A benchmarking implementation framework for automotive ...

Benchmarking: An International Journal A benchmarking implementation framework for automotive manufacturing SMEs BabaMd Deros Sha'ri Mohd Yusof AzhariMd Salleh

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A benchmarking implementation framework for automotive manufacturing SMEs

396

Baba Md Deros Faculty of Engineering, Universiti Kebangsaan Malaysia, Malaysia


Sha’ri Mohd Yusof Faculty of Mechanical Engineering, Universiti Teknologi Malaysia, Malaysia, and

Azhari Md Salleh Academic Director, Akademi Tentera Malaysia, Malaysia Abstract Purpose – The purpose of this paper is to present a conceptual framework for benchmarking implementation in small medium-sized enterprises (SMEs) taking into consideration their characteristics. Design/methodology/approach – The paper begins with the review on the definition of SME and a comparison of the characteristics of SMEs and large organizations. It presents the need for a framework and its relationship with benchmarking and TQM. This is followed by reviewing the benchmarking implementation frameworks proposed by researchers and discusses these frameworks based on their strengths and weaknesses from SMEs perspective. The frameworks were categorised into two broad types based on the different writer’s background and the approach on how they view the benchmarking implementation process. Findings – The paper suggested a conceptual framework for benchmarking implementation dedicated to the automotive manufacturing SMEs. This framework guides them through from the start to end of the benchmarking process. The framework was validated at six pilot case study companies, which gave useful comments and suggestions regarding the usefulness and applicability within the SMEs context. Research limitations/implications – The conceptual framework is still in the development stage and research is undertaken to include the pilot study companies suggestions and comments into the final version of the framework. Practical implications – This guidance and framework provides a useful guide for companies to adopt and adapt before embarking on their benchmarking journey. Originality/value – This paper fulfils an identified knowledge gap and offers practical help to SMEs starting out a benchmarking implementation effort. Keywords Benchmarking, Competitive strategy, Small to medium-sized enterprises, Automotive industry, Malaysia Paper type Research paper

Introduction In most countries, small and medium enterprises (SMEs) dominate the industrial and commercial infrastructure. SMEs play a very important role in national economies, Benchmarking: An International Journal Vol. 13 No. 4, 2006 pp. 396-430 q Emerald Group Publishing Limited 1463-5771 DOI 10.1108/14635770610676272

The authors would like to thank the Ministry of Science Technology and Environment (MOSTE) and Universiti Teknologi Malaysia for their support in providing the research grant for the project entitle “Development of an Integrated Quality Engineering Approach for Malaysian Automotive Industry (IRPA 03-02-06-0060-EA254)”.


providing job opportunities, act as supplier of goods and services to large organizations, and any lack of product quality could adversely affect the competitive ability of the larger organizations (Rose, 2000; Greenan et al., 1997; Ghobadian and Gallear, 1996; Parkin and Parkin, 1996; Storey, 1994). In manufacturing sector, SMEs act as specialist suppliers of components, parts, and sub-assemblies to larger companies because the items can be produced at a cheaper price than the large companies could achieve in-house. For example, in Australia more than 50 per cent of employment and 90 per cent of businesses are represented by SMEs (Husband and Mandal, 1999); 92 per cent of all enterprises in Thailand in 1998 comprised of SMEs and 28.9 per cent of them belongs to the manufacturing sector (Sevilla and Soonthornthada, 2000); 75 per cent of manufacturing employment in Japan is in SMEs (Ghobadian and Gallear, 1996); more than 90 per cent of manufacturing companies in Malaysia are classified as SMEs (Shan, 2000; Malaysia, 1998; MITI, 1998; Kim and Suh, 1991). In the year 2000, the Malaysian SMEs contributed 82.6 per cent to the regional income generation through external sales/import substitution; 40 per cent towards gross domestic production (GDP) and represent 31.2 per cent of the total workforce in the manufacturing sector (Hashim and Wafa, 2002; SMIDEC, 2002). In other words, if economies are to prosper, then it is essential that SMEs become competitive to meet the international and globalisation challenges and able to produce high quality outputs. In a competitive market place, quality improvement tools and practices (such as benchmarking) can help align organization’s key business processes (such as delivery, productivity, responsiveness to customer needs, etc.) to achieve higher customers satisfaction, business competitiveness and bottom-line results (Cassell et al., 2001; Chin et al., 2001; Brah et al., 2000; Drew, 1997; Elnathan and Kim, 1995). However, benchmarking in SMEs has not received sufficient attention. For example, in a study reported by Monkhouse (1995), about 59 per cent of SMEs claimed to have benchmarking, nearly half of them (45 per cent) benchmarked their financial performance, a quarter (25 per cent) have conducted in both financial and process benchmarking, and about a third (30 per cent) performed internal benchmarking. This low percentage may be due to the fact that benchmarking involves a lot of processes and activities, which are complex. Without an appropriate and systematic framework, it might be difficult to achieve the desired outcomes. Therefore, the authors believe that a systematic framework needs to be developed first before embarking on benchmarking to assists and ensure its successful implementation and adoption in any organisation. In this paper, the authors briefly presents the pertinent points concerning benchmarking frameworks so as to provide an overall perspective and understanding of the main differences and similarities between all the frameworks reviewed. Once that is achieved it can guide the way towards further development of a benchmarking framework, which hopefully be suitable and useful for SMEs. Definition for SMEs At present, there seems to be no consensus on the definition for SMEs. Variations exist between countries and industries. SMEs are defined by a number of factors and criteria such as location, size, age, structure, organization, number of employees, sales volume or worth of assets, ownership through innovation and technology (Rahman, 2001; Sevilla and Soonthornthada, 2000; Husband and Mandal, 1999). Table I shows the definitions of manufacturing SMEs in selected economies. Although, the definition and description

Benchmarking implementation framework 397

,500

Sales value , RM25 million P40 million asset , S$12 million fixed assets , NT$40 million paid-up capital and , NT$120 million of total assets

¥100 million assets

Other measures

Sources: Anthony (1983), Hall (1995), SMIDEC (1998), SMI Business Directory (2002) and Sevilla and Soonthornthada (2000)

Manufacturing Manufacturing

,100 ,500 Usually , 100 ,100 ,300 ,300 ,150 ,200

Number of employees

398

United States of America

Manufacturing Manufacturing Varies with industry

Australia Canada People’s Republic of China Indonesia Japan Korea Malaysia Philippines Singapore Taiwan Manufacturing Manufacturing Manufacturing

Sector

Table I. Summaries of main definitions for SMES in selected economies

Country


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varies, however, in practice, most researchers and authors used both the quantitative and qualitative methods to define a SME. In terms of the quantitative criteria, the number of employees is the most frequently used yardstick to determine the size of a SME in several countries (Hashim and Wafa, 2002; Yusof, 2000; Anthony, 1983). The authors have used a similar set of criteria as adopted by previous researchers in benchmarking to define the SMEs and considers SMEs as those firms, which employ less than 250 employees (McAdam and Kelly, 2002; Jeffcoate et al., 2002; Hinton et al., 2000). The authors have adopted this definition for the SME so as to provide fair and effective comparisons between this study and past studies on benchmarking in SMEs. In this study, monetary value based definitions, such as the amount of turnover and paid-up capital were not used because monetary value varies wildly from one country to another. Comparing the characteristics of SMEs and large organizations Welsh and White (1981) suggested that “a small company is not a little large business” because there are many differences between SMEs and large business organizations in terms of structure, policy making procedures and utilization of resources to the extent that the application of large business concepts directly to SMEs may not be appropriate. In the USA, as highlighted by Baumack (1988), many large corporations in the Fortune 500 list actually started by small business entrepreneurs with very limited capital. Examples include Ford Motors, Hewlett-Packard and Microsoft to name a few. The differences of SMEs can be divided into structure, systems and procedures, culture and behaviour, human resources, and also market and customers. Table II gives a summary of the SMEs characteristics, its strengths and weaknesses versus large organizations. SMEs are in a more advantageous position in terms of structure because it facilitates faster communication line, quick decision-making process, faster implementation, short decision-making chain, higher contribution as a source of ideas in their operations and innovation, unified culture and very few interest groups (Kraipornsak, 2002). A majority of SMEs have simple systems and procedures, which allows flexibility, immediate feedback, better understanding and quicker response to customer needs than larger organizations (Kraipornsak, 2002). This is further enhanced by the SMEs corporate mind-set, which is conducive for new change initiatives, provided that the owner/management has the commitment to, and leadership of the change process, together with a sound knowledge of it. In addition, SMEs employees are given the authority and responsibility in their own work areas that can create cohesion and enhance common purposes amongst the workforce to ensure that a job is well done. Innovative environment, early employees and union involvement in change initiatives such as benchmarking will provide higher job satisfaction among its workers, who support the improvement culture and ensure its success compared to large business organizations. SMEs have fewer employees and everybody seems to know almost everyone, thus promoting a better relationship between employees. On the other hand, SMEs have a number major weaknesses, which can result in a disadvantageous situation such as majority of SMEs do not have adequate financial resources and lack of access to commercial lending (i.e. difficult to obtain loans) (Hashim and Wafa, 2002; Kraipornsak, 2002). As a result, SMEs do not have adequate budget for staff training, which can stifle improvement efforts. In terms of human


