Chapter 4 benchmarking (1)

Contemporary Techniques in TQM

Chapter - 4

Prepared and Presented by Dr. Shyamal Gomes // XISS-Ranchi

B E N C H M A R K I N G

Benchmarking

The secret to benchmarking is the notion of ‘ best”- XEROX


Introduction:

Xerox invented the photocopier in 1959, and maintained a virtual monopoly for many years to the extent that its name became a generic name for all photocopiers. However, by 1981, the company’s market shrank to 35% as IBM and Kodak developed high end machines and Canon, Richo and Savin dominated the low-end segment of the market. The Company was suffering from the “ not invented here” syndrome as its managers did not want to admit that they were not the best. The company then instituted the benchmarking process. However, this was initially resisted. When faced with the facts, reaction went from denial to dismay to frustration and finally to action. Once the process began, the company benchmarked virtually every function and task for productivity, cost, service and quality. The results of benchmarking were dramatic:

Quality problem were cut back by two – thirds.Suppliers were reduced from 5,000 to 300.Manufacturing costs went down by half.Development time was cut by two - thirds. Concurrent engineering was practiced. Each product development group secured inputs

from the design, manufacturing and services department from the initial stages of the project.Direct labour was cut by 50% and corporate staff went down by 35% while increasing

volume. The hierarchical organizational structure was pared, and use of cross- functional “Teams

Xerox” was established


Finally, Xerox became the only company worldwide to win all the three prestigious quality awards – The Deming Prize (JUSE) in 1980, The Malcolm Baldridge National Quality Award in 1989, and the European Quality Award in 1992. The Company’s document out-sourcing division, Xerox Business Services, also won the Baldridge Award in the service category in 1997.

This success is mainly attributed to the “leadership through quality” initiative, and to the positive intervention of benchmarking practices.

The success of benchmarking at Xerox motivated many companies to implement benchmarking practices. By the mid-1990s, many companies such as Ford, AT&T, IBM, GE, Motorola etc. implemented benchmarking practices at their divisions across the world and derived many benefits.

During the 1990s, Xerox, along with Ford, AT&T, Motorola and IBM created the International Benchmarking Clearinghouse (IBC) to promote benchmarking and guide other companies and best practices through its electronic bulletin board.

More than 1000 companies joined the IBC to gain access to its extensive database.By 2011, benchmarking had become a common phenomenon in many companies Globally.


What is a Benchmarking?Benchmarking can be defined as a process for improving performance by constantly identifying, understanding and adapting best practices and processes followed inside and outside the company and implementing the results.Simply it is “ the search of industry best practices that lead to superior performance”.

The main emphasis of benchmarking is not on “ best performance” but on improving a given business operation or a process by exploiting “ best practices.”

WHY Benchmarking?

1.To promote best practices and processes for superior performance2.To build a culture for continuous Improvement3.To gain competitive advantages


When Benchmarking?Where there is 8 Negative answers:

1.Is the company’s QMS properly developed, documented and implemented? No.2.Is there any system to allocate appropriate resources and findings for the effective implementation of QMS? No.3.Company’s great strength areas measured? No4.Company’s great weakness areas measured? No5.Company’s great opportunity areas measured? No6.Areas have threats for its survival measured? No7.Customer needs assessed & Rectified? No.8.KSF application is central focus? No.

Where Benchmarking?

Operational StrategiesHr PracticesQuality Improvement effectsMarketing and SCM


How Benchmarking: Process

IntegrationIntegration

AnalysisAnalysis

PlanningPlanning

MaturityMaturity

ActionAction

Process

• Planning: Identify the product, service or process to be benchmarked

• Analysis: Determine the gap between the firm’s current performance and that of the firm’s benchmarked and identify the causes of significant gaps.

• Integration: Establish goals and obtain the support of managers who must provide the resources for accomplishing the goals

• Action: Develop action plans, and team assignment, implement the plans, monitor progress and recalibrate benchmark as improvements are made

• Maturity: Leadership position attended, best practices fully integrated into process.


