MANAGEMENT INFORMATION SYSTEMA management information system (MIS) provides information which is needed to manage organizations efficiently and effectively.[1] Management information systems involve three primary resources: people, technology, and information or decision making. Management information systems are distinct from other information systems in that they are used to analyze operational activities in the organization.[2] Academically, the term is commonly used to refer to the group of information management methods tied to the automation or support of human decision making, e.g. decision support systems, expert systems, and executive information systems.

Types of MIS

Most management information systems specialize in particular commercial and industrial sectors, aspects of the enterprise, or management substructure.

Management information systems (MIS), per se, produce fixed, regularly scheduled reports based on data extracted and summarized from the firm’s underlying transaction processing systems[4] to middle and operational level managers to identify and inform structured and semi-structured decision problems.

Decision support systems (DSS) are computer program applications used by middle management to compile information from a wide range of sources to support problem solving and decision making.

Executive information systems (EIS) is a reporting tool that provides quick access to summarized reports coming from all company levels and departments such as accounting, human resources and operations.

Marketing information systems are MIS designed specifically for managing the marketing aspects of the business.

Office automation systems (OAS) support communication and productivity in the enterprise by automating work flow and eliminating bottlenecks. OAS may be implemented at any and all levels of management.

School management information systems (MIS) cover school administration, often including teaching and learning materials.

Advantages

The following are some of the benefits that can be attained for different types of management information systems.

Companies are able to highlight their strengths and weaknesses due to the presence of revenue reports, employees' performance record etc. The identification of these aspects can help the company improve their business processes and operations.

Giving an overall picture of the company and acting as a communication and planning tool.

The availability of the customer data and feedback can help the company to align their business processes according to the needs of the customers. The effective management of customer data can help the company to perform direct marketing and promotion activities.

Information is considered to be an important asset for any company in the modern competitive world. The consumer buying trends and behaviours can be predicted by the analysis of sales and revenue reports from each operating region of the company.

Enterprise application Enterprise systems, also known as enterprise resource planning (ERP) systems

provide an organization with integrated software modules and a unified database which enable efficient planning, managing, and controlling of all core business processes across multiple locations. Modules of ERP systems may include finance, accounting, marketing, human resources, production, inventory management and distribution.

Supply chain management (SCM) systems enable more efficient management of the supply chain by integrating the links in a supply chain. This may include suppliers, manufacturer, wholesalers, retailers and final customers.

Customer relationship management (CRM) systems help businesses manage relationships with potential and current customers and business partners across marketing, sales, and service.

Knowledge management system (KMS) helps organizations facilitate the collection, recording, organization, retrieval, and dissemination of knowledge. This may include documents, accounting records, and unrecorded procedures, practices and skills.

Materials Requirements Planning (MRP)

MRP is a planning tool geared specifically to assembly operations. The aim is to allow each manufacturing unit to tell its supplier what parts it requires and when it requires them. The supplier may be the upstream process within the plant or an outside supplier. Together with MRP II it is probably the most widely used planning and scheduling tool in the world. MRP was created to tackle the problem of 'dependent demand'; determining how many of a particular component is required knowing the number of finished products. Advances in computer hardware made the calculation possible.

Master Production ScheduleThe process starts at the top level with a Master Production Schedule (MPS). This is an amalgam of known demand, forecasts and product to be made for finished stock. The phasing of the demand may reflect the availability of the plant to respond. The remainder of the schedule is derived from the MPS. Two key considerations in setting up the MPS are the size of `time buckets' and the `planning horizons'. A `time bucket' is the unit of time on which the schedule is constructed and is typically daily or weekly. The `planning horizon' is how far to plan forward, and is determined by how far ahead demand is known and by the lead times through the operation. There are three distinct steps in preparing an MRP schedule:

1. Exploding2. Netting3. Offsetting.

ExplodingExplosion uses the Bill of Materials (BOM). This lists how many, of what components, are needed for each item (part, sub assembly, final assembly, finished product) of manufacture. Thus a car requires five wheels including the spare. BOM's are characterised by the number of levels involved, following the structure of assemblies and sub assemblies. The first level is represented by the MPS and is 'exploded' down to final assembly. Thus a given number of finished products is exploded to see how many items are required at the final assembly stage.

NettingThe next step is 'netting', in which any stock on hand is subtracted from the gross requirement determined through explosion, giving the quantity of each item needed to manufacture the required finished products.

OffsettingThe final step is 'offsetting'. This determines when manufacturing should start so that the finished items are available when required. To do so a 'lead time' has to be assumed for the operation. This is the anticipated time for manufacturing.The whole process is repeated for the next level in the BOM and so on until the bottom is reached. These will give the requirements and timings to outside suppliers.

There are three major assumptions made when constructing an MRP schedule:

The first, and possibly the most important, is that there is sufficient capacity available. For this reason MRP is sometimes called infinite capacity scheduling.

The second is that the lead times are known, or can be estimated, in advance. The third is that the date the order is required can be used as the starting date from

which to develop the schedule.

