.com/articles/does-people-behavior-impact-projects-how-
and-what-do-we-do-about-it.html
  https://www.workamajig.com/blog/guide-to-work-breakdown-structures-wbs
 https://keydifferences.com/difference-between-pert-and-cpm.html
 https://hbr.org/1984/07/budget-choice-planning-versus-control
 https://en.wikipedia.org/wiki/Risk_management
 https://blog.hubspot.com/marketing/free-project-management-software

Prepared by:
Ryan O. Maramba, CHRA, CHRP, COMS, CSPE, LPT, DBA