Culture and behaviour Operations and behaviour of employees influence by owners’/managers’ ethos and outlook Organic, not strong departmental/functional mind-set, corporate mind-set Unified/fluid culture Result-oriented

Corporate mind-set is conducive for new change initiatives High staff loyalty and hard work to company As a seed-bed from which large companies grow As a group provides significant economic output and savings in foreign exchange

Simple system encourage innovation, allows flexibility and speed of response to customer needs/demands Act as training ground for new entrepreneurs and workers

Faster communication line, quick decision-making process, faster implementation Short decision-making chain High incidence of innovativeness and unified culture Very few interest groups Breeding ground for new business ventures and entrepreneurs

Structure Flat with very few layers of management, top management highly visible and close to the point of delivery Less delegation. Division of activities limited and unclear Low degree of specialisation Flexible structure and information flows. Strategic process incremental and heuristic

(continued)

Lack of managerial and technical expertise Uncommitted or dictatorial owner/manager ethos can damage new initiatives Danger when loyalties and emotional ties are place above competence and performance

Lack of proper system – difficulty in ensuring efficiency of work, and high variability in work outcome Lack of proper/effective time and cash flow management “Gut feeling” approach may result in wrong decisions Limited application of new technology Inadequate infrastructure Shortage of raw materials

Low specialisation may result in lack of expertise in change initiatives Need outside assistance Owner controls everything and lacks delegation can stifle growth Lack of capital and credit facilities

Weaknesses

400

Systems and procedures Activities and operations not governed by formal rules and procedures Low degree of standardisation and formalisation People-dominated Simple planning and control system Incidences of “gut feeling” decisions are more prevalent Informal evaluation, control, and reporting procedure Flexible and adaptable processes

Strengths

Table II. SMEs characteristics, strengths and weaknesses versus large organisations

SMEs characteristics


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Immediate feedback from customers Able to respond quicker Understand better customer needs. Aid to large companies. Stimulate market competition

High authority, commitment and responsibility can creates cohesion and enhance common purposes amongst the workforce to ensure job is done Innovative environment will support improvement culture Early union involvement needed to ensure success Fewer employees – better relationship, knows almost everyone Provides employment opportunities

Strengths

Marketing constraints and knowledge International marketing expensive, after sales support not as extensive as large businesses Easily suppressed and dictated by larger multinationals (if they are customers), e.g. product cost, etc.

Lack of financial support, e.g. no training budget, ad hoc, and small-scale approach can stifle improvement efforts Improvement needs investment in human resources Shortage of skilled workers

Weaknesses

Sources: Chee (1987), Salleh and Fichtner (1991), Huxtable (1995), Ghobadian and Gallear (1996, 1997), Yusof and Aspinwall (2000a, 2000b) and Hashim and Wafa (2002)

Market and customers Span of activities narrow Limited external contacts Normally dependent on small customer based close contact, easily accessible and many known customers personally Product and services mostly for local market, few national or international

Human resources High personal authority and commitment of the owner Few decision makers Dominated by pioneers and entrepreneurs Individual creativity encourages and high incidence of innovativeness Modest human capital, financial resources and know-how Individuals normally can see the results of their endeavours Low incidence of unionisation Low degree of resistance to change More generalists, some staff may cover more than one department

SMEs characteristics



Table II.

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resources, SMEs are always faced with the shortage of skilled labour and they have to compete with large companies for skilled workers (i.e. large companies able to offer skilled workers better wages and working conditions) (Reed et al., 2001; Chee, 1987). In addition, SMEs are also faced with frequent raw material shortages and have to pay more, fluctuation in raw material price, unable to obtain credit terms, inadequate inventory management and control of stock in raw materials and less bargaining power compared to large companies (Kraipornsak, 2002; Chee, 1987). Majority of SMEs entrepreneurs have low level of formal education and limited training in new management principles and practices, which led to lack of managerial and technical expertise (Hashim and Wafa, 2002; Chee, 1987). Very often SMEs relied on one-person management, thus insufficient time and attention is given to the various managerial functions (Hashim and Wafa, 2002). In SMEs, the owner controls everything; poor management was attributed to the owners’ lack of business experience, lack of management experience or know-how (Pickle and Abrahamson, 1990; Baumack, 1988). Furthermore, most SMEs lack of proper time management and cash flow management system, which cause high variability in work outcome and difficulty to ensure efficiency of work. Many important business decisions are often based on “gut-feeling” and not on facts that may result in making wrong decisions. SMEs are also faced with other problems such as lack of knowledge in marketing techniques, lack of opportunities at both local and international levels, poor accessibility to the distribution channels and market information, marketing constraints such as pricing, late payment from customers, inability to provide quality product and lack of promotional strategies (Kraipornsak, 2002). Very few SMEs owners prepare an adequate feasibility study of a new enterprise and a sound marketing investigation (Meredith and Grant, 1982). In most cases, marketing investigation by potential entrepreneurs tend to be low level and based on general opinions rather than expert advice, lack of effective selling techniques and market research (Hashim and Wafa, 2002). As indicated by Kraipornsak (2002) and Chee (1987), a majority of SMEs rely on outdated technology, labour intensive and traditional management practices. Some do not trust new technology, while others are unable to afford it, which in many cases led to inefficient, lack of information and inadequate in-house expertise (Hashim and Wafa, 2002). Thus, it is important to appreciate the differences that exist between SMEs and large business organizations. In other words, it is crucial to try and understand SMEs issues and characteristics before making any attempt to help them in implementing TQM activities (such as benchmarking, 7 QC tools, SPC, quality assurance system, etc.). It can be concluded that appropriate technology and efficient production system plays an important role in explaining the comparative advantage and competitiveness of the SMEs and large companies. Defining a framework In the past, many writers and authors have used the term “framework” without first defining it appropriately. At present, there is no consensus on the definition of the frameworks; some writers define it as a set of principles or ideas used as a basis for one’s judgement, decisions, while others portray the frameworks through diagrams, flowcharts, and graphical or pictorial representations (Yusof, 2000). The Oxford’s Advanced Learner Dictionary of current English defines a framework as “a structure giving shape and


