BENCHMARKING & BENCHTRENDING

BENCHMARKING
 it is a continuous process of enlisting the best practices in the world – for process, goals, and
objectives – leading to world-class levels of achievement
 “A systematic and continuous measurement process. A process of continuously comparing and
measuring an organization’s business processes against business leaders anywhere in the world to
gain information that will help the organization take action to improve its performance.”
(international benchmarking clearing house of American productivity and quality center)
 Any performance standard viewed in isolation is of little value. It has to be compared in relation to a
similar objective standard to bring out its relative position and serve as a yardstick for
measurement of progress.
 benchmarking with other companies in the same industry (ex. Turnover ratio)
 examination of one company’s performance against a competing unit will afford meaningful
insights into areas where the company is lagging behind (understanding will trigger action for
improvement to close the gap or better it)
 comparisons should be instituted against world-class standards to attain excellence
 “improving ourselves through the example of others”
 A measure or a best-in-class achievement (standard of excellence for a specific business practice)
 Pioneered by company “Rank Xerox”
 We can benchmark a product, process, activity, strategy or operations

Benchmark – the best practice

Benchmarking – the process of enlisting the best practices

Types of Benchmarking

1. Product Benchmarking (Reverse Engineering)

 An age old practice of product oriented reverse engineering
 Buy the rivals products, tear them down to find out the features and performances compare
with our own products (could be the starting point for improvement)

2. Competitive Benchmarking
 A measure of organizational performance compared against competing organization
 It studies the target specific product designs, process capabilities or administrative methods,
used by a company’s direct competitors
 The processes studied may include marketing, financing, HR, R&D and etc. (not just the product)
 A more holistic approach compared to product benchmarking

3. Process Benchmarking
 The activity of measuring discrete performance and functionality against organizations through
performance in excellent analogous business processes
 Similar to competitive but we do not look into our direct competitors alone. We look into the
processes of any company that has a similar process we are trying to study.
 Ex. Marketing: we also look into companies with the best or most successful marketing
strategies
  To gain leadership position, it is essential to look at a paradigm shifting jump to a new way of
managing process. For this, you may have to go beyond your industry and look at the best in the
breed to bring about a fundamental change and not just an incremental improvement.

4. Internal Benchmarking
 An application of process benchmarking performed within an organization by comparing the
performance of similar business units or business processes
 Applicable when the company has different business units
 Ex. A large corporation with many products and business units for beverage, healthcare
products and etc.
 No need to look at other companies’ performance

5. Strategic Benchmarking
 the application of process benchmarking of the level of business strategy, a systematic process
for evolving alternatives, implementing strategies, and improving performance by
understanding and adopting successful strategy from external partners who participated in an
ongoing business alliance
 differs from operational benchmarking in its scope
 helps develop a vision of the changed organizations it will develop core competencies that will
help sustain competitive advantage
 we look at the entire strategy of the company as a whole
 from the data you have gathered from process benchmarking, you convert it into a strategy

6. Global Benchmarking
 The extension of strategic benchmarking to include benchmarking partners on a global scale
 Broadened strategic benchmarking
Stages in the Process of Benchmarking

Some examples and explanations of the steps:

1. Planning -What we want to benchmark and what is our goal
a. Customer satisfaction – consistency of the product/ service; look at process cycle time,
delivery performance, responsiveness to customer requirements
 b. Seeking the best; it is expensive and time consuming so maybe we can use a company which
already has a recorded performance success in a similar area
c. Not a one-man task. Team should include persons who are most knowledgeable about the
internal operations / performance of the company and will be directly affected by the
changes due to benchmarking
d. Relevant measures do not only refer to those being used by the firm currently. Refine into
measures that comprehend the true performance differences; defining how?