Implementing or improving Material Requirements Planning can provide the following benefits for your company:

Reduced Inventory Levels Reduced Component Shortages Improved Shipping Performance Improved Customer Service Improved Productivity Simplified and Accurate Scheduling Reduced Purchasing Cost Improve Production Schedules Reduced Manufacturing Cost Reduced Lead Times Less Scrap and Rework Higher Production Quality Improved Communication Improved Plant Efficiency Reduced Freight Cost Reduction in Excess Inventory Reduced Overtime Improved Supply Schedules Improved Calculation of Material Requirements Improved Competitive Position

TOTAL QUALITY MANAGEMENT

Total quality management or TQM is an integrative philosophy of management for continuously improving the quality of products and processes. TQM functions on the premise that the quality of products and processes is the responsibility of everyone who is involved with the creation or consumption of the products or services offered by an organization. In other words, TQM capitalizes on the involvement of management, workforce, suppliers, and even customers, in order to meet or exceed customer expectations. Considering the practices of TQM as discussed in six empirical studies, Cua, McKone, and Schroeder (2001) identified the nine common TQM practices as cross-functional product design, process management, supplier quality management, customer involvement, information and feedback, committed leadership, strategic planning, cross-functional training, and employee involvement

At its core, Total Quality Management (TQM) is a management approach to long–term success through customer satisfaction.

In a TQM effort, all members of an organization participate in improving processes, products, services and the culture in which they work.

The methods for implementing this approach come from the teachings of such quality leaders as Philip B. Crosby, W. Edwards Deming, Armand V. Feigenbaum, Kaoru Ishikawa and Joseph M. Juran.

\What is Total Quality ManagementTotal Quality Management is a comprehensive and structured approach to organizational management that achieves best quality of products and services through using effectively refinements in response to continuous feedback, and through using them effectively in order to deliver best value for the customer, while achieving long term objectives of the organization.

The roots of Total Quality Management (TQM) go back to the teachings of drucker, juran, deming, ishikawa, crosby, feigenbaum and countless other people that have studied, practiced, and tried to refine the process of organizational management. TQM is a collection of principles, techniques, processes, and best practices that over time have been proven effective. Most all world-class organizations exhibit the majority of behaviors that are typically identified with TQM.

Guideline for Total Quality ManagementTotal quality management transcends the product quality approach, involves everyone in the organization, and encompasses its every function: administration, communications, distribution, manufacturing, marketing, planning, training, etc. There are many guidelines of total quality management around to create the TQM diagrams. Though the different organization has the different total quality management criterion, in general guideline of total quality management should contain the following items.

TQM is a customer focused approach It is company wide strategy and involves everyone in the organization Aims at satisfying the customer or delighting them Provides best quality product and satisfy them in a cost effective manner Fundamental changes in basic beliefs and practices Prevention of defects is the way and the target is zero defects Total quality management is methodical

Provides meaningful measures of performance that guide the self-improvement efforts of everyone involved

Total Quality Management Model TQM requires a new process thinking mindset. We must realize that everything we do is part of a process. Our focus shifts from managing outcomes to managing and improving processes; from what to do to how to do the processes better. Quality performance expands to include how well each part of the process works and the relationship of each part to the process. Also, process improvement focuses on continuously achieving the greatest potential benefit for our customers.

No two organizations have the same TQM implementation. There is no recipe for organization success, however, there are a number of great TQM models that organizations can use. These include the Deming Application Prize, the Malcolm Baldrige Criteria for Performance Excellence, the European Foundation for Quality Management, and the ISO quality management standards. Any organization that wants to improve its performance would be well served by selecting one of these models and conducting a self-assessment.

The simplest model of TQM is shown in this above TQM diagram. The model begins with understanding customer needs. TQM organizations have processes that continuously collect, analyze, and act on customer information. Activities are often extended to understanding competitor's customers. Developing an intimate understanding of customer needs allows TQM organizations to predict future customer behavior. TQM organizations integrate customer knowledge with other information and use the planning process to orchestrate action throughout the organization to manage day to day activities and achieve future goals. Plans are reviewed at periodic intervals and adjusted as necessary. The planning process is the glue that holds together all TQM activity.

TQM organizations understand that customers will only be satisfied if they consistently receive products and services that meet their needs, are delivered when expected, and are priced for value. TQM organizations use the techniques of process management to develop cost-controlled processes that are stable and capable of meeting customer expectations.

TQM organizations also understand that exceptional performance today may be unacceptable performance in the future so they use the concepts of process improvement to achieve both

breakthrough gains and incremental continuous improvement. Process improvement is even applied to the TQM system itself!

The final element of the TQM model is total participation. TQM organizations understand that all work is performed through people. This begins with leadership. In TQM organizations, top management takes personal responsibility for implementing, nurturing, and refining all TQM activities. They make sure people are properly trained, capable, and actively participate in achieving organizational success. Management and employees work together to create an empowered environment where people are valued.

All of the TQM model's elements work together to achieve results.

SIX SIGMA

Six Sigma is a business management strategy, originally developed by Motorola, USA in 1986, that is widely used in many sectors of industry.

