Best Practices & Benchmarking (Compatibility Mode) PDF

Benchmarking & Business Process Reengineering
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Contents
 What is benchmarking? What are the steps
involved?
 The role of critical success factors
 Characteristics of world class companies
 Benchmarking the Logistics processes
 Best practice, Benchmarking and Supply Chain
Strategy, Prerequisites and obstacles.
 What is Benchmarking and Reengineering
Procedure?
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WHAT IS BEST PRACTICE?
 Best Practice is accepted as “ doing things in the most

effective manner”.
- Usually, this implies that the focus is on specific
operation such as inventory management or
distribution management and then examines
organizations who have been identified as being
experts in that particular area. (Camp, 1989)
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WHAT ARE THE STANDARDS FOR
ASSESSING BEST PRACTICS?
 The achievement of best practices is within the

context of a specific set of circumstances, relevant
and appropriate to the company’s situation.
 A company will pursue best practice as its philosophy
with overall view to become a world class
organization.
 “World Class” in this respect implies an international
reputation for overall effectiveness.
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 The four critical elements which distinguishes world

class companies are:
- Customer Focus
- Flexibility
- Continuous improvement
- Effective management of human resources which
energizes creative decision making and problem
solving.
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 World class organizations know their core business

well and resist the excessive investment in peripheral
activities.
 Their flexibility is the key to their success, they know
what type of responses to make, for how long and the
nature and extent of its added value.
 Without creative use of IT, an organization can not
hope to become a world class.
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CONCLUSION ON BEST PRACTICES
 Adopting best practice is a step toward long term

success.
 The process must become a dynamic component of
the company’s strategic and operational activities.
 In addition, such organizations monitors continuously
the market place and its competitors and is aware of
processes that could enhance their position through
the process of benchmarking.
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WHAT IS BENCHMARKING?
 Benchmarking is a systematic ,structured approach to

search for best practice.
 The principle of benchmarking is evaluation.
Benchmarking exercise should contain the following
two components:
- One is measurement and understanding of the
company’s performance.
- The second is identifying , measuring and
understanding the external best practice
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BENCHMARKING
 Is a continuous ,systematic procedure that measures a

firm’s products, services and processes against those
of industry leaders.
 Measures used are the following:
Cost Per Unit, Break Down Per Customer,
Processing Time Per Unit, Customer Retention Rates,
Revenue Per Unit, Return on investment & customer
satisfaction levels.
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STEPS IN BENCHMARKING
 Planning
Identify the product /service /process to be
benchmarked and the firm to be used for
comparison , determine the measures of
performance for analysis and collect the data.
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 ANALYSIS:
Determine the gap between the firm’s current
performance and that of the benchmark firm
and identify the significant gaps.
 INTEGRATION
Establish goals and obtain the support of
managers who must accomplish the goals
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 ACTION:
Develop cross-functional teams of those
affected by the changes, develop action plan
and team assignments, implement the
plans, monitor progress and recalibrate
benchmarks as improvements are made.
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WHAT IS COMPETITIVE BENCHMARKING?
 Can be defined as the continuous measurement of

the company’s products, services, processes and
practices against the standards of best competitors
and other companies who are recognized as leaders.
 Benchmarking is more than an analytical process, it is
a tool for change and in some organizations it has
become a management culture.
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BENCHMARKING THE LOGISTICS PROCESS
 The underlying philosophy is to have process

improvement and process control.
 Key to quality improvement is not to rely upon
inspection of the output but rather to improve the
process itself. ( SQC-SPC)
 Imagine that this process is a “pipeline” that begins
with the suppliers, runs through the business and
finally to customers.
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BENCHMARKING THE LOGISTICS PROCESS
 The first step in improving performance in the service

pipeline is to understand the structure of the process.
 Unlike oil pipelines, the net work of materials and
information flows, activities and procedures that link
suppliers and end users, is complex.
 A recommended approach to defining the pipeline
structure is to flowchart the steps along the chain
from customer’s order until the final delivery to
customer.
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BENCHMARKING THE LOGISTICS
PROCESS
 The next step is to identify the critical points where, if

something goes wrong , the entire process will be
affected, for example a stock out in the warehouse or a
failure to meet a production plan.
 These critical points are where process control must
be applied and where benchmarking against the “best
in class” companies / industry can bring significant
benefits.
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MAPPING SUPPLY CHAIN PROCESSES
 Flowcharting supply chain processes is the first step