2. Collection of data and information

o Benchmarking protocol – like a contract with our partners
o Schedule of questions – a list of questions (give the partners a copy)

3. Analysis of the findings based on the data collected in stage 2

- B answers “what aspects differ from ours” and C answers “why is there a gap or difference”
- We need to ensure that the comparisons are meaningful and credible since we do not want
an output for academic purposes only but one that can be used in other ways to be
meaningful and useful

4. Formulation and implementation of recommendations

- Recoms need to be applicable and feasible sa conditions of the firm
- Recommendations need funding so we need owner’s and management’s support

5. Constant monitoring and reviewing of the results after implementation

- Document especially for partners
- What is true today may not be true in the future (recommendations may change)
- Reconsider benchmarks because of changes in circumstances

Pre-requisites of Benchmarking
(1) Commitment – from owners, senior managers (support) to continuous improvements
(2) Clarity of objectives – they should be clearly defined at the preliminary stage (planning); team
must have a clear picture of their own performance before approaching others for comparisons
(3) Appropriate scope – appropriate that it is aligned with the objectives, resources, time available,
experience level of those involved; should not be too broad or too general but in consonance
with
the circumstances of the firm
(4) Resources – we must have sufficient resources to complete the project within the required time
(5) Skills – team should have the appropriate skills and competencies to go about the benchmarking
(6) Communication – stakeholders, staff and representatives should be informed

Difficulties in the Implementation of Benchmarking

(1) Time-consuming – teams must devote their time to this, resources
(2) Lack of management support – benchmarking requires direct involvement of managers
(3) Resistance from employees – may be due to those who have been in the company for a long time
and might not be open to change
(4) Paper goals – focus on the actual implementation/ effects rather than the goals on the paper
(5) Copy-paste attitude – key element in benchmarking is the adaptation of the best practice and
tailoring it to the company’s need and culture
BENCHTRENDING
While the benefits of benchmarking are quite impressive, it results in the benchmarking partner to be
forever in a catchup situation. The better partner will not stand still but will be looking continuously for
ways to improve his own performance. Thus, it becomes imperative for an organization to continuously
do a P.E.S.T Scan – monitor the developments in the political, economic, social, and technological fronts
and identify future gaps that may be created by significant market changes, customer preferences,
innovation threats, new entrants, and other environmental variables critical to the long-term success of
the firm. Such trend studies are known as “bench trending” which is similar to benchmarking, but with a
structural dimension.
- Looks at the future
- Like forecasting (we do not look only at our past performance)

There are two types of bench trending

o Strategic Bench Trending - is used to set direction for a business unit
o Operations or Process Bench Trending - which is used to identify technological trends and steps
initiated to bridge the gaps in current performance levels.

Benchmarking vs. Bench trending

Benchmarking is the process of evaluating the business performance with the standard business metrics
of the industry. On the other hand, bench trending is used for monitoring the performance and
operations for bringing improvements and setting a direction.

TOTAL QUALITY MANAGEMENT (TQM)

TQM is an active approach encompassing a company-wide philosophy and system for continuous
improvement of quality. It demands cooperation from everyone in the company.

The 8 Universal Principles of TQM

- We relate it to ISOs (international standard for organizations) which has been developing
guiding principles to protect organizations from fatal errors since its foundation in 1947
- Like certifications (ISO certified); can be bought so customers should still be cautious ; in a
perfect world the products with this are of good quality
- ISO 9001 : quality management system standards model introduced in 1994
- Most current version is 2015

1. Customer focus
- The first and most important principle because a business would not exist without its
customers
- Organizations should strive to understand their current and future customers to meet their
requirements and expectations
- Key benefits of cultivating good customer relationships include: increased market share,
boost to revenue and customer loyalty
- Customer relationship management: If your company is seen as understanding and reacting
appropriately to consumer demand, the success of your business is guaranteed

2. Leadership
- Dismisses the virtues of strong, purposeful, and unifying leadership
- Leaders are responsible for creating a productive and progressive business environment
 - In charge of ensuring that future hires maintain that atmosphere
- Implementing this relies on having an established vision for the business as well as the right
leaders in place to promote that vision to the rest of the team

3. People involvement
- A business would not get very far without a balanced and multi-skilled team (employees)
- Recognizing their importance
- They should be motivated and engaged in the company as a whole. They must understand
their role and how this fits with wider company objectives and take responsibility from
problems that might affect them doing their job with their best ability
- Competency of the employees

4. Process approach
- Can help companies to avoid logistical problems that often stem from confusion over the
right way to go about things
- Future proofs your business as having set processes ensures that there’s no moment of flat
panic when a key team member moves on leaving everyone in the dark on the key elements
of their job
- Developing the processes for every area in the business will ensure resources are used
effectively resulting in cost effective and consistent results
- It also allows you to dedicate time and attention to bigger and more exciting tasks