Phase 1: Planning1. Identify what to benchmark;2. Identify comparative companies;3. Determine data collection method & collect data.

Phase 2: Analysis4. Determine current performance gap;5. Project future performance levels.

Phase 3: Integration6. Communicate finding and gain acceptance;7. Establish functional goals.

XEROX ‘s twelve steps of benchmarking (1980)


Phase 4: Action8. Develop action plans;9. Implement specific actions & monitor progress;

10. Recalibrate benchmarks.

Phase 5: Maturity11. Attain leadership position ;12. Fully integrate practices into processes.


What is ourPerformance level?How do we do it?

Refine

What are others’Performance levels?

How did they get there?

Creativeadaptation

Compare and

contrast (BORROW)

For breakthrough PERFORMANCE

How Benchmarking: Method


Types of Benchmarking

There are Seven major types of Benchmarking:• Strategic benchmarking• Performance or competitive benchmarking• Process benchmarking • Functional / generic benchmarking • Internal benchmarking• External Benchmarking• International Benchmarking


BMBM

Strategic BM: Org. seek to improve their

overall performance for

Long term by KSF

Strategic BM: Org. seek to improve their

overall performance for

Long term by KSF

Performance BM:

Concentrate to Performance of Key products/

services

Performance BM:

Concentrate to Performance of Key products/

services

Process BM: Critical Factors / Process Mapping

Process BM: Critical Factors / Process Mapping

Functional BM: Innovation and

Dramatic improvement by

seeing best processes from different sectors

Functional BM: Innovation and

Dramatic improvement by

seeing best processes from different sectors

Internal BM: Partners are sought

from within organization

Internal BM: Partners are sought

from within organization

External BM: Partners are sought

from outside organization

External BM: Partners are sought

from outside organization

Internal BM: Partners are sought from other countries

Internal BM: Partners are sought from other countries

KEY SUCCESS FACTOR MATRIX (KSF)

Key success

factor

Competitive analysis – Computer Industry …… Segment

Performance Rating

Weight Our Company

Competitor A

CompetitorB

CompetitorC

Sales Force

Distribution

Suppliers

R&D

Service

Cost Structure


Therefore the simple methodology for effective benchmarking is

Step – 1: Identify what to benchmark and determine what to measure

Step – 2: Identify who to benchmarkStep – 3: Collect the data.Step – 4: Analyze data and determine the

performance gapStep – 5: Set goals and develop action planStep – 6: Implement action planStep – 7: Monitor / recalibrate / recycle the process


• Benchmarking must have the full support of senior management and they should actively involved.

• Training is very important for benchmarking team and process

• Benchmarking should be a team activity• Benchmarking is an ongoing process.• Benchmarking efforts must be organized, planned, and

carefully managed.• Use correctly, benchmarking can lead you to the

competitive edge in today’s business market place.

Remember


Limitations• Some times Benchmarking comes from the idea of

copying others.• BM is not a panacea. It is not a strategy nor is it intended

to be a business philosophy.

• It is an important technique. To be effective it must be used properly. It breaks down (waste money, time and energy and some times morale too) if process owners and managers feel threatened or do not accept and act on the findings.

• BM is also not a substitute for innovation: however, it is a source of ideas from outside the organization.


Advantages• Benchmarking is a systematic comparison by which

it promotes superior performance by providing an organized framework through which organization learn how the “ best in class” do things.

• It helps for continuous improvement on current performance

• Benchmarking inspire managers (and organization) to compete.

• Through Benchmark, organization can borrow ideas and opting them to gain competitive advantages.


Conclusion• Benchmarking Ethics:

– Keep it legal– Be willing to give what you get– Respect confidentiality– Don’t refer without permission– Select the right Bench mark


Chapter 4 benchmarking (1)

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