Question:
Within a diversified group, one division, which operates many similar branches in a service industry, has used internal benchmarking and regards it as very useful.
Group central management is now considering the wider use of benchmarking.
Requirement:
(a) Explain the aims, operation, and limitations of internal benchmarking, and explain how external benchmarking differs in these respects.
(b) A multinational group wishes to internally benchmark the production of identical components made in several plants in different countries. Investments have been made with some plants in installing new Advanced Manufacturing Technology (AMT) and supporting this with manufacturing management systems such as Just in Time (HT) and Total Quality Management (TQM). Preliminary comparisons suggest that the standard cost in plants using new technology is no lower than that in plants using older technology.
Requirement:
Explain possible reasons for the similar standard costs in plants with differing technology. Recommend appropriate benchmarking measures, recognising that total standard costs may not provide the most useful measurement of performance.