Business Process Performance Paper 8

Answer (A) is correct. Benchmarking involves setting standards high. Arbitrarily using the unit’s prior period performance runs counter to the goal of benchmarking.

Answer (A) is correct. The ideal benchmarking partner should be similar in size and structure. A larger competitor may be benefiting from economies of scale, which a smaller company cannot match.

Answer (C) is correct. Equipment maintenance and supplier evaluations are both prevention costs, as both are proactive measures to ensure the ability of the production facility to continue to operate.

Answer (D) is correct. Benchmarking is a primary tool used in quality management. It is a means of helping organizations with productivity management and business process analysis. Benchmarking involves analysis and measurement of key outputs against those of the best organizations. This procedure also involves identifying the underlying key actions and causes that contribute to the performance difference. The benchmark need not be a competitor or even a similar entity. Process (function) benchmarking studies operations of organizations with similar processes regardless of industry. Thus, a comparison to procedures against the check-in process for a major airline is an example of benchmarking

Answer (C) is correct. Internal failure costs occur when defective products are detected before shipment. Examples are scrap, rework, tooling charges, downtime, redesign of products or processes, lost output, and lost learning opportunities. Thus, the net cost of scrap would be classified as an internal failure cost on the quality report.

Answer (A) is correct. Internal failure costs occur when defective products are detected before shipment. The internal failure costs include the cost of abnormal spoilage, scrap, and rework. Thus, the total internal failure cost is $2,080 ($645 + $150 + $1,285).

Answer (C) is correct. Improvements should be ongoing, with involvement by management and workers

Answer (B) is correct. A value-added activity contributes to customer satisfaction or meets a need of the entity. A nonvalue-added activity does not make such a contribution. It can be eliminated, reduced, or redesigned without impairing the quantity, quality, or responsiveness of the product or service desired by customers or the entity. It is necessary to place a brake on a bicycle, whether the brake is reworked or new. The addition of the brake is required before the bicycle can be sold, which contributes to the customer’s satisfaction.

Answer (D) is correct. Comparing a unit’s results against industry benchmarks is usually considered as useful as comparing results to the budget. The budget helps in comparing actual results to the expectations of the company. Industry benchmarks help in comparing actual results to industry performance. Comparison to industry is just as important as company expectations in evaluating a unit’s results.

These are the four factors that create competitive advantage. Efficiency is the relationship between inputs and outputs, and superior efficiency leads to lower costs which leads to higher profitability and competitive advantage. A product has superior quality when its customers consider that its attributes give them higher utility than do the attributes of competing products. Innovation in products and processes is perhaps the most important component of competitive advantage, because competition is driven by innovation. Superior responsiveness to customers means the company does a better job than its competition of identifying customer needs and satisfying them.