Six Sigma seeks to improve the quality of process outputs by identifying and removing the causes of defects (errors) and minimizing variability in manufacturing and business processes. It uses a set of quality management methods, including statistical methods, and creates a special infrastructure of people within the organization ("Black Belts", "Green Belts", etc.) who are experts in these methods. Each Six Sigma project carried out within an organization follows a defined sequence of steps and has quantified financial targets (cost reduction and/or profit increase).

The term Six Sigma originated from terminology associated with manufacturing, specifically terms associated with statistical modeling of manufacturing processes. The maturity of a manufacturing process can be described by a sigma rating indicating its yield, or the percentage of defect-free products it creates. A six sigma process is one in which 99.99966% of the products manufactured are statistically expected to be free of defects (3.4 defects per million). Motorola set a goal of "six sigma" for all of its manufacturing operations, and this goal became a byword for the management and engineering practices used to achieve it.

METHODSSix Sigma projects follow two project methodologies inspired by Deming's Plan-Do-Check-Act Cycle. These methodologies, composed of five phases each, bear the acronyms DMAIC and DMADV.[14]

DMAIC is used for projects aimed at improving an existing business process.

DMAIC is pronounced as "duh-may-ick". DMADV is used for projects aimed at creating new product or process designs. DMADV is pronounced as "duh-mad-vee".

DMAICThe DMAIC project methodology has five phases:

Define the problem, the voice of the customer, and the project goals, specifically. Measure key aspects of the current process and collect relevant data. Analyze the data to investigate and verify cause-and-effect relationships. Determine

what the relationships are, and attempt to ensure that all factors have been considered. Seek out root cause of the defect under investigation.

Improve or optimize the current process based upon data analysis using techniques such as design of experiments, poka yoke or mistake proofing, and standard work to create a new, future state process. Set up pilot runs to establish process capability.

Control the future state process to ensure that any deviations from target are corrected before they result in defects. Implement control systems such as statistical process control, production boards, visual workplaces, and continuously monitor the process.

DMADV or DFSS

The DMADV project methodology, also known as DFSS ("Design For Six Sigma"),[14] features five phases:

Define design goals that are consistent with customer demands and the enterprise strategy.

Measure and identify CTQs (characteristics that are Critical To Quality), product capabilities, production process capability, and risks.

Analyze to develop and design alternatives, create a high-level design and evaluate design capability to select the best design.

Design details, optimize the design, and plan for design verification. This phase may require simulations.

Verify the design, set up pilot runs, implement the production process and hand it over to the process owner(s).

CERTIFICATIONCorporations such as early Six Sigma pioneers General Electric and Motorola developed certification programs as part of their Six Sigma implementation, verifying individuals' command of the Six Sigma methods at the relevant skill level (Green Belt, Black Belt etc.). Following this approach, many organizations in the 1990s started offering Six Sigma certifications to their employees. Criteria for Green Belt and Black Belt certification vary; some companies simply require participation in a course and a Six Sigma project.There is no standard certification body, and different certification services are offered by various quality associations and other providers against a fee. The American Society for Quality for example requires Black Belt applicants to pass a written exam and to provide a signed affidavit stating that they have completed two projects, or one project combined with three years' practical experience in the body of knowledge. The International Quality Federation offers an online certification exam that organizations can use for their internal certification programs; it is statistically more demanding than the ASQ certification.[18][20] Other providers offering certification services include the Institute of Industrial Engineers, the Juran Institute, Six Sigma Qualtec, Air Academy Associates and others.

SUPPLY CHAIN MANAGEMENT

Supply chain management (SCM) is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers (Harland, 1996). Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption (supply chain).

Another definition is provided by the APICS Dictionary when it defines SCM as the "design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally."

DEFINITIONS

Further common and accepted definitions of supply chain management are:

Managing upstream and down stream value added flow of materials, final goods and related information among suppliers; company; resellers; final consumers is supply chain management.

Supply chain management is the systematic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole (Mentzer et al., 2001).

SUPPLY CHAIN MANAGEMENT PROCESS

Successful SCM requires a change from managing individual functions to integrating activities into key supply chain processes. An example scenario: the purchasing department places orders as requirements become known. The marketing department, responding to customer demand, communicates with several distributors and retailers as it attempts to determine ways to satisfy this demand. Information shared between supply chain partners can only be fully leveraged through process integration.

Supply chain business process integration involves collaborative work between buyers and suppliers, joint product development, common systems and shared information. According to Lambert and Cooper (2000), operating an integrated supply chain requires a continuous information flow. However, in many companies, management has reached the conclusion that optimizing the product flows cannot be accomplished without implementing a process approach to the business. The key supply chain processes stated by Lambert (2004) are:

Customer relationship management Customer service management Demand management style Order fulfillment Manufacturing flow management Supplier relationship management

Product development and commercialization Returns management

Much has been written about demand management. Best-in-Class companies have similar characteristics, which include the following: a) Internal and external collaboration b) Lead time reduction initiatives c) Tighter feedback from customer and market demand d) Customer level forecasting

One could suggest other key critical supply business processes which combine these processes stated by Lambert such as:

a. Customer service managementb. Procurementc. Product development and commercializationd. Manufacturing flow management/supporte. Physical distributionf. Outsourcing/partnershipsg. Performance measurementh. Warehousing management

Supply Chain Decisions AreasWe classify the decisions for supply chain management into two broad categories -- strategic and operational. As the term implies, strategic decisions are made typically over a longer time horizon. These are closely linked to the corporate strategy (they sometimes {\it are} the corporate strategy), and guide supply chain policies from a design perspective. On the other hand, operational decisions are short term, and focus on activities over a day-to-day basis. The effort in these type of decisions is to effectively and efficiently manage the product flow in the "strategically" planned supply chain.

