QUESTION 5

DISCUSS THE IMPORTANCE OF BECHMARKING IN

PRODUCTION AND OPERATIONS
MANAGEMENT

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.

Definition of key term

Benchmarking
Benchmarking is the process through which a
company measures its products, operations, and
processes against its toughest competitors, or those
companies recognized as leaders in its industry (Cole,
2010:p38).
Benchmarking is the process of studying industry or
competitive practices, functions and products and
finding ways to meet or improve upon them.

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

Highlights areas of practice and performance requiring

attention and improvement. Identifies the loopholes of
the business process and steps to improve them.
Prevents re-inventing ( why invest the time and costs
when someone else may have done it already and
often better, cheaper and faster)
Enables the identification of other companies or
organizations with processes resulting in superior
performance with a view of their adoption.
Helps in the implementation of new technology in

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.

Improving Product Quality

Companies may also use benchmarking to improve
product quality. Engineers sometimes purchase leading
competitors' products. They may then take them apart,
study them and determine how the competitors'
products outlast or outperform others in the industry.
Chemical engineers may study cleaning products in a
similar manner. They can then compare various
elements contained in competitor's products to their
own product line. Subsequently, improvements can be
made to product quality.

Increasing Sales and Profits

A company that uses benchmarking to improve its
functions, operations, products and services may enjoy
increases in sales and profits. Customers are likely to
notice these improvements. The benchmarking company
may also promote is improvements through company
brochures, its sales reps, magazine and television ads.
These efforts are likely to increase sales, especially
among core customers. Companies that operate more
efficiently due to benchmarking can drastically lower their
expenses. These savings can be lead to greater profits.

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.

Helps in cost reduction

Benchmarking in POM is a cost effective and time
efficient way of establishing a pool of innovative ideas.
For example Econet initiated an automating process of
recording
employee
attendance
using
software
applications work to analyse data and determine the
hourly efficiency of its workforce. This helps the
company assess employee discipline and efficiency and
helped to plug wastages and leakages.

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.

Complacency and arrogance

Many organisations tend to relax after
excelling beyond competitors s standards,
allowing complacency to develop. The
realization of having become the industry
leader soon leads to arrogance, when
considerable scope for further
improvements remains

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.

Over- capacity utilization

Furthermore to perils of benchmarking, an organisation may
find itself overstretching its resources all in the name of
trying to match its performance with that of its competitor
(see definition of benchmarking). Careful planning and
effective monitoring and control of the benchmarking process
should be taken seriously lest an organisation may find itself
in the horns of a dilemma which may be in the form of over
capacity utilization. As an example, the organisation will have
to schedule overtime which results in higher costs and
stressed workers who make more mistakes. There is less time
for equipment maintenance, and employees may cut corners
to maintain high levels of production.

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.