“Continuous improvement is better than delayed perfection” – Mark Twain. Organizations can appreciate Mark Twain’s philosophy when they decide quality is a top priority and seek a continuous improvement initiative. In order for a corporation to remain competitive in the 21st century, it must be able to identify how it measures against other corporations and its competitors. After a corporation contrasts itself against others, it must be able to continuously change and improve its strategy and processes. It is crucial that corporations remain competitive and responsive to their customers’ needs. Benchmarking and continuous improvement allow organizations to compare themselves to industry leaders and improve its’ processes and products by employing total quality management. For a corporation to implement continuous improvement and benchmarking, it must familiarize itself with the current trends and issues, influential organizations, best practices, and important theories and concepts.
Implementing benchmarking and continuous improvement is rooted in a corporation’s passion for quality. Managing quality is a corporation’s foundation for differentiation, reducing costs, and response strategies (J. Heizer, 2008). There are two approaches to improving quality that will benefit a company, one is by increasing profit (sales) and the other is by reducing expenditures (J. Heizer, 2008). The impact of quality on a corporation is crucial to its reputation and success. In order to reap the benefits, a firm must follow the principles of quality. The principles of quality include: customer focus, continuous improvement, benchmarking, just-in-time inventory (JIT), and the tools of Total Quality Management (TQM). Benchmarking and continuous improvement are the two principles of quality that will be explored.
Current Trends and Issues
Continuous improvement and benchmarking have several current trends and issues at this time. Continuous quality improvement represents the continual improvement of all processes in order (J. Heizer, 2008). This can be highly beneficial to both manufacturing and service environments. Operations managers must look at all processes and analyze the processes to reduce overall costs. This involves the operations team, along with work centers including: suppliers and customers (J. Heizer, 2008). Total Quality Management or TQM is a popular program put into operation by numerous quality seeking companies. TQM refers to a quality emphasis that encompasses the entire organization, from supplier to customer (J. Heizer, 2008, p. 198). TQM stresses a commitment by management to have a “continuing, companywide drive toward excellence in all aspects of products and services that are important to customers” (p. 198). Quality ultimately should be about customer satisfaction.
A major trend in continuous quality improvement is using just-in-time (JIT) inventory. “Just-in-time inventory reflects its namesake – parts are ordered so they arrive on the line just-in-time to be added to the destined lift truck” (D. Greathouse, 2010, p. 15 para. 1). Just-in-time inventory management promotes process improvement and product quality making it ideal for firms seeking continuous improvement. The correlation between just-in-time inventory management and quality is the reduction in the cost of quality (COQ) and an improved level quality. Since, better quality leads to less inventory, it easier to implement the just-in-time system (J. Heizer, 2008).
Benchmarking is an important aspect of continuous improvement and benchmarking has its own distinct current trends. Benchmarking entails selecting a set standard of performance that represents the very best performance for a process or an activity (J. Heizer, 2008, p.201). A popular trend in benchmarking is to compare its key performance indicators (KPIs) against the data of its competitors, industry leaders, and internally. Steps for developing benchmarks are: determining what to benchmark, form a benchmark team, identify benchmarking partners, collect and analyze benchmarking information, take action to match or exceed the benchmark (J. Heizer, 2008, p. 201). To have benchmarking data is extremely beneficial to companies. They can determine where they stand and then decide where they would like to be.
The leaders of a corporation may want to improve the processes to gain a competitive advantage, increase revenue, and reduce headcount. In order to do so, the leaders must find a way to grade themselves internally and against its competitors or the industry leaders. For example, in a large corporation, management may find that two of its factories producing the same product do not have the same efficiencies. One of its factories has much better quality and higher output. Management can then use internal benchmarking to determine what is inefficient in the process and eliminate it. Internal benchmarking is a perfect way for a leader to grade their organization. This is beneficial for large corporations that have enough departments or regions to internally compare.
Outsourcing is also a major trend in continuous improvement and benchmarking. Outsourcing is “where a discrete portion of a company's many functions can be performed effectively by a service provider external to the company, at substantially lower cost” (S. Bennett, 2009 p. 479). Businesses can get the same or better quality and improve its’ KPIs by outsourcing. Today outsourcing firms claim they can perform most tasks cheaper, faster and better (M. Burns, 2010 p.12). These outsourcing firms are highly successful because they have mastered processes and benchmarked themselves against other firms in that industry. In essence, the outsourcing firms implement the best practices for a specific process or discipline on a mass scale. In turn, these outsourcing companies are extremely attractive because they can do a specific process for multiple firms for a much lower price, than if they performed the task on their own. This has led to more financial leaders to asking for benchmarking data to measure the overall effectiveness of their current organizations (M. Burns, 2010 p.12).
In management’s quest for continuous improvement it faces many ethical issues. The most important aspects operations managers should strive to provide are “healthy, safe, and quality products and services to its customers” (J. Heizer, 2008, p.196). When looking for continuous improvement projects, a manager cannot be blindsided by cost savings if the quality will suffer. A manufacturer is responsible for any poor quality or defective product released to the public (p.197). In order to prevent unethical practices from occurring, a company must compile a code of ethics and disseminate to its’ employees at every level.
In order to gain profit improvement, companies outsource jobs to get equal or better quality at a much lower cost. However, the enticement for lower cost can lead to companies using unethical practices to increase profit. This allows companies to solely focus on their core, high value aspects of the business and “choose to outsource that function” (S. Bennett, 2009 p. 479). Companies such as HP, Dell, and IBM have created the Electronics Industry Code of Conduct (EICC), which sets environmental standards, bans child labor and excessive overtime, and audits for compliance (J. Heizer, 2008, p. 475). When a company is developing its outsourcing strategy, it should follow these ethical principles (J. Heizer, 2008, p. 475):
Seek to do no harm to indigenous cultures.
Seek to do no harm to the ecological systems of the world.
Seek to uphold universal labor standards.
Seek to uphold basic human rights.
Seek to pursue long-term involvement in foreign countries.
Seek to share knowledge and technology with foreign companies.
One ethical outsourcing issue many American customers experience is outsourcing the customer service function. The problem arises when a frustrated customer calls the customer service line and encounters a representative that is not fluent in the English language, customs, and idiosyncrasies (Weinstein, 2007). The customer usually hangs up more frustrated then when they first called the customer service representative. Bad customer service negatively affects quality, and quality’s main focus should always be on the customer. This situation becomes unethical because the corporation knows that its representatives cannot properly address its customer’s concerns and problems, yet allows them to handle sensitive customer issues. Bruce B. Weinstein, PhD., feels very strongly about poorly outsourced customer service and insinuates that “these companies that value short-term profit at the expense of meaningful customer service risk sacrificing long-term profits and the company’s own reputation” (B. Weinstein, 2007).