Understanding Benchmarking

Question:

Write an essay that demonstrates how both Benchmarking and Lean Six Sigma can be used by organisations to facilitate change in their business processes to enhance and sustain their competitive advantage.
 

In this essay, it has been demonstrated that how an organization can implement Benchmarking and Lean Six Sigma method to facilitate change in the business processes so that it can enhance and gain sustainable competitive advantage. As Babarit et al. (2012) stated that, in the last decade business process is changing rapidly, and they are coupling with various disruptive technologies social media, mobile technology, and cloud computing. It has initiated the necessity of business process management. Industry development has made it necessary for companies to change their architecture. According to Antony et al. (2012), the relationship between information technology and business operation is getting highly complicated. On the other hand, with the increase of purchasing power of customers, it has become crucial for an organization to enhance their business operation. As Cheng and Chang (2012) stated that, presently customers are getting more involved with company operations. They scrutinize every access of business such as availability, accessibility and delivery time. Hence, in order to meet customer expectations, it has become mandatory to use strategies such as Six Sigma and benchmarking strategy.

In this essay, at first, both methods are discussed. Then it has been found which organizations have actually implemented these strategies to identify business process change. After observing those case studies, an appropriate strategy has been developed to apply one or both of these techniques in a simple organization.     

As Rolstadas (2012) stated that, Benchmarking is the method to improve performance by recognizing and implying best-demonstrated practices to sales and operation of business. With the help of benchmarking process, managers are able to compare their process and products externally with that of competitors. They also can compare their operations internally with other operations of the organization (Sajjad and Amjad 2012). The major objective of Benchmarking technique is that it helps to find out examples of superior performance and try to understand those factors that drive that performance.  After analyzing those practices, a company is able to implement them into the operations and sales of their own organizations (Williams et al. 2012).   

As Yakovleva et al. (2012) argued that, benchmarking is not about copying strategies of other organization to improve business operation, but it is related to the innovation of enhanced strategies to improve business operations. There are mainly 12 stages related with the appropriate benchmarking procedure. They are such as subject selection, the definition of the process, identification of potential partners, collection of data, determination of gaps, target future performance, communicate, adjustment of goal, implementation and review and calibration (Hong et al. 2012).  There are three major costs related with the benchmarking procedure. They are such as visit cost, time cost and benchmarking database cost (Zink 2012).  The cost of benchmarking can be reduced by using several internet resources.

According to Qayoumi (2012) Lean Six, Sigma is a new methodology of business improvement. It combines both Six Sigma and Lean methodologies. It is the principal aim of Lean process management to reduce waste from business process and focus on customer’s expectations. On the other hand, Six Sigma is implemented to cut process variation and enhance process improvements depending on customer’s perception of quality (Psychogios et al. 2012). When these two processes are combined, they create a business methodology that can standardize and integrate business process. According to Pamfilie et al. (2012), it has been found that organizations, who have implemented Lean Six Sigma methodology, are able to deliver service and goods with minimal waste and in a cost effective manner. As Pamfilie et al. (2012) stated that lean Six Sigma process has utilized all the phases similar to that of Six Sigma. There are two major aspects on which the Lean Six Sigma process works. They are such as reducing defects depending on critical to quality (CTQ) and Lean’s waste elimination.   

Benchmarking in the Oil and Gas Industry

In order to implement benchmarking in an organization, it is required to understand what it actually is.  Benchmarking is not superficial visits, which are undertaken to analyze the business performance. As Hong et al. (2012) argued that, it is impossible to gather detail knowledge of an operation after only a short visit. Benchmarking is also not a personal appraisal tool. As Hilton and Sohal (2012) stated that, Benchmarking should focus on organizations rather than individuals associated with it. Organizations also need to understand that, Benchmarking is not a standalone procedure (Hiebeler et al. 2012). It has to be a constant part of improvement operation strategy. The active benchmarking process can be developed within organizations if they ram up their performance frequently to remain competitive in the present business environment. Oil and Gas industry is the prime example of benchmarking implementations. In order to respond to the drastically changing technology, business, and regulatory demands, most of the oil and gas companies have implemented benchmarking. There are various stages in which benchmarking helps to improve business operations of these companies. They are such as identification of world-class level of performance, determining the drivers of superior performance, determining gaps between world class performance and benchmarking performance recognize best practices in critical business process and build foundation for performance improvement (Habidin et al. 2012). Organizations can apply various types of benchmarking such as internal and external benchmarking and competitive and non-competitive benchmarking (Habidin and Yusof 2012).   

In order to implement Lean Six Sigma into the business process change, it is required to provide training to all employees. As Gremyr and Fouquet (2012) stated that, a belt-based training has been developed for Lean Six Sigma model, which is similar to that of Six Sigma model. There are four belts comprises in the Lean Six Sigma model. They are such as a yellow belt, green belt, black belt and master black belt (Gnanaraj et al. 2012). For each level, there are some levels of skills are available that describe which Six Sigma tools are required to be implemented in the present situation (Chiarini 2012). For, example yellow belt are given to the employees who have awareness about Lean Six Sigma. In the Greenbelt stage employees are focused on using Lean tools.  As (Hilton and Sohal 2012) stated that, in this juncture employees learn how to implement DMAIC and Lean management principles in the business operation.  At the black belt level, employees become full-time project leader of lean management. As Gnanaraj et al. (2012) stated that when lean management project leaders become two years experienced, then they become Master of Black Belt in Lean Six Sigma process. 

