I International Symposium Engineering Management And Competitiveness 2011 (EMC2011) June 24-25, 2011, Zrenjanin, Serbia BENCHMARKING

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1 I International Symposium Engineering Management And Competitiveness 2011 (EMC2011) June 24-25, 2011, Zrenjanin, Serbia BENCHMARKING Aleksandra Jović* Technical faculty Mihajlo Pupin, Zrenjanin, Serbia Sandra Kostić Technical faculty Mihajlo Pupin, Zrenjanin, Serbia Jelena Radanov Technical faculty Mihajlo Pupin, Zrenjanin, Serbia ABSTRACT Today s business world characterizes rapidly changes, and it is imperative strategy to improve quality and profitability must make sense, work quickly and pay off. The Father of the Quality Evolution, Dr W. Edwards Deming once said "Adapt, do not adopt". Benchmarking means the process of measuring an organization s internal processes then identifying, understanding and adapting outstanding practices from other extraordinary companies. In addition, it does not mean copying. Your business is not precisely like any other, however it is essential to discover which business processes your company must follow and to increase your awareness of how much is to learn from other successful companies. Meanwhile, customer needs must be on the first spot in every company. The essence of customer requirements is the perception and understanding is what the customer wants and when it wants. Companies need to focus their goals on customer requirements and therefore must monitor their own performance, to compare with other companies, because that way determines the position, the advantages and disadvantages compared the competition. The principles of corporate social responsibility are very important in understanding the process of benchmarking as a basis for achieving entrepreneurial goodwill. Key words: quality, competitiveness, process, customer, corporate social responsibility. 1. INTRODUCTION The first time when the term benchmarking was used was when cobblers started to measure people s feet for shoes. Cobblers would place someone's foot on a "bench" and mark it out to make the pattern for the shoes. Particularly benchmarking is mostly used for measuring performance using a specific indicator. During the 20th century, the Japanese began to visit the best companies in America and Europe, with intention to gather knowledge and ideas of successful business. The Japanese significantly promote their business through applying and modification of collected information. Japanese companies have become competitive and leading in the global market. Benchmarking philosophy has roots in Japan, where it is called Dantotsu, which means: striving to be the best. Dantotsu was used in Japan since World War II. Nowadays, the concept of benchmarking is developed in the USA during the 60s in 20th century. Originally it was developed by companies that function in industrial field. The pioneer in the implementation of benchmarking in the USA is Xerox Company. This company started its overall transformation when Japanese companies appeared. The Xerox Company had a problem with Japanese competitors who support the idea of good, but cheap and in the same time profitable. Successful companies at the end of 20th and the beginning of 21st century use benchmarking as a technique of strategic management. 483

2 Benchmarking is defined as the continuous activity of identifying, understanding and adapting best practice and processes that will lead to superior performance. American Productivity & Quality Center (APQC) gives the best definition of benchmarking. Benchmarking is the process of identifying, understanding, and adapting outstanding practices and processes from organizations anywhere in the world to help one organization to improve its performance. Peter Drucker claims that benchmarking is the instrument, which helps company to determine whether or not globally competitive. To be as good as a leader precondition to be competitive and everything what one company does, the other should aim to at least do equally well. Philip Kotler said that benchmarking means learning from companies, which do particular assignments better, than the other companies. Evolution of benchmarking is shown in Figure THEORY Figure 1: Evolution of Benchmarking Approaches to benchmarking are: Process benchmarking - measuring and comparing an organization's business process against leaders anywhere in the world, to gain information which will help the organization to improve its performance. Financial benchmarking - financial analysis and comparison of the results to assess companies overall competitiveness and productivity. Benchmarking from an investor perspective- observing the companies that can be considered as a profitable investment from the perspective of an investor. Performance benchmarking the process of comparing products and services between initiator and target companies to check their competitive position. Product benchmarking - the process of redesigning of current products and designing of new products. The company can see its own strengths and weaknesses through comparing products with competitor ones. Strategic benchmarking is used when organizations seek to improve their overall performance by focusing on specific strategies or processes. Functional benchmarking the process that compares single functions of two or more companies. Functions such as Human Resources, Finance and Accounting and Information and Communication Technology are unlikely to be directly comparable in cost and efficiency terms. Best-in-class benchmarking - includes learning from the leading competitor or the company that best carries out a specific function. Operational benchmarking - involves every activity of the company from staffing and productivity to office flow and analysis of procedures performed. The basics of benchmarking process include four questions and it answers. These questions are: What should we benchmark?, Whom should we benchmark?, How do we perform the process? and How do they perform the process?. When company decides it is ready to benchmark, and chooses potential partners, it must pay attention on ethical principals, which gives The International 484

