Task to be performed:
You are required to read the case: “A Competitive Crisis” regarding Benchmarking provided to you in the class and answers the following questions:
1. You are a benchmarking consultant. Empire staff has shared this information with you, and it wants you to know why you think benchmarking is an appropriate course for it to follow. Is benchmarking likely to help Empire Communications? What will you tell it?
Ans. Benchmarking is an approach of setting goals and measuring productivity based on best industry practice. It was developed out of the need to have information against which performance can be measured. For example a customer support engineer of a television manufacturer attends a call within forty-eight hours. If the industry norm is that all calls are attended within twenty-four hours, then the twenty-four hours can be a benchmark. Benchmarking helps in improving performance by learning from best practices and the processes by which they are achieved. It involves regularly comparing different aspects of performance with the best practices, identifying gaps and finding out novel methods to not only reduce the gaps but the improve the situations so that the gaps are positive for the organization.
It studies the circumstances and processes that help in superior performance. Better processes are not merely copied, but efforts are made to learn, improve and evolve them to suit the organizational circumstances.
These processes are also repeated periodically so that the organization doesn't lag behind in the dynamic environment. It is a process of continuous improvement in search of competitive advantage.
For Empire it is best to follow the benchmarking process because as it is seen from the given case there is not a single department, which is matching or is symmetrical to the industry average.
For employee development empire is spending 260000 whereas industry average is 450000 which means that empire is not spending a reasonable amount on its employees training which can cause it to lose on its quality of products and more wastage of material, time and efforts as it is quite noticeable that when a work of skilled and unskilled labour is matched skilled labour is always a hand above the unskilled one. Similar is the situation of material, integration and testing, supplier auditing and internal auditing departments.
Empire is spending more amount of money on warehousing, material control, material preparation, production control, assembly, income inspection and in-process inspection. Because of this it is evident in the case that Empire's costs are about $4.6 million above the industry cost.
Benchmarking will surely help Empire as it will help to adjust Empire its cost's according to the best average cost, which are prevailing in the industry. It will help Empire to cut its cost in those areas in which it is exceeding the industry norms. Benchmarking can also help Empire to invest in those areas of its organization, which are lacking due to fewer resources such as lack of training to employees, which in turn will exceed its production capacity and reduce its wastage and raw material.
2. How would you determine the best process areas for benchmarking for Empire? (5 Marks)
Ans. Firms can use benchmarking process to achieve improvement in diverse range of management function like: -
The best process areas for benchmarking for Empire are
Firstly, Human resource management empire has 5 employees which deal in its human resource department the expenditure on recruiting and hiring is 300000, there are compensation also which are given to employees which amount to 60000 of company's funds and Empire spend around 260000 on its employees development. Now if we compare these figures with the industry for benchmark we can clearly see that Empire is spending far lesser amount on development of its employees. It is spending only half the amount spent by the industry on employee development. So, Human resource needs to be a keen area where benchmarking is essential.
Secondly, there is a huge gap in warehousing Empire is spending far more finance than the industry is spending on the same. This can be seen from the difference it has which is amounting to $2025000. This is a huge sum to be invested by a company and that too in warehousing. The management of Empire should look into the warehousing to ensure that the company shall be able to fill this huge gap.
The next concern for the company are material and production control. In material and production control also we can see there is a big difference between the company and industry, which should be checked and filled and this gap should be made positive with the help of human resource management.
As we can see that in the case there are two types of difference one are positive and other are negative but both differences are not even near to any industry average. So Empire should take help of benchmarking as aforesaid to fill the differences and make them positive for the company.
3. Given the fact that the telecom industry is extremely competitive, is it likely that Empire will find willing benchmarking partners among its competitors? If not, what would you do?
Ans. as the telecom industry is very dynamic and competitive. There is always something new and innovative happening every day. In such an environment to find a benchmarking partner or partners is a tough job. As every now and then new companies are entering the industry some of which are huge entrepreneurs in other industries and are now entering the telecom industry, which itself sets new standards for the existing firms. The competition levels are increasing and to find a benchmark is not easy.
Benchmarking may not be possible due to highly complex and dynamic business environment. A company can only be a leader or a follower. If the marketing department is good enough to find new and attractive schemes then the company can be a leader in making and attracting new customers and retaining the old ones.
In such a case it is not possible to find benchmarking partner so its best for Empire to set its target as they are in the industry. If Empire cannot be a market leader it has to be a follower and intimate the changes with fast pace so that it is able to survive the fast moving business environment of the telecom industry.
4. Develop a recommendation for Empire Communications for how you propose to lead it through the benchmarking activity and what it should expect to gain from it?
Ans. Empire communication should use the benchmarking process in an effective way to fill its gaps and make them positive so that it can match with the industry norms. If Empire make a little changes in some of the departments and attain itself to guidelines of benchmarking then the difference of 460000 will be added to its before tax profit which will make its profit just double its current profit.
Employee development need to be increased so that it could train its employees better and save on its cost of material wastage and production time.
Materials need to be increased and Empire communication need to increase its production.
Warehousing expenses should be decreased as when these expenses are compared with the average industry warehousing expenses we see that the difference is of almost 2 million which is a very big difference and it needs to be reduced.
Material control is also same as the warehousing expenses it should also be reduced.
Material preparation, assembly and production control are also higher than those of industry.
There should be more investment in integration and test.
Incoming inspection and in process inspection both should be reduced.
Supplier and internal auditing should be more funded.
For Empire its best recommendations is that it should invest in those departments which are lagging behind the industry and it should de invest the amount from those departments which are having more than average investment when compared with the industry. This will make a balance in the investment and the difference of 4.6 million will be changed into before tax profit, which would be a welcome change for Empire.
Notes:
