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Introduction
Benchmarking is one of a manager's best tools
for determining whether the company is
performing particular functions and activities
efficiently, whether its costs are in line with
those of competitors, and whether its internal
activities and business production processes
need improvement.
The idea behind benchmarking is to measure
internal processes against an external standard.
Types of benchmarking
There are two primary types of
benchmarking:
Internal benchmarking: comparison of
practices and performance between
teams, individuals or groups within an
organization
External benchmarking: comparison of
organizational performance to industry
Importance of benchmarking in
production and operations
management
Process improvements
Because the business world is ever changing,
organizations ought to stay abreast of new production
processes that may be cost effective and efficient in
terms of delivery. Benchmarking will help a company
identify these gaps in their conversion process in
comparison to other better performing companies or
market leaders and also ways in which they can
manage their processes. For example a bakery that still
adopts manual processes during production may
experience higher costs of production & inefficiencies as
compared to one that invests once off in automated
Globalisation
Relating to international benchmarking, this process
assists a firm to operate in the global market especially
in todays business environment because the standards
of that organization will be matching with the standards
that are being accepted globally. For example a
company operating in the service industry like CUT has
to match world standards as they may be unable to
operate or compete in the global market. Hence
constant upgrade and comparison with the outside
world is a necessity if a company wishes to expand into
markets outside its locality.
Knowledge Enhancement
By observing and scrutinizing other companies an
organization can look into companies that engage in
similar activities with them and be able to identify the
best practices that can be applied to their own
processes in order to improve them. That knowledge
acquired about other companies can be easily
transferred to their own organization thereby creating
opportunities for innovations.
Conti
Drawbacks of benchmarking
Lack of clarity
The organisation doing the benchmarking may lack
clarity from where data is originated. One of the
biggest mistakes that managers do is that they do not
understand the source from where they acquire the
data and this can cause errors in setting up the
benchmark.
Resource diversion
The purpose of benchmarking from its definition is to try and
match or outmatch your standards as an organisation with
those of your next best competitor. Depending on the particular
area that you are benchmarking, resources tend to be
concentrated toward that particular area; lets take for instance,
production processes. The organisation will use any resources
that it has access to toward improving its production processes
while neglecting other areas that may also need attention. The
organisation will suffer from myopia and ultimately the
production processes may improve but at the expense of other
areas that could have benefitted from those resources too.
RIGIDITY
Benchmarking is rigid , in other words it
stifles innovation and creativity
Once a firm sets the other as a model to
emulate it begin to operate within the
confinement of how the yardstick firm
operates and not be able to become
creative in its own capacity
LACKS STANDARDISATION
Factors that cause success in firms are not uniform and
they are not all visible or traceable.
Two firms can operate in the same way but the other
can benefit from such invisible traits as employee
motivation, customer loyalty, relationships with
suppliers among others.
In other words there is no hard rule to use for
benchmarking
CONCLUSION
Benchmarking is crucial in production and operation
management because it provides the production managers with
basis of improvement be it in functional policies, processes and
production as a whole.
benchmarking is disadvantaged in that it requires resources and
its companies may be in the same industry but they differ that
what works for one organisation will not necessarily work for
another
Production and operations managers should consider
benchmarking so as to improve production efficiency and
effectiveness, they can adopt from other exceptional firms and
tailor make their discoveries to best suit their organisation.