There are four major decision areas in supply chain management: 1) location, 2) production, 3) inventory, and 4) transportation (distribution), and there are both strategic and operational elements in each of these decision areas.

ERP

ERP (Enterprise Resource Planning) systems typically include the following characteristics: An integrated system that operates in real time (or next to real time), without relying

on periodic updates. A common database, which supports all applications. A consistent look and feel throughout each module. Installation of the system without elaborate application/data integration by the

Information Technology (IT) departmen

BEST PRACTICES OF ERPBest practices are incorporated into most ERP systems. This means that the software reflects the vendor's interpretation of the most effective way to perform each business process. Systems vary in the convenience with which the customer can modify these practices.Companies that implemented industry best practices reduced time–consuming project tasks such as configuration, documentation, testing and training. In addition, best practices reduced risk by 71% when compared to other software implementations.

The use of best practices eases compliance with requirements such as IFRS, Sarbanes-Oxley, or Basel II. They can also help comply with de facto industry standards, such as electronic funds transfer. This is because the procedure can be readily codified within the ERP software and replicated with confidence across multiple businesses who share that business requirement.

IMPLEMENTATIONERP's scope usually implies significant changes to staff work processes and practices.[12]

Generally, three types of services are available to help implement such changes—consulting, customization, and support.[12] Implementation time depends on business size, number of modules, customization, the scope of process changes, and the readiness of the customer to take ownership for the project. Modular ERP systems can be implemented in stages. The typical project for a large enterprise consumes about 14 months and requires around 150 consultants.[13] Small projects can require months; multinational and other large implementations can take years. Customization can substantially increase implementation times

BENEFITSThe fundamental advantage of ERP is that integrating the myriad processes by which businesses operate saves time and expense. Decisions can be made more quickly and with fewer errors. Data becomes visible across the organization. Tasks that benefit from this integration include:

Sales forecasting, which allows inventory optimization Chronological history of every transaction through relevant data compilation in every

area of operation. Order tracking, from acceptance through fulfillment Revenue tracking, from invoice through cash receipt Matching purchase orders (what was ordered), inventory receipts (what arrived), and

costing (what the vendor invoiced)

DISADVANTAGES Customization is problematic. Re–engineering business processes to fit the ERP system may damage

competitiveness and/or divert focus from other critical activities ERP can cost more than less integrated and/or less comprehensive solutions. High switching costs associated with ERP can increase the ERP vendor's negotiating

power which can result in higher support, maintenance, and upgrade expenses. Overcoming resistance to sharing sensitive information between departments can

divert management attention. Integration of truly independent businesses can create unnecessary dependencies. Extensive training requirements take resources from daily operations. Due to ERP's architecture (OLTP, On-Line Transaction Processing) ERP systems are

not well suited for production planning and supply chain management (SCM)

The limitations of ERP have been recognized sparking new trends in ERP application development, the four significant developments being made in ERP are, creating a more flexible ERP, Web-Enable ERP, Interenterprise ERP and e-Business Suites, each of which will potentially address the failings of the current ERP.

BPO

Business process outsourcing (BPO) is a subset of outsourcing that involves the contracting of the operations and responsibilities of specific business functions (or processes) to a third-party service provider. Originally, this was associated with manufacturing firms, such as Coca Cola that outsourced large segments of its supply chain. In the contemporary context, it is primarily used to refer to the outsourcing of business processing services to an outside firm, replacing in-house services with labor from an outside firm.

BPO is typically categorized into back office outsourcing - which includes internal business functions such as human resources or finance and accounting, and front office outsourcing - which includes customer-related services such as contact centre services.

BPO that is contracted outside a company's country is called offshore outsourcing. BPO that is contracted to a company's neighboring (or nearby) country is called near-shore outsourcing.

Often the business processes are information technology-based, and are referred to as ITES-BPO, where ITES stands for Information Technology Enabled Service. Knowledge process outsourcing (KPO) and legal process outsourcing (LPO) are some of the sub-segments of business process outsourcing industry.

TYPES OF BPO

BPO are 5 types they are: a. Administrative Department b. Purchase Department c. Selling Department d. Call Centre e. Back Office

CATAGORIES

BPO services are generally categorized into horizontal and vertical services. These have been explained below:

1. Horizontal BPO: Horizontal BPO involves function centric outsourcing. The vendor specializes in carrying out particular functions across different industry domains. Examples of horizontal BPO are outsourcing in procurement, payroll processing, HR, facilities management and similar functions. Automatic Data Processing (ADP) is an example of a horizontal BPO vendor. ADP focuses on providing services in horizontal functions such as payroll, HR, benefit administration, tax solutions, etc. However, according to Gartner, companies should focus on providing vertical services as the market matures.

