Page 138 - DMGT206_PRODUCTION_AND_OPERATIONS_MANAGEMENT

Unit 7: Efficiency and Effectiveness

Self Assessment Notes

Fill in the blanks:
1. ……………… focuses on designing the organization to create a dramatic improvement in
performance.

2. Before the re-engineering of the business processes are carried out, critical success factors
required to compete are identified and ………………
3. BPR must incorporate the organizational culture and must emphasize constant
communication and ……………… .
4. An assessment of a fit between the strategy and the existing resources and ………………
establishes the extent to which implementation is likely to require major changes within
the organization.

7.2 Benchmarking

In the early eighties, the Mexican Government expanded the capacity of steel mill based on the
DRI process, Imexsa, at Lazoro Cardenas, to 2 million tons. Three years after expansion and after
having absorbed significant losses, the government then decided to privatize the facility. Ispat
International N.V. is owned by the Mittals, registered in Holland and headquartered in London.
It is one of the most successful Indian led enterprises. Ispat was invited and successfully won the
bid for the ownership of the facilities, in January 1992.
The new management started to benchmark the operating processes. Team members looked at
the best practices within the Ispat network, the steel industry as a whole, and also identified and
studied related processes at global leaders such as Ericsson and General Electric. They collected
and analyzed detailed volume, cost, quality and productivity data for each step in the production
process on a daily basis. Ispat started implementing the recommendations. By 1998 the annual
steel shipments had increased to over 3 million tons; productivity had improved from 2.62 to
0.97 man-hours per ton. J.P. Morgan and Credit Suisse First Boston reported Imexsa as the lowest
cost slab producer in the world.
Successful companies in every industry engage in a variety of practices, which lead to achievement
of high level performance. Benchmarking has become one of the most popular tools of business
management in corporate attempts to gain and maintain competitive advantage. The central
essence of benchmarking is about learning how to improve business activity, processes and
management. However, benchmarking as a term has been used widely to refer to many different
activities. There is a wide variation in definitions used to describe ‘benchmarking’. Some of the
definitions are given below to highlight the diversity:

 “A continuous systematic process for evaluating the products, services and work of
organizations that are recognized as representing best practices for the purpose of
organizational improvement” (Spendolini, 1992).

 “A continuous search for, and application of, significantly better practices that lead to
superior competitive performance” (Watson, 1993).
 “A disciplined process that begins with a thorough search to identify best-practice-
organizations, continues with the careful study of one’s own practices and performance,
progresses through systematic site visits and interviews, and concludes with an analysis
of results, development of recommendations and implementation” (Garvin, 1993).
 “Benchmarking is an external focus on internal activities, functions, or operations in order
to achieve continuous improvement” (McNair and Leibfried, 1992).

LOVELY PROFESSIONAL UNIVERSITY 133