5. Systematic approach to management

- Linked to the previous one
- Identifying, understanding, and managing processes using a clear system will help to
streamline your business
- by ensuring that team members are dedicating the right amount of attention to key tasks,
you will eliminate wasted time and make your business more efficient

6. Continuous improvement
- A business should always be pushing for improvement, competitors will be improving
- The basis of TQM

7. Factual approach to decision making

- States that effective decisions are made based on rational analysis of data
- Have hard data in order to explain the reasons why your performance is like this
- Evidence is important
- Facts > feelings

8. Mutually beneficial supplier relations

- Supply chain management
- Establish better supplier relations because the quality of raw materials they give us will
reflect on the quality of our finished product

The 3 Core Concepts of TQM

1. Quality Control (QC) – deals with the past
2. Quality Assurance (QA) – deals with the present
3. Quality Management (QM) – deals with the future
Goal of TQM – to continuously improve our quality (product/ service)
- We know this through customer feedback (understand their psychology/ decision-making)

SIX SIGMA

Six Sigma is a set of practices originally developed by Motorola to systematically improve processes by
eliminating defects. A defect is defined as non-conformity of a product or service to its specifications.
(how to improve quality? By eliminating defects .. continuation of TQM)

While the particulars of the methodology were originally formulated by Bill Smith at Motorola in 1986,
Six Sigma was heavily inspired by six preceding decades of quality improvement methodologies such as
quality control, TQM, and Zero Defects. Like its predecessors, Six Sigma asserts the following:
• Continuous efforts to reduce variation in process outputs is key to business success
• Manufacturing and business processes can be measured, analyzed, improved and controlled
• Succeeding at achieving sustained quality improvement requires commitment from the entire
organization, particularly from top-level management
(its principles go back to the 8 principles of TQM)

The term “Six Sigma” refers to the ability of highly capable processes to produce output within
specification. In particular, processes that operate with six sigma quality produce at defect levels below
3.4 Defects Per (one) Million Opportunities (DPMO). Six Sigma’s implicit goal is to improve all processes
to that level of quality or better.

Six Sigma is a registered service mark and trademark of Motorola, Inc. Motorola has reported over
US$17 billion in savings from Six Sigma as of 2006. In addition to Motorola, companies that adopted Six
Sigma methodologies early on and continue to practice it today include Honeywell International
(previously known as Allied Signal) and General Electric (introduced by Jack Welch).

Methodologies
Six Sigma has two key methodologies: DMAIC and DMADV, both inspired by W. Edwards Deming’s Plan-
Do-Check-Act Cycle: DMAIC is used to improve an existing business process, and DMADV is used to
create new product or process designs for predictable, defect-free performance.
DMAIC (present/ existing)
Basic methodology consists of the following five (5) steps:
 Define the process improvement goals that are consistent with customer demands and
enterprise strategy.
 Measure the current process and collect relevant data for future comparison.
 Analyze to verify relationship and causality of factors. Determine what the relationship is, and
attempt to ensure that all factors have been considered.
 Improve or optimize the process based upon the analysis using techniques like Design of
Experiments.
 Control to ensure that any variances are corrected before they result in defects. Set up pilot
runs to establish process capability, transition to production, and thereafter continuously
measure the process and institute control mechanisms.

DMADV (new)
Basic methodology consists of the following five steps:
 Define the goals of the design activity that are consistent with customer demands and
enterprise strategy.
 Measure and identify CTQs (critical to qualities), product capabilities, production process
capability, and risk assessments.
 Analyze to develop and design alternatives, create 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 production process and handover to process
owners.

Some people have used DMAICR (Realize – a variaton of DMAIC. Others contend that focusing on the
financial gains realized through Six Sigma is counter-productive and that said financial gains are simply
byproducts of a good process improvement. (A good income will follow from good quality products.)