2. Vertical BPO: A vertical BPO focuses on proving various functional services in a limited number of industry domains. Healthcare, financial services, manufacturing and retail are examples of vertical BPO domains. EXL Service Holdings is a vertical BPO having focus on industry domains such as healthcare, business services, utilities and energy and manufacturing.

ADVANTAGES & LIMITATIONAn advantage of BPO is the way in which it helps to increase a company’s flexibility. However, several sources have different ways in which they perceive organizational flexibility. Therefore business process outsourcing enhances the flexibility of an organization in different ways.

Most services provided by BPO vendors are offered on a fee-for-service basis. This can help a company becoming more flexible by transforming fixed into variable costs. A variable cost structure helps a company responding to changes in required capacity and does not require a company to invest in assets, thereby making the company more flexible. Outsourcing may provide a firm with increased flexibility in its resource management and may reduce response times to major environmental changes.

Another way in which BPO contributes to a company’s flexibility is that a company is able to focus on its core competencies, without being burdened by the demands of bureaucratic restraints. Key employees are herewith released from performing non-core or administrative processes and can invest more time and energy in building the firm’s core businesses. The key lies in knowing which of the main value drivers to focus on – customer intimacy, product leadership, or operational excellence. Focusing more on one of these drivers may help a company create a competitive edge.

A third way in which BPO increases organizational flexibility is by increasing the speed of business processes. Supply chain management with the effective use of supply chain partners and business process outsourcing increases the speed of several business processes, such as the throughput in the case of a manufacturing company.

Finally, flexibility is seen as a stage in the organizational life cycle: A company can maintain growth goals while avoiding standard business bottlenecks. BPO therefore allows firms to retain their entrepreneurial speed and agility, which they would otherwise sacrifice in order to

become efficient as they expanded. It avoids a premature internal transition from its informal entrepreneurial phase to a more bureaucratic mode of operation.

A company may be able to grow at a faster pace as it will be less constrained by large capital expenditures for people or equipment that may take years to amortize, may become outdated or turn out to be a poor match for the company over time.

Although the above-mentioned arguments favor the view that BPO increases the flexibility of organizations, management needs to be careful with the implementation of it as there are issues, which work against these advantages. Among problems, which arise in practice are: A failure to meet service levels, unclear contractual issues, changing requirements and unforeseen charges, and a dependence on the BPO which reduces flexibility. Consequently, these challenges need to be considered before a company decides to engage in business process outsourcing[14]

A further issue is that in many cases there is little that differentiates the BPO providers other than size. They often provide similar services, have similar geographic footprints, leverage similar technology stacks, and have similar Quality Improvement approaches

BUSINESS PROCESS REENGINEERINGBusiness Process Reengineering (BPR) involves the fundamental rethinking and redesign of processes to achieve dramatic improvements in performance, efficiency and alignment of processes with organizational strategy.

Business process reengineering transforms organizations:

For companies needing to realize significant and immediate cost savings, the best place to start is in business process reengineering. Inadequate or inefficient business processes are far more damaging than many realize, negatively affecting profit margins, new business opportunities, and the bottom line. By reengineering business processes for optimal impact and efficiency, BPO Maestro helps companies around the world to be more competitive.

Using information technology to improve performance and cut costs. Its main premise, as popularized by the book "Reengineering the Corporation" by Michael Hammer and James Champy, is to examine the goals of an organization and to redesign work and business processes from the ground up rather than simply automate existing tasks and functions.

Driven By CompetitionAccording to the authors, reengineering is driven by open markets and competition. No longer can we enjoy the protection of our own country's borders as we could in the past. Today, in a global economy, worldwide customers are more sophisticated and demanding.

Less ManagementModern industrialization was based on theories of specialization with millions of workers doing dreary, monotonous jobs. It created departments, functions and business units governed by multiple layers of management, the necessary glue to control the fragmented workplace.

In order to be successful in the future, the organization will have fewer layers of management and fewer, but more highly skilled workers who do more complex tasks. Information technology, used for the past 50 years to automate manual tasks, will be used to enable new

work models. The successful organization will not be "technology driven;" rather it will be "technology enabled."

Customer Oriented and Radical ImprovementAlthough reengineering may wind up reducing a department of 200 employees down to 50, it is not just about eliminating jobs. Its goals are customer oriented: it is about processing a contract in 24 hours instead of two weeks or performing a telecommunications service in one day instead of 30. It is about reducing the time it takes to get a drug to market from eight years to four years or reducing the number of suppliers from 200,000 to 700.

Reengineering is about radical improvement, not incremental changes.

BENCH MARKING

Benchmarking is the process of comparing one's business processes and performance metrics to industry bests and/or best practices from other industries. Dimensions typically measured are quality, time and cost. In the process of benchmarking, management identifies the best firms in their industry, or in another industry where similar processes exist, and compare the results and processes of those studied (the "targets") to one's own results and processes. In this way, they learn how well the targets perform and, more importantly, the business processes that explain why these firms are successful.

