Quality Management

Benchmarking
Chapter 10

Summers: Quality Management, 2nd. ed. © 2009 Pearson Education, Upper Saddle River, NJ 07458.
All rights reserved
 Benchmarking
• Evaluate or check (something) by
comparison with a standard.
https://www.youtube.com/watch?v=R6tJpyaFiQc

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Summers: Quality Management, 2nd. ed. © 2009 Pearson Education, Upper Saddle River, NJ 07458.
All rights reserved
 Benchmarking
• Benchmarking
– During the benchmarking process, a company
compares its performance against a set of
standards or against the performance of a
best-in-class company. With the information
provided by the comparison, a company can
determine how to improve.

Summers: Quality Management, 2nd. ed. © 2009 Pearson Education, Upper Saddle River, NJ 07458.
All rights reserved
 Benchmarking
• What is benchmarking?
– It is a tool that will:
• Compare and measure your business performance
against world class companies.
• Highlight areas where your business performance
is sub-optimal.
• Highlight worldwide best practices that lead to
superior performance.
• Help to continuously improve your performance.
• Introduce new ideas.

Summers: Quality Management, 2nd. ed. © 2009 Pearson Education, Upper Saddle River, NJ 07458.
All rights reserved
Summers: Quality Management, 2nd. ed. © 2009 Pearson Education, Upper Saddle River, NJ 07458.
All rights reserved
 Steps for Benchmarking O
1. Identify problem areas
2. Identify other industries that have similar processes
3. Identify organizations that are leaders in these
areas: Look for the very best in any industry and in
any country
4. Survey companies for measures and practices
5. Visit the "best practice" companies to identify
leading edge practices
6. Implement new and improved business practices

Summers: Quality Management, 2nd. ed. © 2009 Pearson Education, Upper Saddle River, NJ 07458.
All rights reserved
• In the 1970s, Xerox was the largest
manufacturer of copiers in the world. However,
Japanese manufacturers were making better
copiers and making a good profit.
• This prompted the company to directly compare
itself with its direct and best competitors to
determine what it could do to increase
productivity while decreasing costs.

Summers: Quality Management, 2nd. ed. © 2009 Pearson Education, Upper Saddle River, NJ 07458.
All rights reserved
• The results from their benchmarking were astonishing.
They found (10):

• Xerox's ratio of indirect to direct staff was twice that of

direct competition;
• It had nine times the number of production suppliers;
• Assembly line rejects were in the order of ten times
worse;
• Product time to market was twice as long;
• Defects per 100 machines were seven times worse.

Summers: Quality Management, 2nd. ed. © 2009 Pearson Education, Upper Saddle River, NJ 07458.
All rights reserved
• Over the next five years, Xerox would have to increase
productivity 18% to keep up with its competitors. It did
this through a strategy known as leadership through
quality, which became the foundation of the revival of the
company.
• For example, Xerox benchmarked L.L. Bean, a Maine
outdoor sporting goods retailer, because of their
excellent warehouse procedures that are now the
standard at most companies.
• It also benchmarked almost 230 performance areas by
the time it won the Malcolm Baldridge National Quality
award in 1989 (11).
Summers: Quality Management, 2nd. ed. © 2009 Pearson Education, Upper Saddle River, NJ 07458.
All rights reserved
• Mass Transit Railway Corporation (MTRC) in Hong Kong
• MTRC carries millions of passengers daily and is one of the largest
urban metros in the world but they benchmark
• This process benchmarking is done through Community of Metros
(CoMET), which includes mass transit systems from Mexico City,
New York City, Paris, London, Moscow, Sao Paulo, Berlin, and Hong
Kong.
• Each year all members gather uniform performance data to compare
in semiannual meetings.
• Five key areas of interest are service quality, reliability,
efficiency, asset utilization, and financial performance.

Summers: Quality Management, 2nd. ed. © 2009 Pearson Education, Upper Saddle River, NJ 07458.
All rights reserved
• MTRC has conducted several process benchmarking
studies in the past, such as closed loop customer
satisfaction process, supplier management/purchasing
process, information technology and system function,
asset management process, a safety case study, and a
reliability case study .
• They did so with companies such as IBM, Xerox,
American Express, Federal Express, Hong Kong
Telecom, Chase Manhattan Bank, and Orient Overseas
Container Line.

Summers: Quality Management, 2nd. ed. © 2009 Pearson Education, Upper Saddle River, NJ 07458.
All rights reserved
• MTRC was able to net its biggest gains through
benchmarking its suppliers. MTRC implemented
eight different changes in the supplier purchasing
process to improve this area and were able to reduce
material supplier base by 40 percent .
• They were also able to save $16.5 million by means of
alternative sourcing and $6 million by identifying and
adopting a noise damping wheel for its electrical multiple
units (31).

Summers: Quality Management, 2nd. ed. © 2009 Pearson Education, Upper Saddle River, NJ 07458.
All rights reserved
 Types of Benchmarking O
• Process benchmarking - Focuses on improving specific critical processes
and operations. Involves producing process maps to facilitate comparison
and analysis. The objective is to benchmark cost and efficiency.
• Performance benchmarking - allows the initiator firm to assess their
competitive position by comparing products and services with those of
target firms.
• Strategic benchmarking - involves observing how others compete. Used
when businesses need to improve overall performance, strategic
benchmarking examines the long-term strategies and general
approaches that have enabled high-performers to succeed. Developing
new products and services, and improving capabilities for dealing with
changes in the external environment

Summers: Quality Management, 2nd. ed. © 2009 Pearson Education, Upper Saddle River, NJ 07458.
All rights reserved
Summers: Quality Management, 2nd. ed. © 2009 Pearson Education, Upper Saddle River, NJ 07458.
All rights reserved
Summers: Quality Management, 2nd. ed. © 2009 Pearson Education, Upper Saddle River, NJ 07458.
All rights reserved
 Benchmarking
• What are the major benefits of benchmarking?
– Identifies opportunities for improvement
– Motivates action by external example of excellence
– Clarifies current status
– Stimulates change
– Identifies strengths and assets
– Provides an urgency for change
– Uncovers new ways of improving processes
– Promotes improvement

Summers: Quality Management, 2nd. ed. © 2009 Pearson Education, Upper Saddle River, NJ 07458.
All rights reserved
 Benchmarking
• What are the different standards for
comparison?
• AWARDS/CERTIFICATIONS
– Malcolm Baldrige National Quality Award
– ISO 9000 – qualitydigest.com
– Deming Prize
– Supplier Certification Requirements
– Best-in-field organizations

Summers: Quality Management, 2nd. ed. © 2009 Pearson Education, Upper Saddle River, NJ 07458.
All rights reserved
 Benchmarking
• What are the other standards for comparison?
• Public (free) studies
– Industry Week Magazine
– The BenchMark Exchange
• www.benchnet.com -you have to contribute

Summers: Quality Management, 2nd. ed. © 2009 Pearson Education, Upper Saddle River, NJ 07458.
All rights reserved
 Benchmarking
• What are the other standards for
comparison?
• Private (pay-to-see) studies
– Example: mpi-group.net
• MPI’s U.S. Benchmarking Toolkit for one year for $995
– Many many others…

Summers: Quality Management, 2nd. ed. © 2009 Pearson Education, Upper Saddle River, NJ 07458.
All rights reserved