towards understanding the opportunities that exist for
improvements in productivity through reengineering
those processes.
 To examine the reengineering opportunities, we must
understand the following:
“ Value-adding” time
versus
“non-value- adding” time.
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VALUE-ADDING TIME IN SUPPLY CHAIN
 Value-adding time is time spent doing something

which creates a benefit for which the customer is
prepared to pay.
Example: Manufacturing, Physical Distribution, etc;
 Non-value –adding time is time spent on an activity
whose elimination would lead to no reduction of
benefit to the customer.
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 However, some non-value-adding activities are

necessary because of the current design of the
processes but they still represent a cost and should
be minimized.
 The difference between value-adding time and non-
value-adding time is crucial to our understanding as
to how the logistics process can be improved.
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 A supply chain map is essentially a time-based

representation of the processes and activities that are
involved as the materials or products move through the
chain.
 The map will highlight the time that is consumed when
materials or products are simply still as inventory.
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PREREQUISITES FOR BENCHMARKING
 Will and commitment of top management

 Clear-cut definition of strategic goals
 Goal is to become the “Best”
 Openness to new ideas
 Understanding of existing processes, products and
services.
 Documentation of all processes
 Proper communication across all team members.
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OBSTACLES TO SUCCESSFUL BENCHMARKING
 Lack of sharp focus

 Unrealistic timetable
 Poor team composition
 Settling for “OKAY” mindset.
 Lack of or limited top management support.
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WHAT IS BUSINESS PROCESS RE-ENGINEERING?
 The fundamental rethinking and radical redesign of the

business processes to achieve dramatic improvements
in critical, contemporary measures of performance,
such as cost, quality, service and speed.
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BPR is Not?
 Automation
 Downsizing
 Outsourcing
WHAT DOES BPR DO?

 BPR seeks improvements in Cost, Quality, Service, Speed
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Why Reengineer?
 Customers
 Demanding
 Sophistication - Technology
 Changing Needs/Preferences
 Competition
 Local
 Global
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OBJECTIVES OF BPR
 Streamlining management process and formalizing

communications.
 Eliminating unproductive activities in the operational
processes.
 Improving collaborative creation of work products
such as documentation, specification, designs, etc;
 Improving decision making capability
 Strengthening team member’s approach to problem
solving and changes in process.
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Key Characteristics of BPR
 Radical Improvement
 Integrated Change
 People Centred
 Focus on End-Customers
 Process-Based
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BPR Versus Continuous Improvement
Process Reengineering
Continuous Improvement
Radical Transformation
Incremental Change
People & Technology Focus
People Focus
High Investment
Low Investment
Rebuild
Improve Existing
Champion Driven
Work Unit Driven
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REQUIRMENTS FOR IMPLIMENTING
PROCESS REENGINEERING
 Identifying the customer needs and then designing

processes and aligning people to meet those needs .
 Effective transformation can only be performed in a
series of phased steps involving the reorganization of
technological, attitudinal and organizational attributes
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 This approach involves complete rethinking and

transformation of key business processes, leading
to strong horizontal co-ordination and greater
flexibility in responding to changes in the
environment.
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 The system requires redesigning

information to cut across departmental lines.
 Work is always organized around
process rather than function, hence the shift
to team based operation.
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 Information has to be shared and the

employees should be able to see at a glance the
entire process, so that they can visualize
where their respective jobs fit in the system .
 Hence, there is a constant effort to make their
organizations more competitive and more
responsive to customers.
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Benchmarking & Business Process Reengineering

 Best Practice is accepted as “ doing things in the most

 The achievement of best practices is within the

 The four critical elements which distinguishes world

 World class organizations know their core business

 Adopting best practice is a step toward long term

 Benchmarking is a systematic ,structured approach to

 Is a continuous ,systematic procedure that measures a

 Can be defined as the continuous measurement of

 The underlying philosophy is to have process

 The first step in improving performance in the service

 The next step is to identify the critical points where, if

 Flowcharting supply chain processes is the first step

 Value-adding time is time spent doing something

 However, some non-value-adding activities are

 A supply chain map is essentially a time-based

 Will and commitment of top management

 Lack of sharp focus

 The fundamental rethinking and radical redesign of the

WHAT DOES BPR DO?

 Streamlining management process and formalizing

 Identifying the customer needs and then designing

 This approach involves complete rethinking and

 The system requires redesigning

 Information has to be shared and the

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