Chapter 27 - Quality Management
Learning Objective: To understand benchmarking as a method of quality management
Benchmarking is the practice of identifying the best companies in the industry and comparing its performance standards.
Benchmarking makes it cheaper and quicker to solve quality problems than if no external comparison were to be made;
It helps identifying areas for improvement and therefore helps businesses to focus and direct their efforts;
It encourages cross-over ideas when performed across industries;
It helps businesses increase international competitiveness.
The benchmarking process:
1. Identifying aspects within the business to be benchmarked: key areas to customers in that market (e.g. speed, reliability, speed of delivery, etc.) - these are called BPI (benchmarking performance indicators);
2. Measure the business performance in the areas identified (BPIs) by looking at records to verify problems, complaints, important data, etc. which will reveal how the company has been doing in those aspects;
3. Identify firms in the industry to be benchmarked against (the best), the ones which are reference in the different areas previously identified.
Can be found in government benchmarks or industry reports;
4. Use BPI data from the benchmarked firms to establish areas for improvement: these data can be obtained from agreements with these firms, published accounts and reports, industry-specific publications, market research with customers and suppliers;
5. Set standards for improvements to the same or higher than the best-performing firms in the field;
6. Change internal process to achieve the standards set. Different degrees of changes may be necessary: sometimes incremental, sometimes drastic;
Re-measure: benchmarking is a continuous process. Measures need to be achieved, revised, and updated for it to be effective.
Benchmarking steps summarized:
The main limitations of benchmarking are to do with:
Difficulty in obtaining relevant and up-to-date industry information;
It discourages initiatives for original ideas as benchmarking looks into implementing initiatives from other firms;
The return on the investment (although low) may not be worth it as some improvements might go unnoticeably.
Conclusion on Quality Management (Standards, Control, Assurance, TQM, Benchmarking):
Quality is fundamental for business success;
Quality is applicable for all industries (including services);
Quality leads to cost reductions (↓ defects);
Quality leads to increased revenues (↑ reputation);
Quality leads to increased motivation.
The meaning of quality must not be forgotten. It is not necessary to produce the best product or service at all costs, but to achieve the quality of product or service that the customer expects.
Chapter 27 - Quality Management
To-Do-List: Activity 27.7
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