support” (Hornby, 1990). Meanwhile, Struebing and Klaus (1997) believed a sound framework should define what the organisation does, what it is trying to do, how it is going to do it and ensure that each step is done in the correct sequences. On the other hand, Popper (1994) as quoted by Yusof (2000) defines a framework as a set of basic fundamental principles, which can help to promote discussions and actions. In other words, a sound framework can link-up between benchmarking concept and practical application because it guides the organisation in adopting and implementing benchmarking activities in a more systematic, comprehensive, controlled and timely manner. Why need a framework? The most frequent reason cited for change efforts (such as TQM, BPR, reengineering, etc.) failure is wrong implementation approach. Aalbregtse et al. (1991), for example cited the following reasons for having a framework to: . illustrate an overview and communicate a new vision to the organisation; . force management to address a substantial list of key issues which otherwise might not be addressed; . give valuable insights into the organisation’s strengths and weaknesses, and its overall strategic position in the market-place; and . support implementation and to improve the chance of success because it will provide not only overview but also more detailed information describing the content of each framework element and its relationship to other elements. In the authors’ opinion, these reasons are also applicable and valid to the benchmarking implementation, since benchmarking is one of the tools found in TQM. In this paper, the authors have defined framework as a set of simplified theoretical principles and practical guidelines to carryout benchmarking implementation and adoption, which can enhance the chance of success that are easy to understand, efficient and can be implemented at reasonable costs and time. Framework design requirements The SMEs characteristics, strengths and weaknesses against large organizations were discussed in the preceding section. A question, which arises then, is how one can characterise a good framework that really suits the SMEs. In general, the following criteria can be considered as a guide in developing a good framework to suit the SMEs characteristics (Yusof and Aspinwall, 2000a): . systematic and easily understood; . simple in structure; . having clear links between the elements or steps outlined; . general enough to suit different contexts; . represent a road map and a planning tools for implementation; . answers “how to?” and not “what is?”; and . implementable at reasonable cost and time. Thus, it is important that these criteria are considered when developing a framework for SMEs.


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Meanwhile, Medori and Steeple (2000) summarised the design requirements for developing a framework that include the following steps. They are: . procedures for selecting and implementing measures; . ability to identify whether existing measurement system is up to date and measuring critical issues (i.e. audit capability); . selected measures should be congruent with company strategy and have strong relationship with the six core competitive priorities (i.e. quality, cost, flexibility, time, delivery and future growth); and . facilitates rapid selection of measures from a data bank; and workbook approach (i.e. step-by-step methodology). Benchmarking framework’s relationship with benchmarking and TQM The relationship of benchmarking framework with benchmarking and total quality management (TQM) can be summarised and shown in Figure 1. By referring to Figure 1, it can be seen that the benchmarking framework is at the heart of the benchmarking process and thus plays a very important role in ensuring the success of benchmarking process. This in-turn, can lead to the success of the overall TQM program. Generally, companies need to first know their strengths and weaknesses before embarking on adopting the benchmarking tool to improve their productivity, product quality, process efficiency, services, etc. This leads to improvement in their overall business performance and competitiveness. Without a suitable benchmarking framework that provides the steps and guides what actions to be taken, which is easy to use, the SMEs have to face many difficulties and problems in conducting benchmarking to investigate and identify their strengths and weaknesses compared to their competitors. Review on previous benchmarking implementation frameworks In this paper, the authors present some relevant benchmarking framework studies reviewed, which represent the various frameworks developed and proposed by various academics, researchers, consultants and experts in the field. It would be impractical to cover all the available frameworks, however, as far as possible the authors would TQM

Benchmarking framework

Figure 1. Benchmarking framework’s relationship with benchmarking and TQM

Benchmarking Benchmarking


present the ones, which form the representative samples of the most common, relevant and widely published. The various frameworks reviewed were categorised into two broad types namely, consultant/expert and academic/research based on the author or researcher background and in accordance to the approach how they view benchmarking implementation process. For example, the approach taken by consultant/expert towards benchmarking implementation is more practical orientated (i.e. hands-on); meanwhile the academic/researcher look at it from theoretical and conceptual aspect. Consultant and expert based framework In general, consultant based frameworks were derived from personal opinion and judgement through practical experience in providing consultancy service to organisations embarking on a benchmarking project. Crow (1999) developed a generic framework for benchmarking best practices to improve product development process that follows Deming PDCA cycle into five major dimensions, which includes strategy, organization, process, design optimisation, and technology. As shown in Table III, the five major dimensions are further subdivided into 28 best practices categories. He had used the product development best practices to investigate competitive dimensions (such as time-to-market, low development cost, low cost producer, high value product, innovation and product performance, quality, reliability, ease of use, serviceability, and agility) associated with product development. The framework provides a detailed example to conduct the evaluation process; it described the strategic levers associated with each of the competitive dimensions or strategies; it shows how to perform the product performance summary, strategic alignment analysis, gap analysis for identifying implementation actions and priorities; it enable the organization to develop an action plan for improving the product development process. In addition, it can also be used to identify strengths and weaknesses relative to a common framework in product development process. However, it can be argued that the framework is very complex, categorise best practices into 28 categories with more than 270 best practices and can only be used in the product development process (i.e. not a generic framework) thus the framework is not applicable in other areas of the business. Meanwhile, Spendolini (1992) prescribed a generic five stages benchmarking model, which is simple and incorporates essential elements in the benchmarking process. The five stages benchmarking process begins with determining what to benchmark, forming a benchmarking team, identifying benchmarking partners, collecting and analysing benchmarking information, and finally, taking the appropriate action (i.e. following the Deming PDCA cycle) as shown in Figure 2. In addition, Spendolini (1992) proposed four general guidelines to conduct benchmarking process successfully, such as: follow a simple, logical sequence of activity; give heavy emphasis on planning and organization; use customer focused benchmarking; and make it a standardised process for the whole organization. The model provides a structure, framework and common language for planning and execution of benchmarking investigation. It is very flexible where anyone (for example the benchmarking team) who wants to use the framework can modify the process to suit their needs and requirement; it provides a new bench marker with basic process map and set of benchmarking do’s and do nots; and specialists had validated it.


Product data Design automation Simulation & analysis Computer aided manufacturing Support technology Knowledge organization Design for manufacturability Product cost management Robust design Integrated test design & program Design for operation & support

Process management Process improvement Understanding the customer Requirements & specifications management Development process integration Supplier/subcontractor integration Transition to production Configuration management Design assurance Project & resource management

Management leadership Early involvement Product development teams Organizational environment

Business & product strategy Product planning & management Technology management

Source: Crow (1999)

Technology

Design optimisation

Process

Table III. Product development best practices framework Organization

406

Strategy


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Benchmarking implementation framework I Determine what to benchmark


V Take Action

IV Collect & analyze benchmarking information

The Benchmarking Process

407

II Form a benchmarking team

III Identity benchmark partners

Source: Spendolini (1992)

However, it can be argued that the model has a few weaknesses because it only represent the steps to be taken in implementing benchmarking in specific business process and had not given a general outline of the overall benchmarking concept. The Malaysian Benchmarking Service, NPC (1999) developed a generic approach for benchmarking studies process following the Deming PDCA cycle. The benchmarking study can be divided into three phases as shown in Figure 3. Each phase describe the benchmarking processes conducted and their respected benefits. The first phase provides awareness, understanding of key issues, establish key questions, learn the methodology, review own process, and in-depth discussions for the benchmarking study. In the second phase, the benchmarking activities carried out are preparing for site visit, site visit, data collection, recommendations for improvement and share findings. The benchmarking processes performed in third phase are planning, implementing best practices, monitoring the result, standardisation and finally daily control of best practices implementation. Adaptation and improvement resulting from the best practices identified throughout the study only occur after the company had adopted and implemented the recommendations from the benchmarking study. The model provides for gap identification process that facilitates comparison of “apples to apples” identify “how” improvement can be made, focuses on learning and best practices transfer and maximise improvements achieved from benchmarking implementation. The NPC (1999) approach to benchmarking process seems to be simple, systematic and can be applicable to any benchmarking projects in any organizations. Jenin (2000) had empirically tested this benchmarking approach in performing functional benchmarking to manage customer complaints in a large government

