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MB0044-Production and Operation Management
2. What do you understand by ‘industry best practice’? BrieflyexplainDifferent types of Benchmarking.
Industry best practice
:Each industry would have developed over years or decades. Materials wouldhave changed, processes would have changed. As all products or services aremeant to serve needs of the customers, they undergo continuous changes –both in shapes and features. Because of research that is conducted, materialsand methods go on improve necessarily. The companies that were at theforce innovate to stay in business as new entrants would be adopting thelatest techniques that the pioneers had taken decades to establish. So thepractices adopted by various firms in any industry would end up adoptingalmost similar methods of getting an output required. Such practices wouldget refined to great extent giving rise what we call industry best practices.These tend to get stabilized or changed owning to the development of newequipments which are designed and manufacturers of those with an eye ongrowing markets which demand higher quality and reduced prices.Competition benefits those who can use all these to their advantage. Industrybest practices open up the field for benchmarking by companies which needto improve their performance.
Bench Marking:
It is a method of measuring a company’s processes, methods, proceduresand in a way all functions in great detail. Benchmarking is used to understandhow these got into the system and what circumstances brought them about.It is a learning process with a few to find out whether some of the reasonshave changed and bring in new processes for improvement.. The metrics thatcould be used are – number of pieces per hour, cost per unit, number of breakdowns per week, customer alienation during a week, return oninvestment, number of returns from customers in a month, inventoryturnover, and many others. As can be seen the figures as found abovedetermine the efficiency of the organization. To keep focused, manyorganizations, especially the large ones, select a few processes for purposesof benchmarking. This helps in ensuring constant and deep attention to thoseaspects which are to be dealt with. The following are the types of benchmarking firms consider.
Types of benchmarking
• Process benchmarking - the initiating firm focuses its observation andinvestigation of business processes with a goal of identifying and observingthe best practices from one or more benchmark firms. Activity analysis will berequired where the objective is to benchmark cost and efficiency;increasingly applied to back-office processes where outsourcing may be aconsideration.• Financial benchmarking - performing a financial analysis and comparing theresults in an effort to assess your overall competitiveness and productivity.• Benchmarking from an investor perspective- extending the benchmarkinguniverse to also compare to peer companies that can be consideredalternative investment opportunities from the perspective of an investor.• Performance benchmarking - allows the initiator firm to ***ess theircompetitive position by comparing products and services with those of targetfirms.• Product benchmarking - the process of designing new products or upgradesto current ones. This process can sometimes involve reverse engineeringwhich is taking apart competitors products to find strengths and weaknesses.• Strategic benchmarking - involves observing how others compete. This typeis usually not industry specific, meaning it is best to look at other industries.• Functional benchmarking - a company will focus its benchmarking on asingle function to improve the operation of that particular function. Complexfunctions such as Human Resources, Finance and Accounting and InformationandCommunication Technology are unlikely to be directly comparable in cost andefficiency terms and may need to be disaggregated into processes to makevalid comparison.• Best-in-class benchmarking - involves studying the leading competitor orthe company that best carries out a specific function.• Operational benchmarking - embraces everything from staffing andproductivity to office flow and analysis of procedures performed.

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