Key ROLES required for successful implementation of Six Sigma

1. Executive Leadership includes CEO and other key top management team members.
They are responsible for setting up a vision for Six Sigma implementation. They also empower the
other role holders with the freedom and resources to explore new ideas for breakthrough
improvements.
2. Champions are responsible for the Six Sigma implementation across the organization in
an integrated manner. The Executive Leadership draws them from the upper management.
Champions also act as mentors to Black Belts. At GE this level of certification is now called “Quality
Leader”.
3. Master Black Belts, identified by champions, act as in-house expert coaches for the
organization on Six Sigma. They devote 100% of their time to Six Sigma. They assist champions and
guide Black Belts and Green Belts. Apart from the usual rigor of statistics, their time is spent on
ensuring integrated deployment of Six Sigma across various functions and departments.
1. Experts this level of skill is used primarily within Aerospace and Defense Business
Sectors. Experts work across company boundaries, improving services, processes, and products for
their suppliers, their entire campuses, and for their customers. Raytheon Incorporated was one of
the first companies to introduce Experts to their organizations. At Raytheon, Experts work not only
 across multiple sites, but across business divisions, incorporating lessons learned throughout the
company.
2. Black Belts operate under Master Black Belts to apply Six Sigma methodology to specific
projects. They devote 100% of their time to Six Sigma. They primarily focus on Six Sigma project
execution, whereas Champions and Master Black Belts focus on identifying projects/functions for
Six Sigma.
3. Green Belts are the employees who take up Six Sigma implementation along with their
other job responsibilities. They operate under the guidance of Black Belts and support them in
achieving the overall results. (all of their time is not dedicated to six sigma)
4. Yellow Belts are employees who have been trained in Six Sigma techniques as part of a
corporate- wide initiative, but have not completed a Six Sigma project and are not expected to
actively engage in quality improvement activities.

5S’s Concept in Quality Management

1. Seiri
- Organization or re-organization
- to straighten or contain and can be meant to say that you should discard unnecessary things
(get rid of waste and get easier / quick access)
- organize things in an organization well to avoid wasted time like developing a system to
bring consistency
- Steps:
o Planning and training, Method of sorting, Categorization, Survey, Cleaning
o Decide on the scope of the operation
o Define objectives and teach people to recognize what is unnecessary (red tags, yellow
tags)
o Apply stratification management

2. Seiton
- Neatness
- Helps decide the way things are to be placed so that working is smooth
- Involves safety and productivity
- 3 rules:
o Decide where things need to be placed
o Keep things in that place
o Always follow the system
- “a place for the thing and the thing in its place”
- Keeping things in the best way: what to keep, where to keep, how to keep, and how much
to keep, ground rules for organizing neatly, marking areas and cautions, proper place for
things

3. Seiso
- Cleaning (clean up, take up the job of cleaning)
- Extended to the entire surrounding
- Getting rid of bad things and purifying
- First calls for an inspection, then acting on it
- Essence is that it helps us detect or see defects with our own eyes (ex. Checking machinery
with our own eyes or hands to see if its ok – lose parts, overheating, unusual sounds, etc.)
 - To reveal potential defects
- Things to remember: Who should do the cleaning?, Assigning roles, providing tools for
cleaning, making it a day-to-day routine, care of special and sophisticated equipment,
education on seiso

4. Seiketsu
- Standardization
- First three is easy to do once, so we must standardize
- Whatever cleanliness and orderliness have been achieved through the first three should be
maintained and not allowed to deteriorate
- Keep a strict control over the situation and this cannot be achieved by a one-time effort
(cleaning)
- If we face any problem, our capabilities coupled with the system should be able to
overcome that problem
- Complete when its horizons have been expanded to include the entire working environment
- Points to remember: standardization is to systematize, knowledge of putting the finger of
the troubled spots, imparting knowledge systematically, visual management, sensory
alertness and control, position marking
- To promote this there should be incentive at the workshop and factory level

5. Shitsuke
- Discipline
- Following a system
- Calls for changing from our present unsystematic way of adherence to set procedures
- System functions in an orderly manner
- Easier to do things with everyone, with the team as it becomes fun and when it’s difficult, it
becomes easier with teamwork
- Tips to remember: routine and complacency, instructions and communications are clear

Different types of Quality Costs

 Costs of quality assurance incurred by the manufacturer = Internal Quality Costs
1. Prevention costs
2. Appraisal costs
3. Failure costs

 Costs of quality assurance at the user’s end = User Quality Costs