Figure 2. The five-stage benchmarking model

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Phase 1

Phase 2

5.0 Site Visit Preparation

Start

408 1.0 Agree on Benchmarking Topic

Phase 3

9.0 Planning for Adopting Best Practices

10.0 Implementation of Best Practices

6.0 Data Collection: Site Visit


11. Monitoring the Result 2.0 Finalise on Scope: Measures and Definition

3.0 Data Collection: Survey

7.0 Recommend Improvement?

12. Standardisation

2nd site visit (only if necessary)

Yes

4.0 Share Strengths

13. Daily Control

8.0 Share Findings 14. Continue Existing Project? Yes

Figure 3. NPC approach for benchmarking study

No New Area

Source: NPC (1999)

agency involved in the service sector and not in the SMEs for its applicability and usability. However, it can be argued this benchmarking framework only described the specific steps on how to perform the benchmarking implementation process but it did not provide the overall roadmap and guidelines for companies to follow before embarking on the benchmarking effort. Academic and research based framework On the other hand, academics and researchers mainly through their own research, knowledge and experience in benchmarking developed the academic based frameworks. Lee (2002) developed a generic model for assessing, implementing and sustaining business excellence through structured approach in implementing best practices in TQM (such as in operations, quality, customer satisfaction, and, etc.) found in the Singapore Quality Award. The model consists of four major elements. They are core values, goals, approaches and deployment and business excellence. It starts by identifying a set of core values and its goals, and followed by a systematic implementation of initiatives based on the PDCA cycle. The model provides a guiding structure for organizations to systematically implement an effective TQM program that targets a specific purpose. In the authors’ opinion, this model could also be use effectively for implementing benchmarking because benchmarking has a very close relationship with the TQM program. The model provides a systematic structure to identify core values; easily adapted, proposed a list of best practices for each core value


at each stage of the benchmarking effort and it is generic for all applications. The framework for excellence model seems to be simple and generic in terms of applications but it has been designed and tested only in large organizations from past Singapore Quality Award winners, meanwhile its applicability and usability in SMEs is still unknown and yet to be empirically proven. Fong et al. (2001) proposed a generic analytical framework, which is simple, systematic and consists of both hard and soft measures for benchmarking the value management process consisting of four basic steps. It starts by identifying the critical success factors (CSFs), followed by determining the factors to be benchmarked, then establishing the quantifiable performance metrics, and finally comparing the results and selecting the practice with the best result for benchmarking. In addition, they investigated and identified the CSFs for the value management process; objective measures (i.e. hard analysis – e.g. time, cost, and quality, etc); subjective measures (i.e. soft analysis – e.g. facilitator skills, teamwork, creativity, customers satisfaction, etc.); and benchmarking results that reflect actual situation. On the other hand, the framework’s practicality, applicability and usability in SMEs are yet to be validated empirically. Davies and Kochhar (2000) developed a framework for selecting practices based on relationship between practices and performance; and dependency relationships between practices, which improves operational performance in manufacturing planning and control function. The framework is divided into six steps starting from identification of the need to improve the operational performance system; identification of best practices for the areas of performance to be improved; prioritise practices based on impact on specific measure of performance; assess the predecessor practices for the practice to be implemented; implement desired practices; and results improvement in operational performance. In addition, they proposed a structured approach in identifying, selecting and transferring best practices; prioritise practices based on dependency of relationships between practices and impact on performance; predecessor practices sequence of implementation to gain maximum benefits; and adverse effects of practices adoption on other measures of performance. Figure 4 shows


2. Closed liason with other departments

6. Clear responsibilities of the supplier and buyer

7. Procedure for carrying out supplier audits

Source: Davies and Kochhar (2000)

3. Supplier development programs used

Figure 4. Predecessor practices to the practice “supplier development programs used”

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an example of predecessor practices to the practice “supplier development programs used” for the area of purchasing. In this case, the “supplier development programs used” is dependent on the predecessor practices such as: close liaison with other departments; clear responsibilities of the supplier and buyer; and procedure for carrying out supplier audits. They believed the framework could provide information to operational managers to focus and link best practices on objectives to be achieved, consider adverse effects of implementing practices on related performance measures, analyse necessary predecessors which are required to make a practice effective, adopt best practices which are linked to objectives and build on existing competencies and practices, minimise fire-fighting and avoid panaceas. In addition, the framework has been validated empirically through case studies, industrial experts, interviews and questionnaires. Medori and Steeple (2000) developed a framework for enhancing operational performance in all areas of the manufacturing function. The framework is based around two separate but linked documents. The first document is a “workbook” which consist of a framework structure of six-stage plan as shown in Figure 5. Meanwhile, the second document consisted of “checklist” containing a list of performance measures that are segregated by six competitive priorities (i.e. quality, cost, flexibility, time, delivery and future growth). This second document contains mainly non-financial measures, with full descriptions and methods of calculation for each measure. They investigated the assessment of existing performance measurement system; establish and adopt appropriate financial (such as profit, market share, cost, etc.) and non-financial performance measures (such as quality, flexibility, time, delivery and growth, etc.) for competitiveness. Their framework’s can aid in setting-up a new performance measure if a company does not have one, identifying obsolete measures (false alarms), identifying and selecting core non-financial measures not being measured (gaps); able to identify the route to implement any selected measures; has audit capability which can aid in examining a company’s existing measurement system. This framework has been tested empirically for its applicability and usability. However, Medori and Steeple (2000), themselves believed the framework has two weaknesses, such as: in stage 1, it is difficult to relate company success factors for manufacturing strategy, which was based on four competitive priorities (i.e. cost, quality, delivery and people) with performance measurement grid’s six competitive priorities (i.e. quality, cost, flexibility, time, delivery and future growth) in stage 2.

Stage 1. Company Success Factors

Figure 5. Diagram illustrating framework structure

Stage 2 Performance Measurement Grid

Stage 3. Selection Of Measures

Stage 6. Periodic Maintenance

Source: Medori and Steeple (2000)

Stage 4 Audit

Stage 5. Implementation of Measures


Secondly, the checklist, which is a critical part of the framework may be outdated in time and hence measures may need to be updated. Voss et al. (1994) developed and tested a benchmarking framework based on interaction between product and process innovation in the area of technology management. The framework can be summarised into a generic six steps procedures. They are: (1) identify business processes to be benchmarked; (2) use a “top-down” approach to develop an overall framework of the processes to be benchmarked; (3) use a “bottom-up” approach, based on literature and knowledge of best practice to identify sub-processes and characteristics of best practice; (4) develop metrics for each process; (5) develop tools, self-assessment scorecards and benchmarking frameworks; and (6) test the frameworks and tools for usability and usefulness. They believed the framework could assist in developing new manufacturing and business processes, assuring effective implementation of new process technology and also improving continuously the production processes. The framework is robust and generic, designed to support the assessing and benchmarking team, provides a common focus, direction and designed to force companies’ management to ask relevant questions during benchmarking and self-assessment process. Zairi (1994) developed a generic step-by-step framework and classified the benchmarking study process into two stages. The stages are: (1) focus on internal comparison to increase effectiveness; and (2) focus on external comparison to increase competitiveness. The first stage is about controlling and managing all internal processes effectively by adopting and adapting to a culture of never ending improvement through Deming’s cycle of Plan-Do-Check-Act (PDCA) (Figure 6). Internal comparison can lead to improved performance through reduced variability with the workforce. During the first stage, best practices from high performers (i.e. department or areas) in the organization are identified and “shared” with others to enable them to improve and raise their overall level of performance. The second stage is the conversion of internal standards of effectiveness into external competitiveness through benchmarking effort (Figure 7). Internal benchmarking need low resources requirement (i.e. financial, human, time), easy to get cooperation from the workforce and able to prepare the organization for external benchmarking. In addition, it recognises the importance of organisational culture (i.e. committed to measurement and improvement) and also provides the problem solving tools and techniques on how to conduct benchmarking process. In the preceding paragraphs, the authors have described some previous benchmarking implementation frameworks studies that are thought to be significant and relevant to this research. At this point, the authors would like to caution readers that these frameworks would not form a definitive list of all the currently available


