Benchmarking Question

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  Your operational dept encounters production defect at the rate of 3 defects per 1000 lines of code. During a vendor meet you come across another company XYZ that is of the same size of yours and in the same industry.  This company’s production defect is 2 defects per 1000 lines of code.  Can you conclude that the XYZ operation dept is better that yours? Can you use this for benchmarking? Explain. (7 marks) 

In Benchmarking we measure the performance of the best-in-class companies for each benchmark being considered – information source can be companies themselves, articles in the magazines, analysts in the market, clients and vendors etc.  Although we can say that XYZ dept is doing better job then us, we need to benchmark with best-in Class in Industry. 

We can take following steps. 

·         Identify the weak areas (Functional, Technical or Operational areas, in this case it is operational) in my operation department.

·         Identify the key factors and variables with which to measure those functions

·         Select the best-in-class companies for each area to be benchmarked – mainly companies that have highest customer satisfaction and optimized costs in these areas

·         Measure your performance for each variable with the best-in-class companies for each benchmark being considered, to determine the gap between your firm and the best-in-class examples

·         Identify those programs and actions to meet or exceed the benchmark based on a plan developed to enhance those areas that show potential for compliment.

·         Implement these programs by setting specific improvement targets and deadlines. Also design a monitoring process to review and update the analysis over time.

·         The process implemented in above step can be taken as basis for monitoring, revision and recalibration of measurements in future benchmarking studies.



phajone_p's picture

- Can you conclude that the XYZ operation dept is better than yours?
As provided information, it is not enough to say that the XYZ operation dept is better than my operation dept because we do not know the description of “Defect”, how to count LOC, and other factor of each other.
- Can you use this for benchmarking?
As the assumption that XYZ is in the same industry and is Leading or Hi-class Company, if we want to benchmark against XYZ operation dept, we have to follow the step below.
1. Identify the clear description of area to be benchmarked. (Clearly Baseline in an organization) What is “Defect”? What is LOC? How to collect and calculate?
2. Ensure XYZ dept has the same description of each attribute.
3. Compare the baseline calculation. Benchmarking is effective when we compare our baseline with the company that calculates their baseline using the same approach that we use to calculate our baseline.
4. Check the result of comparing to identify the variation. In case, we have found that there is 1 defect per thousand LOC of variation.
5. Do the RCA of variation (if any) in order that we can improve the process in area that causes the variation.