Figure 1: Organizational structure for Lean Six Sigma model

The Xerox Corporation is the first company that has used the benchmarking technique to enhance its competitiveness during the mid-90s (Zink 2012). The form that time is benchmarking has become an important part of Business performance management of the organization. There are some major factors of improvement revealed under the benchmarking process. They are such as competition, manufacturing cost and quality of product (Habidin and Yusof 2012).   It has been found that the average manufacturing cost of the copies companies of Japan is 30-40% less than that of company Xerox (Hong et al. 2012). For this reason, Japanese companies are able to cut down their production.

Benefits of Lean Six Sigma

Xerox Corporation also has neglected the potential of new entrants such as Canon, Sevin, and Ricoh, who have grabbed the lower-end market and niche segments. It also has been found that the products of Xerox had over 30,000 defective parts per one million products. It is 30 times more than its competitors (Gnanaraj et al. 2012). It has been found that the company Xerox needs 18% annual productivity growth rate to match up with its Japanese competitors (Yakovleva et al. 2012).  In order to improve the condition, the company had initiated 5 stage benchmarking process. These five stages are as planning, analysis, integration, action, and maturity. The company has asked its branch managers to match its stocking policy with the installation orders of customers. It reduces the inventory holding time of the company. It leads to saving of $200 million for the organization (Yakovleva et al. 2012). Successful implementation of benchmarking strategy has increased the number of satisfied customers, and it also helps to reduce the number of defective parts by 78%.   

Company 3M has used Lean Six Sigma process in order to provide high quality products and service to its customers. It was launched in the year of 2001 in the company 3M.  As Yakovleva et al. (2012) stated that, Lean Six Sigma process provides methodologies, tools and cultural mindset that can help to meet the brand promise of the organization.  There are five primary ways in which Lean Six Sigma helps to improve the business operation of the company 3M.  The central part of 3M Lean Six Sigma process is a belief that consumers are entitled to get highest quality product from the enterprise. By cutting down root causes of variation from the business process, it helps to improve product quality. As Hong et al. (2012) stated that Lean Six Sigma process helps accelerate and streamline manufacturing process, supply chain and services of the organization to meet the demand. It helps the company to minimize defects and waste for the production process. It aligned innovation with the needs of customers helps the company to develop a right product that can meet the needs of clients. Now Lean Six Sigma process has become a mandatory part of 3M’s business operations. Successful implementation of this method has improved sales performance of the company by 20% in the last decade (Yakovleva et al. 2012).  There are five stages related with Lean Six Sigma process. They are such as defining, measuring, improve and control. Together they are known as (DMAIC) tools. They help to make production control and enhance the business operation.

Figure 2: DMAIC tools used in Lean Six Sigma process 

On the other hand, LEAN tools help to enhance speed and eliminate waste from the manufacturing process. 

Figure 3: LEAN tools used in Lean Six Sigma process 

In this section, it has been discussed how Hewlett-Packard Corporation can implement benchmarking process lean six sigma process in the organization. There are four phases in which HP can perform benchmarking. These stages are like a plan, adapt, collect and analysis. The planning process of the company includes performance benchmarking, process benchmarking and strategic benchmarking. In the next stage, the company needs to gather information. It includes points such as the cost of packaging materials, materials, physical properties like size and total package product weight. A process flow plan for the competitive analysis program has been given below for the company HP.

Belt-Based Training for Lean Six Sigma Model

Figure 4: Process flow of competitive analysis program for the company HP

The company HP can adopt Lean Six Sigma process and give training to its employees so that they become expert problem solvers. By implementing Lean Six Sigma, the company can improve the current skill level of employees. It also provides them detail understanding about definition, measurement, analysis, improvement, and control methodologies of business operation (Hong et al. 2012). Appropriate application of six sigma model helps HP to produce products and services faster, better and cheaper manner. It helps to remove wastage from the manufacturing process, which helps to increase overall organizational productivity. Appropriate application of Six Sigma model will help the company HP to make an annual savings of $300 million. There is a table given below to measure the applicability of Lean six sigma process in HP.

Figure 5: Advantages of implementing Lean Six Sigma in HP

After analyzing benchmarking and Lean Six Sigma model, it has been found that both of these strategies are helpful to identify the process change within an organization. With the increase of customer expectation and demand from a company, it has become utterly important for the company to implement any one of the strategies for business process improvement. It has been found that company Xerox has successfully implemented the benchmarking process, which enables the company to save more than $200 million. On the other hand, the company 3M has successfully analyzed the Lean Six Sigma model and used it in the organizational process. It has been found that the company HP can successfully use both these models on anyone of them to improve its business performance.  

Reference list

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