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Control and manage process

PLAN

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1 Set internal standards

6

Effectiveness

Evaluating current performance 2

3 5

Identifying process limitation/ Opportunities for improvement

4

Measure and evaluate ACT

Figure 6. Benchmarking stage 1 – effectiveness

Improve processes

CHECK

Select process sultable for benchmarking

DO

Source: Zairi (1994)

Apply benchmarking to all processes

PLAN Repeat experience with same/ new partners on regular basis

16

8

15

9 Competitiveness

Compare standards

ACT

Figure 7. Benchmarking stage 2 – competitiveness

Source: Zairi (1994)

10

14 13 Change relevant practices for improving performance

Identity suitable partners

12

Agree on measurement strategy

11

Understand why difference in performance

Compare standards

CHECK


benchmarking frameworks. However, the authors felt that those described are sufficient to highlight the major issues in benchmarking framework studies. Discussions on previous frameworks All the frameworks described have been summarised according to certain important issues as shown in Table IV. Most of the frameworks have been developed and tested in various industries and organisations such as electronics, healthcare, automotive, aerospace, components manufacturers,, etc. which are large in size, except those frameworks developed by Medori and Steeple (2000) and Voss et al. (1994), which were also tested in SMEs for their applicability and usability. Medori and Steeple (2000) framework’s was tested only in operational area of the manufacturing function in the automotive parts and components manufacturing industry. Meanwhile, Voss et al. (1994) framework’s was tested in industries, which are not related to the automotive sector. The other four frameworks reviewed such as Fong et al. (2001), Crow (1999), Zairi (1994) and Spendolini (1992) were still in the hypothetical stage because they did not indicate the research methodology used and business size in testing the validity and applicability of their frameworks empirically by using actual field data. The nine previous benchmarking frameworks reviewed had various numbers of steps, ranging from four to sixteen steps to perform the benchmarking activities or processes. Although, these benchmarking frameworks have different number of steps, one major similarity between the frameworks is that they can be condense into four major elements of the Deming PDCA cycle. This is in line with the findings by previous authors on benchmarking methodologies such as APQC (2001), NPC (2001), Sarkis (2001) and Ahmed and Rafiq (1998). In this context, PDCA means planning what to do, doing what has been planned, checking results or effects of what has been done and finally acting upon those results, in terms of standardisation, further improvement or feedback. Although the various authors had used different terms, however, they actually represent the same meaning for each element (Yusof, 2000). For example, the terms determine what to benchmark, establish goals for core values, identify needs carry the same activity in the planning stage. The activities, elements, ideas in the frameworks were analysed and categorised into PDCA format and shown in Table V. The PDCA format is effective because this general approach allows for incorporation of change characteristics. Some of the frameworks, such as Crow’s (1999) and Davies and Kochhar (2000) are too complex and complicated in nature for SMEs to apply. For example, Crow (1999) developed a complicated framework that can only be used for benchmarking best practices to improve product development process. It is complicated because its five major benchmarking dimensions is further subdivided into 28 best practices categories and comprise of more than 270 best practices. Davies and Kochhar (2000) developed a framework that could only be used for selecting practices based on dependency relationships between practices and performance. Fong’s (2001) analytical framework could only be used for benchmarking value management process. Medori and Steeple (2000) themselves believed that their framework has two critical weaknesses; first, it is difficult to relate the company success factors for manufacturing strategy with


Medori and Steeple (2000)

Davies and Kochhar (2000)

Fong et al. (2001)

To develop a generic model that can be use to assess the organization’s quality related performance in operations, quality, and customer satisfaction To develop a generic analytical framework for benchmarking the value management process To develop a framework for selecting practices which will improve operational performance in manufacturing planning and control function To develop a framework for enhancing operational performance in all areas of the manufacturing function

Lee (2002)

Table IV. Comparison to similar framework studies for SMES and large organizations Objective

Medium large

Multiple case studies Step approach 6 stage plan

Automotive parts and components manufacturers

Large Multiple case studies A focus group Mail survey

Automotive and aerospace Step approach parts components 3 phases manufacturers Six steps

(continued)

Use Deming PDCA cycle


Not Use Deming indicated PDCA cycle

Not indicated

Step approach Four steps

Applicable in all industry or organization


Business size Similarities

Large Multiple case studies by using in-depth, face-to-face interviews

Framework structure Research methodology

Electronics and healthcare Step industry, and government approach 4 phases institution

Industry

414

Author/researcher


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Large

Small Medium Large

Not Use Deming indicated PDCA cycle Not Use Deming indicated PDCA cycle

Case study

Multiple case studies

Not indicated

Not indicated

Step approach 3 phases 14 steps Step approach 3 phases 6 steps

To develop a generic benchmarking model that provides a framework for a successful benchmarking process

Step approach 2 phases 16 steps Applicable to all industries Step and organizations approach 5 phases

Spendolini (1992)

Zairi (1994)

Voss et al. (1994)

Not Use Deming indicated PDCA cycle

Business size Similarities

Not indicated

Framework structure Research methodology

Applicable to all industries Step and organizations approach 4 steps

Applicable to all organizations but tested only in a government agency involved in the service sector Petrochemicals, electrical To develop and test benchmarking/self-assessment fittings, system integrator, fibres, chemicals, adhesive frameworks/tools in process and paper industries technology innovation and management To develop a generic model for Applicable to all types of conducting benchmarking industries and organizations

To develop a generic framework for benchmarking best practices to improve product development process To develop a generic model to perform benchmarking process

Crow (1999)

Industry

Malaysian benchmarking service, NPC (1999)

Objective

Author/researcher



Table IV.

Table V. Similarities of framework using PDCA elements Step approach 3 phases 14 steps Step approach 5 stages Step approach 4 phases Step approach Four steps Step approach 3 phases Six steps Step approach 6 stage plan

Malaysian benchmarking service, NPC (1999)

Lee (2002)

Medori and Steeple (2000)

Davies and Kochhar (2000)

Fong et al. (2001)

Spendolini (1992)

Step approach

Crow (1999)

Conduct gap analysis & improvement plan

Assess strengths & weaknesses

Selection of measures using checklist

Match mission and strategy with success factors based on competitive priorities

(continued)

Regularly audit and Implementation of examine existing measures measures identified as gaps

Implement practices to Prioritise practices based Assess predecessor on impact on performance practices for the practice to improve operational performance be implemented

Identify need and best practices

Compare results and select practice with best result

Continuous improvement

Determine which CSFs are Measure performance to to be benchmarked indicate level of success

Monitor implementation effectiveness

Identify CSFs

Establish goals for core values

Form a benchmarking team Identify benchmark partners Select and implement best practices to achieve goals

Collect and analyse Take action benchmarking information

Understand what best practices to be adopted (what is possible)

Determine what to benchmark

Action

Check

Recommend improvement Implement best practices Standardised Monitoring Daily control implementation results

Doing

Determine CSFs for strategic directions (what’s needed) such as time-to-market, etc. Agree on topic and scope Site visit and collect data Planning for adapting best Share strengths and findings practices

Framework Planning structure

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Step approach 2 phases 16 steps

Step approach 3 phases 6 steps

Voss et al. (1994)

Identify business processes to be benchmarked

Select process to benchmark Identify suitable partners Agree on measurement strategy

Framework Planning structure

Zairi (1994)

Author/researcher Measure and evaluate

Understand process Evaluate current performance Identify process limitations/ opportunities for improvement

Action

Set and compare standards Improve process performance by changing relevance practices Control and manage process Repeat experience with same/new partners on regular basis Apply benchmarking to all processes Test frameworks and tools Use “top-down” to develop Develop metrics, tools, self-assessment scorecards for usability and overall framework and usefulness and benchmarking “bottom-up approach to identify sub-processes and frameworks for each process characteristics of best practice

Check

Doing



Table V.

