Project Benchmarking

Factors Used in Determining Project Benchmarking

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Benchmarking is a method of comparing one process of business as well as performance metrics to the best practices of the other firms in the similar industry. The dimensions which are generally considered during the benchmarking are time, quality and cost (Benchmarking, 2008). In this process, management of an organisation has determine the best company in the similar industry and compare own existing process to the benchmark enterprise process. Under this method, the organization learn the different things such as how to form and achieve the targets, how to rearrange the process and improve them etc (Benchmarking, 2008). The following research study is based on the project benchmarking. The report will explain the different factors which will help in determining the benchmarking strategy as well as key performance indicators and their application.

Concept of Benchmarking

According to the given case scenario, a private organization wishes to expand its retail outlets into a new town and for this, a benchmarking strategy has to be developed. In the retail industry, the benchmarking play an important role (Benchmarking in project management, 2015). With the help of this, the private organization get the view of the strategy for the external environmental and also assist the firm to develop the various internal actions for the different objectives of the business.

Benchmarking is important for monitoring the existing system, process or procedure of an organization and established the numerous method for continuous improvement in the firm. By using it, an enterprise can easily assess the own performance against the competitors because it helps the company to gain the competitive advantages and overcome the risk during the benchmarking (Benchmarking in project management, 2015). For getting the maximum benefits of it, the organization should define those areas which requires more improvements. There are three level of benchmarking by which a company can improved the existing process and system in more effective manner. These levels are internal (within the company), strategic benchmarking (between industry and competitors) and outside the company (Benchmarking in project management, 2015).

It is one of the best tool for the organization to determine whether the firm is performing the various business activities and functions in effective manner or not. The aim behind using the benchmarking method is assessment of the internal process and procedure's against the set standard methods (Benchmarking in project management, 2015). It can be used as an strategy at any time but is generally performed in the case of generation of the needs within the firm. For taking the initiative for the benchmarking, the five questions have emerged which are when, why, who, what and how?. These are the very important questions for the management team of a company at the time of start the benchmarking process. Benchmarking can be divided into the several categorizes such as strategic, process, product, functional, performance, international, internal and external benchmarking (Benchmarking in project management, 2015). These all are performing in the different situation as well as requirements of the change in the business. At the time of performing the benchmarking process in a firm, the fours steps procedure have to be followed. The first step is understand the existing system of the business. The second stage is analyse the same process of the competitors, third is compare the existing system with the competitors and the last step implement and follow the new procedure to fill the gap of performance (Benchmarking, 2008).

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The factors that will determine benchmarking strategy and where applicable provide real world examples of key performance indicators that can be used

As per the given case, it has been clear that before opening the new retail outlet into a new town, its important to determine those factors which will help in selecting the benchmarking strategy at the time of expansion (Andersen, Henriksen and Aarseth, 2007). There are different factors that helps in choosing this strategy for the opening the new outlet into a new town. These factors are quality of the product, increased cost or budget, poor operation functionality, long time to distribution of the product, inappropriate procurement strategy of the material from the suppliers and poor manufacturing process (Kerzner, 2004). The explanation of different factors which will determine benchmarking strategy for private retail organization are giving in the below paragraphs.

1. Quality of final product:

The first factors is related to the quality of the final product and services. The private retail organization has prepared the quality goods but these are not much good in quality as compare to its competitors. So its more important for the firm to give the focus on the quality of the final product. Because it will help in increase the customer satisfaction level and stay remain in the competition (Highsmith, 2009). For improving the quality of the final product, the management of private organization has to set the benchmark of those company which is related to the retail industry such as Tesco, Next PLC, Sainsbury's etc.

Example: Quality is a key performance indicator for most of the organisations in different industries. This can be understand by the Xerox case and this name is become a generic mane for all photocopiers. In 1981, IBM and Kodak were taken the 35% market share because of developing the high-tech machines (Benchmarking, 2008). In this ear, Xerox had prepared the quality improvement plan and which help then in got the success and survival in the competitive market. This quality plan has later known by the Benchmarking program. With the help of this process, company had got the success in the improving the quality of the finished product and it highlighted distinctive elements which make the goods more superior (Benchmarking, 2008).

2. Distribution of the goods:

The second factor is take long time in distribution of the final product. In the case of expansion of the business of into a new town by opening the outlet, private organization has need to increase the speed of the distribution of the final item (Kerzner, 2013). In this context, the existing distribution system has not effective so before planning for the expansion, firm has to determine those factors which affects the distribution of final goods. This can be only possible by benchmarking for improve the process of distribution (Hillson, 2003).