The term benchmarking was first used by cobblers to measure people's feet for shoes. They would place someone's foot on a "bench" and mark it out to make the pattern for the shoes. Benchmarking is used to measure performance using a specific indicator (cost per unit of measure, productivity per unit of measure, cycle time of x per unit of measure or defects per unit of measure) resulting in a metric of performance that is then compared to others. Also referred to as "best practice benchmarking" or "process benchmarking", this process is used in management and particularly strategic management, in which organizations evaluate various aspects of their processes in relation to best practice companies' processes, usually within a peer group defined for the purposes of comparison. This then allows organizations to develop plans on how to make improvements or adapt specific best practices, usually with the aim of increasing some aspect of performance. Benchmarking may be a one-off event, but is often treated as a continuous process in which organizations continually seek to improve their practices.

In 2008, a comprehensive survey on benchmarking was commissioned by The Global Benchmarking Network, a network of benchmarking centers representing 22 countries. Over 450 organizations responded from over 40 countries.

BENEFITS & USES

1. Mission and Vision Statements and Customer (Client) Surveys are the most used (by 77% of organizations of 20 improvement tools, followed by SWOT analysis(72%), and Informal Benchmarking (68%). Performance Benchmarking was used by 49% and Best Practice Benchmarking by 39%.

2. The tools that are likely to increase in popularity the most over the next three years are Performance Benchmarking, Informal Benchmarking, SWOT, and Best Practice

Benchmarking. Over 60% of organizations that are not currently using these tools indicated they are likely to use them in the next three years.

Collaborative benchmarkingBenchmarking, originally described as a formal process by Rank Xerox, is usually carried out by individual companies. Sometimes it may be carried out collaboratively by groups of companies (e.g. subsidiaries of a multinational in different countries). One example is that of the Dutch municipally-owned water supply companies, which have carried out a voluntary collaborative benchmarking process since 1997 through their industry association. Another example is the UK construction industry which has carried out benchmarking since the late 1990s again through its industry association and with financial support from the UK Government.

ProcedureThere is no single benchmarking process that has been universally adopted. The wide appeal and acceptance of benchmarking has led to the emergence of various benchmarking methodologies. One seminal book on benchmarking is Boxwell's Benchmarking for Competitive Advantage (1994). The first book on benchmarking, written and published by Kaiser Associates, is a practical guide and offers a 7-step approach. Robert Camp (who wrote one of the earliest books on benchmarking in 1989) developed a 12-stage approach to benchmarking.

The 12 stage methodology consists of:

1. Select subject2. Define the process3. Identify potential partners4. Identify data sources5. Collect data and select partners6. Determine the gap7. Establish process differences8. Target future performance9. Communicate10. Adjust goal11. Implement12. Review and recalibrate

COSTS

The three main types of costs in benchmarking are:

Visit Costs - This includes hotel rooms, travel costs, meals, a token gift, and lost labor time.

Time Costs - Members of the benchmarking team will be investing time in researching problems, finding exceptional companies to study, visits, and implementation. This will take them away from their regular tasks for part of each day so additional staff might be required.

Benchmarking Database Costs - Organizations that institutionalize benchmarking into their daily procedures find it is useful to create and maintain a database of best practices and the companies associated with each best practice now.

The cost of benchmarking can substantially be reduced through utilizing the many internet resources that have sprung up over the last few years. These aim to capture benchmarks and best practices from organizations, business sectors and countries to make the benchmarking process much quicker and cheaper.

BALANCE SCORE CARDThe Balanced Scorecard (BSC) is a strategic performance management tool - a semi-standard structured report, supported by proven design methods and automation tools, that can be used by managers to keep track of the execution of activities by the staff within their control and to monitor the consequences arising from these actions.[1] It is perhaps the best known of several such frameworks (it is the most widely adopted performance management framework reported in the annual survey of management tools undertaken by Bain & Company, and has been widely adopted in English-speaking western countries and Scandinavia in the early 1990s). Since 2000, use of the Balanced Scorecard, its derivatives (e.g., Performance Prism), and other similar tools (e.g., Results Based Management) has also become common in the Middle East, Asia and Spanish-speaking countries.

Balanced Scorecard BasicsThe balanced scorecard is a strategic planning and management system that is used extensively in business and industry, government, and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals. It was originated by Drs. Robert Kaplan (Harvard Business School) and David Norton as a performance measurement framework that added strategic non-financial performance measures to traditional financial metrics to give managers and executives a more 'balanced' view of organizational performance.  While the phrase balanced scorecard was coined in the early 1990s, the roots of the this type of approach are deep, and include the pioneering work of General Electric on performance measurement reporting in the 1950’s and the work of French process engineers (who created the Tableau de Bord – literally, a "dashboard" of performance measures) in the early part of the 20th century.

The balanced scorecard has evolved from its early use as a simple performance measurement framework to a full strategic planning and management system. The “new” balanced scorecard transforms an organization’s strategic plan from an attractive but passive document into the "marching orders" for the organization on a daily basis. It provides a framework that not only provides performance measurements, but helps planners identify what should be done and measured. It enables executives to truly execute their strategies.