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performance measurement; second, the checklist, which a critical part of the framework may be outdated with time and thus need to be constantly updated. Meanwhile, the frameworks developed by Spendolini (1992), NPC (1999), Lee (2002) and Zairi (1994) describe the steps on how to perform benchmarking for specific business process. In short, these frameworks only provide the steps to perform benchmarking but did not describe the overall outline or road map and guidelines for SMEs to follow before embarking on the benchmarking activities. In addition, majority of the frameworks requires many people to execute the various tasks of implementing benchmarking initiatives such as establish close and long term relationships with suppliers, supplier audits and collection of data on supplier capabilities, process improvement, understanding the customer, and, etc. again resembling a large company situation and not the SMEs. To suit the SMEs context, the implementation framework developed for them should be simple to understand and followed. As had been discussed in the preceding section, SMEs are constrained by resources (such as financial, technological, human and time), so implementing benchmarking initiatives based on these complicated frameworks can be ridiculous and disastrous. In addition, besides being complex, some of the framework assumed that certain systems are already in place before embarking on benchmarking implementation and adoption. For example, Crow (1999), NPC (1999), Fong et al. (2001), Davies and Kochhar (2000) and Medori and Steeple (2000), suggested that TQM systems are already in place. This may not be true of all SMEs but could be true of large organizations because SMEs may not have similar systems as large organizations. Self-assessment and TQM practices, which are pre-requisites to benchmarking adoption, must be implemented first, since they form the foundation of a successful benchmarking process. From the literature it can be seen that benchmarking framework, suitable and relevant for SMEs to adopt is found to be lacking. The literature review had also shown that there is no framework dedicated for the SMEs. Manufacturing SMEs are faced with four major problems if they wish to benchmark, which includes: (1) no generally accepted instrument for benchmarking of manufacturing practices; (2) no tools available to support benchmarking (such as a framework, self-assessment tool, etc.); (3) not enough resources to collect the necessary data for benchmarking; and (4) no adequate databases of manufacturing practices for companies to benchmark themselves against (Sarkis, 2001; Haksever, 1996; Voss et al., 1994). This represents a gap in the current research at developing benchmarking framework for SMEs. Therefore, there is a need for further research in developing a benchmarking framework for SMEs to fill the gap, to compliment and to enrich the existing literature on benchmarking frameworks. The authors will propose a new benchmarking framework for the SMEs which hopefully be suitable, effective, suits their characteristics and help them in their effort to become more effective and competitive at national, regional and international markets. The authors believe without a suitable framework and guidelines many


SMEs shall be struggling in their efforts towards achieving more efficient and competitive performance. A framework for benchmarking implementation in automotive manufacturing SMEs In this section, the authors proposed a conceptual framework, which represent the authors’ initial idea and based on the shortcomings of previous frameworks studies found in the literature. It will be used to guide and aid in the process of developing an implementation framework believed to be suitable for benchmarking implementation in SMEs. The literature review showed that most of the frameworks were too prescriptive or too complicated in nature, provide the “steps to be taken” (i.e. tool-oriented) for benchmarking implementation in specific functional area such as manufacturing, innovation and technology management, product development, customer satisfaction, etc. rather than being a general outline for benchmarking implementation on wholesale basis and developed based on large company structure, thus not suitable for SMEs. The criteria that one needs to consider when developing a framework that suit the SMEs characteristics had been explained in the preceding section.


Prerequisite key elements for benchmarking implementation Firstly, the most important element that is vital for successful benchmarking implementation in SMEs is the existence of positive top management leadership, attitude, vision and mission towards business competitiveness and their commitment towards providing resources (i.e. financial, human, technical and time) in performing benchmarking activities (Figure 8). It is suggested that top management should set-up

TOP MANAGEMENT VISION FOR BUSINESS COMPETITIVENESS (Company Level)

Provide

Identify & Select Performance Measures

Goals Critical Success Factors Top management leadership Resources Management & Business Results Systems & Processes Creativity & Innovation Human Resource Management Policy & Strategic Planning Customer Satisfaction Employee Satisfaction Organizational Culture Work Environment

Higher Customer Satisfaction (i.e. Time, Quality,Service). Better Financial Performance (i.e. Profitability, Growth, ROI). Efficient Business Processes (i.e. Time, Productivity, Cost) Competitiveness Innovative & Committed Human Resources

Key Performance Measures Hard Measures (e.g.WIP Levels, Lead-Time, Delivery-Time, Rejects (%), Rework (%), Product Quality, Reliability & Cycle Time, Skill Level, etc.) Soft Measures Management Commitment (e.g. quality improvement), Customer Satisfactions, Team Work, Employee (e.g. Involvement, Reward, Suggestion System, etc.)

PLAN

ACT

General Methodology Planning Analysis Integration Action

Tool & Technique Self-Assessment; Internal; External; Best Practices Benchmarking Identify/Select Tool & Technique

CHECK

DO

Figure 8. Proposed conceptual framework for benchmarking implementation in SMEs

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a benchmarking unit or task force at the company level. The four major roles of the benchmarking unit are to: (1) assists top management in making benchmarking policy decisions; (2) identify and select key business performance measures to be benchmarked from a spectrum of performance measures depending upon the objectives, priority set by the company; (3) decides on the benchmarking techniques to be adopted; and (4) to review all the activities with respect to the benchmarking effort. In terms membership, the unit must comprise of representatives from the managerial, supervisory and operator level from the majority of business functions in the company (such as manufacturing, quality, engineering, finance, and sales). In other words, the unit must include a cross section of employees, so that everybody could contribute their share to the company’s effort of becoming more efficient, profitable and competitive. Subsequently, the company’s top management should empower this unit with the appropriate authority and responsibility; and also provide the CSFs that shall act as enablers in achieving the benchmarking objectives. The crucial role of the benchmarking unit is to assist the company’s top management in formulating short (e.g. 1 year) and long term (e.g. 3 years) benchmarking strategies and translate them into action plans, monitor their implementation progress, provide follow up actions to ensure the benchmarking efforts achieved its previously set goals. In short, the top management and benchmarking unit should ensure the company adopt and practice the continuous business process improvement philosophy in every aspect of their daily operations. The next major role of the top management and benchmarking unit is to communicate the company’s benchmarking vision, mission and the required changes in working culture to all levels of the organisation. It is important to get employees’ involvement at the early stages of the benchmarking effort to ensure they understand and receptive, why the company needs to perform the benchmarking process. In addition, the company’s top management should encourage the employees to be involved by giving their comments and suggestions with respect to the benchmarking effort plans. In short, effective two-ways communications link should be in-place before embarking on the benchmarking effort. As discussed in the preceding section, SMEs has a corporate mind-set that top management or owner act as the role model for any change initiative, employees tend to copy, emulate, or imitate their actions and behaviours. Therefore, it is important that top management or owner portrays the “positive thinking towards continuous business process improvement” and also towards achieving higher quality products and services at competitive price through their actions and behaviour to give employees the right and consistent message. Finally, in order to carry out the action plans, the top management and benchmarking unit must first assess the level and amount of resources (i.e. financial, human, technical and time) available for the benchmarking effort within the organisation. In other words, there must be enough funds, human resources, time and technical tools available for conducting the benchmarking effort and ensure its success. In addition, employees must be coaxed and not forced in performing the benchmarking activities because the success of the first few benchmarking projects could determine