3 Benchmarking Clearinghouse. These principals are principals of legality, confidentiality, exchange, use, first contact and third party contact. 3.METHODS The basic phases of benchmarking process, which APQC, EFQC and other companies support are: planning, analysis, integration and actions. Benchmarking process phases are shown in Figure 2. Planning company needs a good preparation for benchmarking to be successful. Firstly, before company even starts looking at whom to benchmark, it has to decide what to benchmark. Company must select the process that will be compared, then analysed to the details and measured its performances. Then, it is good to form a benchmarking team which will create a process map and confirm all indicators based on the measuring performance process. In addition, processes are compared in costs and productivity and it is necessary to determine time schedule. In this phase, company's first steps are scope and research, and then identify whom to benchmark. World-class leadership companies or functions with superior work practices, wherever they exist, are the appropriate comparisons. Company need to contact the companies and see if they will benchmark with company. The selection depends on company's characterises, environment and goals, which are meant to be achieved. Finally, Benchmarking team has to collect data about company and prepare it for benchmarking. Primary source of information company can get by visiting competitive company personally. Those visits must be well planed, because there is a possibility that benchmarking company will not cooperate. In that case, company uses secondary source. A wide array of sources exists, and a good starting point is a business library. An electronic search of recently published information on an area of interest can be requested. In addition, company can use different articles, case studies, books, media reports, and blogs by leaders of the best benchmarking companies. Figure 2: Benchmarking process phases Analysis It is important to have a full understanding of internal business processes before comparing them to external organizations. After this step, company has to examine the best practices of other organizations and finally to measure the gap. Quantifying the company s current performance, the best practice for the process, and the performance gap is vitally important. Gap analysis is a key component of any benchmarking process and helps that project achieve the most important objectives. Gap analysis is divided into the following three main phases: baseline where the company is at present, entitlement the best that the company can achieve with effective utilization of their current resources and benchmark the best practice performance of a truly 485

4 optimized process. In order to utilize gap analysis effectively, the benchmarking process must be able to produce quantifiable results. Integration Communicate benchmarking findings, gain acceptance from upper management, and revise performance goals. Thus, goals that reflect projected improvement are necessary. On the basis of the benchmarking findings, the targets and strategies should be integrated into business plans and operational reviews and updated as needed. Therefore, company has to redefine goals and incorporate them in to the planning process. Actions In this phase, company need to develop action plan and to apply action plans. Information and knowledge gained are applied in business and begin to monitor to achieve the set goals. Finally, company has to recalibrate the benchmarks. Best practices are implemented and periodically recalibrated as needed. After this phase is the phase of maturity, in which company must determine when a leadership position is attained. Maturity is achieved when best practices are incorporated in all business processes, when benchmarking becomes a standard part of guiding work and when performance level are continually improving toward a leadership position. 4.FINDINGS After benchmarking, organization becomes redesigned and functions on completely different basic then before. In benchmarked organizations, everything is submitted to changes, which brings new requests and challenges to the top management. Table 1 shows how company looks before and after benchmarking. Table 1: Before and after benchmarking Before After - non-invention - using of all good ideas - only 1 possible solution - more alternatives - accent on internal environment - accent on external environment - goals from the past - the best goals - lack of understanding the market - better understanding of the market - internal priorities - users priorities - we are good - we need to be better - managing by experience - managing based on facts - following others from own branch - leaders in own branch 5. DISCUSSION Benchmarking is used the most in the USA and Japan. Nothing points so clear on need for changes in organization like gap that exists between organization performances and the best competitors. No one can stay peaceful and be against changes in some car factory in the USA. For example, Japanese car factories have average zero mistakes per one new car, while American have about thirty. Japanese companies have developed Kaizen tools that western managers do not accept. Successful companies proved that it is possible to predict changes and respond to challenges until they can handle the changes. Japanese companies successfully design, produced and placed on market competitive products using Kaizen strategies. Those strategies the Japanese managers use more than thirty years while western managers do not pay attention to them. Kaizen strategy emphasizing does not mean that innovation can and needs to be forgotten. If company wants to develop it needs Kaizen innovations. Japanese success did not depend on cultural facts and their solutions can be applied anywhere. Kaizen management represents the element of overall control of quality management, and refers to continuous long-term change approaches with respecting of human needs and qualities. 486

5 6. CONCLUSION The most effective way of successfully managing of changes is to create them., claims Peter Drucker. There are many methods used by companies in an effort to improve quality in both their products and services. In the fast-paced environment that surrounds industries today, they find themselves faced with the pressure to discover fail proof ways to run their businesses. Benchmarking provides companies the opportunity to assess their own procedures and helps them to understand their industry better which leads to innovative thinking. Some benefits of benchmarking are a better understanding of customers and competitors, reduction in waste, quality problems and reworking, quicker awareness of important innovations, a stronger reputation within the market, and increased profits and sales turnover. The benchmarking process is not an easy one. It requires more time and effort than most managers think. There are a series of steps to follow to ensure that the benchmarking process is successful. Benchmarking encourages a company to become open to new methods, ideas, processes and practices to improve effectiveness, efficiency and other performance. Most important, regular benchmarking encourages a culture of continuous evaluation and improvement. 7. IMPLICATIONS To determine if company s business, unit or organisation is ready for benchmarking, it has complete the following questionnaire, based on American Productivity and Quality Center (APQC) material. Company need to study the statements and tick one box to reflect the level to which the statement is true for its business, unit or organisation. Most Some Few None Processes have been documented with measures to understand performance. Employees understand the processes that are related to their own work. Direct customer interactions, feedback or studies about customers influence decisions about products/services. Problems are solved by teams. Employees demonstrate, by words and actions, that they understand the mission, vision and values. Senior executives sponsor and actively support quality improvement projects. The organization demonstrates, by words and actions, that continuous improvement is part of the culture. Commitment to cange is articulated in the strategic plans. Add the columns: Multiply by the factor: x 6 = x 4 = x 2 = zero Grand total: The answer will come from score: Ready for benchmarking Need some preparation 0-15 Need some help 487

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