This new approach to strategic management was first detailed in a series of articles and books by Drs. Kaplan and Norton. Recognizing some of the weaknesses and vagueness of previous management approaches, the balanced scorecard approach provides a clear prescription as to what companies should measure in order to 'balance' the financial perspective. The balanced scorecard is a management system (not only a measurement system) that enables organizations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results. When fully deployed, the balanced scorecard transforms strategic planning from an academic exercise into the nerve center of an enterprise.

Kaplan and Norton describe the innovation of the balanced scorecard as follows:

"The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must

make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation."

PerspectivesThe balanced scorecard suggests that we view the organization from four perspectives, and to develop metrics, collect data and analyze it relative to each of these perspectives:

The Learning & Growth PerspectiveThis perspective includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement. In a knowledge-worker organization, people -- the only repository of knowledge -- are the main resource. In the current climate of rapid technological change, it is becoming necessary for knowledge workers to be in a continuous learning mode. Metrics can be put into place to guide managers in focusing training funds where they can help the most. In any case, learning and growth constitute the essential foundation for success of any knowledge-worker organization.

Kaplan and Norton emphasize that 'learning' is more than 'training'; it also includes things like mentors and tutors within the organization, as well as that ease of communication among workers that allows them to readily get help on a problem when it is needed. It also includes technological tools; what the Baldrige criteria call "high performance work systems."

The Business Process PerspectiveThis perspective refers to internal business processes. Metrics based on this perspective allow the managers to know how well their business is running, and whether its products and services conform to customer requirements (the mission). These metrics have to be carefully designed by those who know these processes most intimately; with our unique missions these are not something that can be developed by outside consultants.

The Customer PerspectiveRecent management philosophy has shown an increasing realization of the importance of customer focus and customer satisfaction in any business. These are leading indicators: if customers are not

satisfied, they will eventually find other suppliers that will meet their needs. Poor performance from this perspective is thus a leading indicator of future decline, even though the current financial picture may look good. In developing metrics for satisfaction, customers should be analyzed in terms of kinds of customers and the kinds of processes for which we are providing a product or service to those customer groups.

The Financial PerspectiveKaplan and Norton do not disregard the traditional need for financial data. Timely and accurate funding data will always be a priority, and managers will do whatever necessary to provide it. In fact, often there is more than enough handling and processing of financial data. With the implementation of a corporate database, it is hoped that more of the processing can be centralized and automated. But the point is that the current emphasis on financials leads to the "unbalanced" situation with regard to other perspectives.  There is perhaps a need to include additional financial-related data, such as risk assessment and cost-benefit data, in this category.

Strategy MappingStrategy maps are communication tools used to tell a story of how value is created for the organization.  They show a logical, step-by-step connection between strategic objectives (shown as ovals on the map) in the form of a cause-and-effect chain.  Generally speaking, improving performance in the objectives found in the Learning & Growth perspective (the bottom row) enables the organization to improve its Internal Process perspective Objectives (the next row up), which in turn enables the organization to create desirable results in the Customer and Financial perspectives (the top two rows).

PERFORMANCE MANAGEMENTPerformance management (PM) includes activities that ensure that goals are consistently being met in an effective and efficient manner. Performance management can focus on the performance of an organization, a department, employee, or even the processes to build a product or service, as well as many other areas.

Performance management as referenced on this page is a broad term coined by Dr. Aubrey Daniels in the late 1970s to describe a technology (i.e. science imbedded in applications methods) for managing both behavior and results, two critical elements of what is known as performance.

BENEFITS

Managing employee or system performance facilitates the effective delivery of strategic and operational goals. There is a clear and immediate correlation between using performance management programs or software and improved business and organizational results.

For employee performance management, using integrated software, rather than a spreadsheet based recording system, may deliver a significant return on investment through a range of direct and indirect sales benefits, operational efficiency benefits and by unlocking the latent potential in every employees work day (i.e. the time they spend not actually doing their job). Benefits may include:

Direct financial gain Grow sales Reduce costs in the organization Stop project overruns

Aligns the organization directly behind the CEO's goals Decreases the time it takes to create strategic or operational changes by

communicating the changes through a new set of goals

Motivated workforce Optimizes incentive plans to specific goals for over achievement, not just business as

usual Improves employee engagement because everyone understands how they are directly

contributing to the organizations high level goals Create transparency in achievement of goals High confidence in bonus payment process Professional development programs are better aligned directly to achieving business

level goals

Improved management control Flexible, responsive to management needs Displays data relationships Helps audit / comply with legislative requirement Simplifies communication of strategic goals scenario planning Provides well documented and communicated process documentation

Organizational DevelopmentIn organizational development (OD), performance can be thought of as Actual Results vs Desired Results. Any discrepancy, where Actual is less than Desired, could constitute the performance improvement zone. Performance management and improvement can be thought of as a cycle:

1. Performance planning where goals and objectives are established2. Performance coaching where a manager intervenes to give feedback and adjust

performance3. Performance appraisal where individual performance is formally documented and

feedback delivered

A performance problem is any gap between Desired Results and Actual Results. Performance improvement is any effort targeted at closing the gap between Actual Results and Desired Results. Other organizational development definitions are slightly different. The U.S. Office of Personnel Management (OPM) indicates that Performance Management consists of a system or process whereby:

1. Work is planned and expectations are set2. Performance of work is monitored3. Staff ability to perform is developed and enhanced4. Performance is rated or measured and the ratings summarized5. Top performance is rewarded

Just in timeJust in time (JIT) is a production strategy that strives to improve a business return on investment by reducing in-process inventory and associated carrying costs. Just-in-time

production method is also called the Toyota Production System. To meet JIT objectives, the process relies on signals or Kanban between different points in the process, which tell production when to make the next part. Kanban are usually 'tickets' but can be simple visual signals, such as the presence or absence of a part on a shelf. Implemented correctly, JIT focuses on continuous improvement and can improve a manufacturing organization's return on investment, quality, and efficiency. To achieve continuous improvement key areas of focus could be flow, employee involvement and quality.

Quick notice that stock depletion requires personnel to order new stock is critical to the inventory reduction at the center of JIT. This saves warehouse space and costs. However, the complete mechanism for making this work is often misunderstood. For instance, its effective application cannot be independent of other key components of a lean manufacturing system or it can "...end up with the opposite of the desired result." In recent years manufacturers have continued to try to hone forecasting methods such as applying a trailing 13 week average as a better predictor for JIT planning; however, some research demonstrates that basing JIT on the presumption of stability is inherently flawed.

The philosophy of JIT is simple: inventory is waste. JIT inventory systems expose hidden cost of keeping inventory, and are therefore not a simple solution for a company to adopt. The company must follow an array of new methods to manage the consequences of the change. The ideas in this way of working come from many different disciplines including statistics, industrial engineering, production management, and behavioral science. The JIT inventory philosophy defines how inventory is viewed and how it relates to management.

Inventory is seen as incurring costs, or waste, instead of adding and storing value, contrary to traditional accounting. This does not mean to say JIT is implemented without an awareness that removing inventory exposes pre-existing manufacturing issues. This way of working encourages businesses to eliminate inventory that does not compensate for manufacturing process issues, and to constantly improve those processes to require less inventory. Secondly, allowing any stock habituates management to stock keeping. Management may be tempted to keep stock to hide production problems. In short, the Just-in-Time inventory system focus is having “the right material, at the right time, at the right place, and in the exact amount”-Ryan Grabosky, without the safety net of inventory. The JIT system has broad implications for implementers.

Transaction cost approachJIT reduces inventory in a firm. However, a firm may simply be outsourcing their input inventory to suppliers, even if those suppliers don't use Just-in-Time (Naj 1993). Newman (1994) investigated this effect and found that suppliers in Japan charged JIT customers, on average, a 5% price premium.

Environmental concernsDuring the birth of JIT, multiple daily deliveries were often made by bicycle. Increased scale has required a move to vans and lorries (trucks). Cusumano (1994) highlighted the potential and actual problems this causes with regard to gridlock and burning of fossil fuels. This violates three JIT waste guidelines:

1. Time—wasted in traffic jams2. Inventory—specifically pipeline (in transport) inventory3. Scrap—fuel burned while not physically moving

Price volatilityJIT implicitly assumes a level of input price stability that obviates the need to buy parts in advance of price rises. Where input prices are expected to rise, storing inventory may be desirable.

Quality volatilityJIT implicitly assumes that input parts quality remains constant over time. If not, firms may hoard high-quality inputs. As with price volatility, a solution is to work with selected suppliers to help them improve their processes to reduce variation and costs. Longer term price agreements can then be negotiated and agreed-on quality standards made the responsibility of the supplier. Fixing up of standards for volatility of quality according to the quality circle

Demand stabilityKarmarker (1989) highlights the importance of relatively stable demand, which helps ensure efficient capital utilization rates. Karmarker argues that without significantly stable demand, JIT becomes untenable in high capital cost production.

Supply stabilityIn the U.S., the 1992 railway strikes caused General Motors to idle a 75,000-worker plant because they had no supply.

Main benefits of JIT include: Reduced setup time. Cutting setup time allows the company to reduce or eliminate

inventory for "changeover" time. The tool used here is SMED (single-minute exchange of dies).

The flow of goods from warehouse to shelves improves. Small or individual piece lot sizes reduce lot delay inventories, which simplifies inventory flow and its management.

Employees with multiple skills are used more efficiently. Having employees trained to work on different parts of the process allows companies to move workers where they are needed.

Production scheduling and work hour consistency synchronized with demand. If there is no demand for a product at the time, it is not made. This saves the company money, either by not having to pay workers overtime or by having them focus on other work or participate in training.

Increased emphasis on supplier relationships. A company without inventory does not want a supply system problem that creates a part shortage. This makes supplier relationships extremely important.

Supplies come in at regular intervals throughout the production day. Supply is synchronized with production demand and the optimal amount of inventory is on hand at any time. When parts move directly from the truck to the point of assembly, the need for storage facilities is reduced.

Minimizes storage space needed. Smaller chance of inventory breaking/expiring.