the sustainability of benchmarking effort in the long run. In short, the main purpose of conducting a benchmarking effort is to produce, offer and deliver high quality products and services at competitive prices that are able to satisfy or exceeds customer expectations, which in turn will bring profit to the company. Critical success factors Having established the prerequisite key elements, vision and mission for business competitiveness, the company’s top management must then establish the CSFs that can lead towards successful benchmarking implementation. These CSFs (Figure 8) represents a range of enablers which, when put into practice will enhance the chance for successful benchmarking implementation and adoption in the organization. The list of CSFs presented is not meant to be a definitive of all CSFs available but just to highlight the ones, which are commonly used. Additional CSFs should be added into the list and used whenever it is necessary and appropriate. With regards to the SMEs characteristics and constraints, it is important to ensure that the CSFs be implemented gradually and progressively in stages according to the company’s needs and available resources. In other words, the benchmarking adoption and implementation should eventually lead to improvement in the business process performance measures (i.e. hard and soft measures), which in turn will enhanced the company’s overall business competitiveness. Key performance measures The first group of key performance measures (KPMs) commonly gathered in benchmarking studies, which comes under the hard or tangible measures includes work-in-progress (WIP) levels, lead-time, delivery-time, reject (per cent), rework (per cent), product quality, product reliability, process cycle time, employees skill level, and, etc. However, the authors would like to highlight and recognise that these “hard measures” are the “ends” or the objectives of the benchmarking effort. The tangible KPMs targets or goals could be achieved through conducting and implementing change effort such as TQM, business process redesign or reengineering (BPR), quality function deployment (QFD), self-assessment, benchmarking, etc. In practice, the application, adoption and implementation of these hard or tangible measures shall depend upon the company needs and their applicability in the SMEs environment. The main objectives for monitoring these hard or tangible measures are towards continuously improving the business process performance and efficiency, products quality, and also in the company’s overall management systems. For example, high WIP levels may indicate large amount of the company’s money is sitting on the shop floor, if not properly monitored and controlled may lead to cash flow problems. Meanwhile, high reject levels would show that the company’s manufacturing or production processes are not performing very well and thus resulted in a lot of wasted resources. Therefore, the use and application of the hard measures in the company for monitoring business performance must be geared towards continuous product and service quality improvement, reduced costs and also 100 per cent on-time delivery. The second group of KPMs can be termed as “soft or intangible measures”. They are more difficult to quantify in terms of numbers, dollars and cents. However, they play very important role in ensuring the success of benchmarking initiatives. In short,


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these intangible or soft performance measures act as enablers in changing or transforming the organisation’s overall perception, practice and culture towards continuous business survival and competitiveness in the market place. In other words, these intangible measures are the “ends” or “results” of the human resource’s quality improvement initiatives, which are targeted towards changing the company’s management and employees mind-set. The main purpose of measuring these “soft measures” while implementing the benchmarking effort is to find out whether the company’s management and employees are motivated and receptive towards the change efforts that are taking place. The soft measures may include management commitment towards quality improvement, improvement in customer’s satisfaction for both internal and external customers, existence and practice of team working, employee’s involvement, rewards and suggestion schemes, etc. Employees’ satisfaction can be achieved not only through “employees caring practices” but also through activities such as family medical facilities, employee’s health and safety insurance policy, etc. In most cases, companies really work hard to satisfy their external customers, however, it has been noticed that very little is done towards satisfying their internal customers (i.e. employees). To survive and be competitive in the market place, companies need to satisfy both their internal and external customers because only satisfied internal customers can bring satisfaction to the external customers. Furthermore, sustaining the benchmarking effort is possible if only the employees are satisfied and motivated, thus soft measures initiatives must go hand-in-hand with the hard measures. For example, employees will be confused and frustrated if they were told to perform the benchmarking effort without the appropriate and adequate training relating to the process. Initially, the benchmarking initiatives should concentrate on the company’s business process weaknesses in which improvement would result in improved performance. In SMEs, the hard measures such as machine down-time reduction, machine set-up time, scrap rate, rework, machine repair and material wastages are some of the main areas on which to focus in the early part of the benchmarking effort. This is important that tangible results are seen early in the implementation process, if not, the SMEs will shy away from practising the benchmarking effort and blame for its “lip-service” of promoting more efficient processes and higher quality products. Self-assessment and benchmarking techniques The four basic groups of business process improvement techniques for conducting the benchmarking process are self-assessment, internal, external and best practice benchmarking. Self-assessment is a very important process prior to conducting benchmarking because it provides the company with the critical baseline data on its current business process performance status. In addition, the baseline data could be used as a reference for comparing the company’s future business processes performance and competitiveness whether they are improving or otherwise. Having conducted the self-assessment exercise during the early stages of the benchmarking implementation process, the company can then proceed to conduct the internal benchmarking. Internal benchmarking can be use as a training ground for understanding and implementing benchmarking because it could provide a sound-learning base for building-up confidence on the benchmarking technique. In other words, the company must fully understand its own business processes first


before comparing them with others. Once, this is achieved and when it is no longer possible to improve against internal performance, the company can then progress to conduct external benchmarking. In general, external benchmarking is more difficult to perform as compared to internal benchmarking, however it can discover new innovations and produce significant returns. External benchmarking partners may come from other companies within the same industry or any other industries that share similar business processes. Eventually there comes a point when it is no longer possible to improve against external partners using similar business processes, the company could then proceeds to perform the best practice benchmarking against external partners regardless of business processes, industry sector or location. In this case, the most important factor is the “process” being benchmarked. Best practice benchmarking is more difficult to perform when compared internal and external benchmarking, however it could bring breakthrough innovation and significant business process improvement.


General benchmarking methodology Having selected the KPMs to be benchmarked and the benchmarking technique to be adopted, there must be a systematic approach for implementing the benchmarking initiatives. In other words, the general methodology describes the guidelines or process map on how to implement or conduct the actual benchmarking process. To ensure it is done systematically the selected processes to be benchmarked need to go through a series of process steps. The steps to be taken represent a generic approach towards the implementation and adoption of the various benchmarking techniques (i.e. internal benchmarking, external benchmarking, and best practice benchmarking). A general benchmarking methodology shown in Figure 9 provides an aid towards better understanding of the benchmarking process. In addition, a simplified example will be used to further illustrate the implementation process for the internal benchmarking technique. Referring to Figure 9, the first step of the benchmarking process is planning. It is designed to develop the plan for conducting the benchmarking investigation. It will form the basis for the entire benchmarking investigation; therefore, every effort should be made to conduct this step as thoroughly as possible. During this step the company need to decide and select the processes it wants to benchmark, analyse the processes in

1. Planning

4. Action

2. Analysis

3. Integration

Figure 9. General benchmarking methodology

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detail, calculate the processes metrics and define their performance gaps, identify comparative best practice partners, determine data collection method and collect data. The person who is responsible for drafting the benchmarking implementation plan should have a certain level of knowledge, experience and technical know-how in benchmarking concepts, its practical implementation and application. For example, one should understand what internal benchmarking means, where to implement it, how to implement it; what are their associated CSFs; are they quantifiable, measurable and auditable; is it easy to obtain the data; which specific data to collect; is the data integrity reliable; is the resulting CSFs measures can be easily calculated; who should be trained; what preparatory work that should be carried out; how to interpret the data; and, etc. All these questions need to be addressed in the early part of the benchmarking process. In short, proper planning requires a detailed study to prevent a lot of problems that might crop-up later on during the benchmarking implementation process. Having established the detailed plan, the company can then proceed to the analysis step. In this step, the data collected in the benchmarking study is analysed thoroughly to find out and provide a basis for comparison. The key questions to be answered in this step are: what is the performance of the best practice partners; what is our performance compared to them; why they are better; what can we learn from them; and how can we apply the lessons to our company. In other words, this step involves analysing the benchmarking data to determine current performance “gap” project future performance levels, identify and understand the practices which contributes to the best practice partners’ strengths. The objective of the third step is to develop goals and integrate them into the benchmarked process so that significant performance improvements are made. The key questions to be answered in this step are: has top management accepted the benchmarking team’s findings; based on the findings do the company need to modify its benchmarking goals; and also have the goals been clearly communicated to all the relevant parties. In step four, develop the action plans needed to achieve the goals decided upon in step three. The key questions that need to addressed in this step are: will the plans allow the achievement of the stated goals; how will benchmarking progress be tracked and what is the schedule for recalibration of the benchmarks. In short, this step involves the implementation of the necessary actions, monitor their progress and finally recalibrate benchmarks. Benchmarking goals In general, the benchmarking goals could be in the form of higher customer satisfaction (i.e. product quality, on-time delivery, lower costs, etc.); better financial performance (i.e. profitability, growth, return on investments, return on assets, etc.); efficient business processes (i.e. cycle time, cost, productivity, etc.); competitiveness (i.e. product cost, product selling price, etc.); and innovative and committed human resources (i.e. employees satisfaction, effectiveness, safety, health, absenteeism, etc.). These benchmarking goals may differ from one company to the other and depends on the company objectives in performing the benchmarking effort. Validation of the conceptual framework for benchmarking The proposed conceptual framework for benchmarking implementation was validated and tested in SMEs. In this section, the authors discuss the general and specific