Example: L.L. Bean is a catalogue seller of selling the different equipments outside the country. The exiting system of the company was very poor and the it took more then one week to reach at the destination. In this context, the company has taken the decision regarding improve the existing distribution system with the help of benchmarking method. The result is the quality problem has cut by 2/3, manufacturing cost just half of the previous cost, labour cost has cut by 50% and requirement of the staff has cut by 35% by increase the volume of the production (Benchmarking, 2008). These all are possible by the benchmarking method which increase the production capacity of the system and improve the distribution system.

3. Functionality of the manufacturing system:

The third factor which influenced the company to select the benchmarking strategy is poor manufacturing and operation functionality. Due to the use of the existing system of production and operation, the wastage of the raw material becomes increased and it leads to affect the budget of the company (Kerzner, 2002). In this context, its needed to adopt the process benchmarking method for increase the efficiency of the manufacturing of the machines and try to minimize the wastage of raw material. Under this method, company has to select those firm and benchmark it which production process more effective. By doing this, private organization will effectively utilize the machines efficiency and produce large volume of products (Highsmith, 2009).

4. Inventory management system:

Private retail organization also facing the problem of increase holding cost of final products. Company has produce the items in the large volume and store them in warehouses. Due to the poor quality of the goods, the people rarely buy the services of the firm. This leads to increase the inventory as well as carrying charges (Yong and Huynh, 2008). This is the fourth factor which helps the management to adopt the benchmarking methodology to manage the inventory of the finished product. Hence, its most important for the organization to follow the functional benchmarking method. In this strategy, private company has to compare the existing process of inventory management system and process with the other business competitors to determine the various innovative ways. It will improve the working process and bring the dramatic changes in the system (Turner, 2014).

Example: Toyota Motor Corporation is the first company that use the JIT (Just in Time) system in the manufacturing process. Under this method, company start to produce the products according to the demand of the item and order placed by the customer for the particular car (Meredith and Mantel, 2011). Whenever the order received by the company, its begin to produce the cars and all these products are customized means based on the requirements and needs of the people. By doing this, it decrease the holding and carrying cost raw material and final product of Toyota. It leads to easily manage the inventory of the different items (Kwak and Ibbs, 2000). It also increase the functionality of the system and meet the demand of the target customer’s.

Another good example relate to the manufacturing process is Motorola Company which adopt the flexible manufacturing system for producing the different electronics gadgets and equipments. In the present time, organization has deal in the different sectors and develop the good quality products (Svihla and Jelinek, 2007). The arrangements of the machines and equipments in the manufacturing area are in flexible way. By little changes in the arrangements of the facilities, company is easily produce the different variety of the products. The goods are less in volume but the quality of the finished commodities are good.

5. Procurement method for material acquisition:

It is the major factor which has seen in most of the organizations. At the time of purchase the material from the suppliers, many companies have make the contract with them for the specific time duration (Bizer and Schultz, 2008). It increase the dependability on the particular vendors and when the material has not provided by the supplier then it affect the whole production and operation process. In the case of private retail organization, by seen the increase dependability on the particular vendors, this factor has considered by the management team for adopting the benchmarking strategy (Kerzner, 2004). This helps the firm to reduce the dependability on the single suppliers and improve the process of procurement of the raw material.

Example: Domino's Pizza has make the strong supplier networks for acquires the different raw food items for preparing the different variety of fast food. The strategy behind procurement of the food materials is developing the new products, improve the different operation activities for dealing with the changes and develop the core competencies (Andersen, Henriksen and Aarseth, 2007). The strategic benchmarking method has used by the company. Under this strategy, Domino's Pizza has followed the vendor rating method and start giving the orders to the selected the suppliers. By doing this, firm is now purchase the food stuff from the different vendors by focusing the quality of buying material (Kerzner, 2013).

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From the above report, it can be concluded that benchmarking in project management play an important role because it provides the external view of the strategy of a company. It helps the manager to priorities the work for improving the existing process and system. It gives the several benefits to the organization such as reducing labour cost, manager the work flow, reengineered the process, improve the efficiency of the system, helps in developing the new services, reduce the extra cost, manage the inventory level etc. In the give case, private retail organization has to adopt the different benchmarking systems according to then situation and need of the changes. In order to implement the new modifications in the company, there is a requirement of the well trained people so that new changes can be implemented in more effective manner. The work of benchmarking has not stooped at implementation of changes but it also used in continuous improvements in the system by monitoring and evaluation.


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