comments, criticisms and suggestions made by the pilot case study companies’ respondents concerning the framework’s strengths and weaknesses. All the six pilot case study companies gave very positive comments on the proposed conceptual framework. Their comments are: it is feasible, easily understood and can be implemented with ease, a comprehensive approach that covers all the major aspects of the benchmarking implementation and it provides a straight forward guide, which could simplify the benchmarking process even to someone who is new to the benchmarking concept. In short, the framework could be used as a base for conducting the benchmarking process even to beginners. Apart from that, most of them agreed the framework is a sensible approach towards conducting benchmarking initiatives in SMEs particularly that involves in the manufacturing sector. In addition, with some modifications the framework can be made applicable to other types of industries. Most of them highlighted the top management’s roles and responsibilities in the key areas of the framework should be in-place first before embarking on the actual benchmarking implementation effort in achieving the vision towards business competitiveness. For example, developing benchmarking strategies, policies, vision and mission for competitiveness should form an integral part of the business planning in an organisation. All of them agreed that top management must not only give their full commitment in providing sufficient resources but they must also be committed to implement the recommendations made by the benchmarking team. Meanwhile, five of the pilot study companies agreed that the framework’s overall structure is sensible and suitable approach for SMEs to adopt while implementing benchmarking effort. In addition, four of them perceived the framework as practical, realistic and uncomplicated, which can easily be used in real working environment. Other positive comments raised by at least one of the pilot study company are the framework could give a clear and effective way of presenting the overall benchmarking concept; and it is a simple approach for incorporating benchmarking effort into a SME. The pilot study companies also provide a few suggestions and constructive criticisms that could further enhance the framework’s applicability and usability in SMEs. They are: . The vision and goal section should also include “competitiveness” advantages in the area of product quality, cost and delivery (i.e. QCD). . It is difficult to evaluate costs incurred against the improvement achieved especially the soft measures in benchmarking implementation. . A “target to be achieved” should also be included in the general methodology section while conducting the review step because a “target” will drive the company to practice continuous improvement. . Add continuous improvement and equipment utilisation in the KPMs section because idle equipment and machineries did not produce any output. A high equipment utilisation indicates the company is maximising the usage of its available facilities, meanwhile, a low utilisation values indicates the machinery and equipment are under utilise. . Human resource development and training should be focussed on educating the employees to improve their usage and practices of positive work cultures.


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A dedicated coordinator is strongly required to ensure the benchmarking implementation program successfulness. Most SMEs are always constrained by limited availability of resources (i.e. financial, technical, human and time), therefore this aspect should be taken into account during benchmarking effort implementation.

In addition, majority of pilot study respondents agrees with the authors that the different types of benchmarking techniques and initiatives may be implemented according to the needs of the company and also depends on the resources availability and not applied wholesale. Discussions and conclusions The implementation of benchmarking is not, and has not been an easy task for many organisations. Majority of the frameworks proposed by previous researchers and consultants tend to be prescriptive in nature and seems to provide the “steps to be taken” to implement benchmarking in specific area of the business process such as the operational performance in manufacturing function, value management process, innovation and technology management, evaluating the organization’s quality related performance in operations and customer satisfaction, product development process, rather than being a road map or general outline for implementing benchmarking as a whole. An insight has been gained into the strengths, weaknesses, similarities and differences that exist between the frameworks reviewed by classifying them into two major types (i.e. consultant/expert and academic/research based). The consultants/experts benchmarking implementation frameworks were actually founded based on practical experience. Meanwhile, academic/research frameworks were based on conceptual and theoretical background. The literature review showed that both these types of frameworks suffer from similar weaknesses such as being complicated and prescriptive in nature. Furthermore, most of the frameworks found in the literature were not specifically developed for the SMEs sector and thus were not suitable for SMEs. Even if they appear to be suitable, they still suffer from certain problems such as being complicated and prescriptive, which need addressing. In addition, as has been shown from the review, the frameworks developed to date have been dominated by large company approaches. The problem highlighted, indicate that current benchmarking implementation framework still suffer from many weaknesses that need improvements and are far from suitable for SMEs to apply. SMEs are different in terms of their structures, processes, resources and culture, which need to be taken into account when developing a framework that fits them. Therefore, the weaknesses of the currently available frameworks, which have been highlighted in the review, need to be considered when developing an implementation framework to suit the SMEs needs and environment. In other words, the literature review has provided the authors with a lot of information on the shortcomings of currently available benchmarking frameworks. However, on the positive side, these shortcomings from previous benchmarking frameworks could be use as a baseline in formulating the conceptual benchmarking implementation framework for SMEs. The authors believes, what is important in any change effort or initiative, such as benchmarking, is the ability to do it right the first time.


In summary, the literature review had also shown that there is still lack of benchmarking framework that was dedicated specifically to the SMEs in the manufacturing sector. Thus, a new benchmarking implementation framework is needed to fill the gap in the existing literature and to help the SMEs in their effort to become more effective, productive and improve their competitiveness level in national, regional and international markets through benchmarking implementation and adoption. The concepts within the proposed framework have been developed to be simple in nature and structure, not prescriptive, provide a systematic approach, present a general outline for benchmarking implementation on wholesale basis and encompass most of the pertinent issues with regards to benchmarking implementation. The framework does not suggest that all the concepts should be taken wholesale at-one-go, but rather one-at-a-time according to a company’s needs and available resources. Due to their limited resources, SMEs actually need to start the benchmarking and improvement initiatives in “tangible” measures (such as reject per cent, rework per cent, WIP levels, lead-time, etc.) rather than “intangible” measures, which are difficult to quantify in the form of numbers or percentages. This is important because positive results at the early stages of the benchmarking implementation would provide future motivation and thrust in the benchmarking technique, which in turn, help to sustain the use of benchmarking practice in improving business and management processes. The use and implementation of hard and soft KPMs for benchmarking purposes must be geared towards continuous business processes performance improvement in the organisation. Past experienced showed that sustainable benchmarking efforts require motivated employees, thus soft performance measures must go hand-in-hand with the hard performance measures. Above all, relevant training must be provided first before embarking on the benchmarking process to ensure its successful implementation and adoption. The conceptual benchmarking implementation framework was empirically tested and validated at six pilot study SMEs in the automotive manufacturing sector. Future research is underway to include the pilot study companies’ suggestions and comments into the final version of the framework. Having done that the framework will then be widely deployed in SMEs in the automotive manufacturing sector. Finally, the authors hope the framework would be of benefit to the SMEs in their pursuit towards enhancing their business competitiveness and excellence. References Aalbregtse, R.J., Hejka, J.A. and McNeley, P.K. (1991), “Total quality management (TQM): how do you do it?”, Automation, August, pp. 30-32. Ahmed, P.K. and Rafiq, M. (1998), “Integrated benchmarking: a holistic examination of select techniques for benchmarking analysis”, Benchmarking for Quality Management & Technology, Vol. 5 No. 3, pp. 225-42. Anthony, D. (1983), “Japan”, in Storey, D.J. (Ed.), The Small Firms: An International Survey, Croom Helm, London, pp. 46-83. APQC (2001), “Process classification framework”, Developed by: APQC’s International Benchmarking Clearinghouse In Partnership with Arthur Andersen & Co., SC. Baumack, C.M. (1988), How to Organise and Operate Small Business, 8th ed., Prentice-Hall, Englewood Cliffs, NJ.


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