BENCHMARKING

K. KAVITHA K.PREMKUMAR

M.SRINIVASAN
C.YAZHINI

CONTENT
• • • • • • • • • Introduction Procedure Levels of benchmarking Types of benchmarking Process of benchmarking Guidelines Challenges Myths and Paradigms Case Study

What is Benchmarking
• Benchmarking is the process of comparing one's business processes and performance metrics to industry bests or best practices from other industries

• the continuous process of measuring our products, services and business practices against the toughest competitors or those companies recognized as industry leaders (Xerox Corp.)

OBJECTIVE
• To determine what and where improvements are called for
• To analyze how other organizations achieve their high performance levels, and • To use this information to improve performance.

Why Benchmark
• Identify opportunities to improve performance • Learn from other‟s experiences • Set realistic but ambitious targets • Uncover strengths in one‟s own organization • Better prioritize and allocate resources

Benefits of Benchmarking
• Promotes a thorough understanding of company‟s own process
• Saves time and money • Identify non value added activities

• Focuses on performance measures and processes and not on products
• It provides a basis for training human resource

PROCEDURE
• Identify your problem areas • Identify other industries that have similar process • Identify organization that are leaders in these areas • Survey companies for measures and practices

• Visit the “BEST PRACTICE” companies to identify leading edge practices
• Implement new and improved business practices

LEVELS OF BENCHMARKING
• Internal benchmarking
• Competitive benchmarking • Non-Competitive benchmarking

• World class benchmarking

TYPES OF BENCHMARKING
• • • • • • Process benchmarking Product benchmarking Strategic benchmarking Functional benchmarking Best in class benchmarking Operational benchmarking

PLAN
• Decide what you wish to benchmark • • • Decide against whom you need to benchmark Identify outputs required Determine data collection methodologies

DATA COLLECTION
• Secondary/background research
• Primary research - from the benchmark

ANALYZE

• Of the gaps • Of the factors that create the gaps (enablers)

IMPLEMENTATION
• Implementation planning
• Roll-out of new modus operandi (changes)

MONITORING

• Collecting data • • Evaluating progress Iterative change

AREAS TO BENCHMARK
• • • • • • • • • Customer service levels Inventory management Inventory control Purchasing Billing and collection Purchasing practices Quality process Warehousing and distribution Transportation

Selecting Benchmarking Partners
Selecting appropriate benchmarking partners is essential for successful strategic and performance benchmarking. A benchmarking partner should: • Have a compatible mission, values and objectives • Be of comparable size • Be a research intensive university

CONTD…

• Have a similar discipline mix

• Have superior performance in the areas to be benchmarked • Have a commitment to quality management and a „willingness to share

GUIDELINES TO BENCHMARKING
• Thorough understanding of one‟s own process • Involvement of management and employees in the analysis of best practices • It should be a continuous process as the competition is always changing • Partner‟s willingness to share information • Selection and empowerment of benchmarking teams • Legal concerns • Manage confidentiality of critical information • The practices should be tested and implementation results verified.

LIMITATION

• Best-in-class performance is not a static but a moving target • Time-consuming and expensive • Benchmarking not a panacea • Benchmarking

PITFALLS

• Involve the employees who will ultimately use the information and improve the process • Relate Process improvement to strategy and competitive positioning

• Define the firm‟s own process before gathering data for the purpose of comparison

BENCHMARKING CHALLENGES
• Business Model variations • Differences in annual periods • Accounting methodologies and data reporting • Environment impact • Identifying ‘right measures’ • Balancing „lag’ and ‘lead’ indicators „appropriate‟ analytical tools and techniques • Management commitment & Leadership • Employee engagement and motivation

MYTHS & PARADIGMS
Benchmarking is not: • Copying or imitating others In rapidly changing circumstances, good practices become dated very quickly. Also, the fact that others are doing things differently does not necessarily mean they are better • A quick fix, done once for all time • Merely competitor comparison The objective is to figure out how the winner got to be best and determine what we have to do to get there. Benchmarking is best undertaken in a collaborative way. • Spying or espionage • Industrial tourism

INTERNAL BENCHMARKING
• Case-1 Reliance Communication: Earlier routers were configured from the field and a maximum of 3-4 could be configured.

INTERNAL BENCHMARKING
After adopting I.B, the process was carried out from the Network operation Center, itself by the engineers. Advantages: • Increase in efficiency of the work process • Increase in the no. of routers configuration(3-18) • Around 6 fold increase in performance

CASE 2
• Pre-benchmarking status: A line of operators were required to monitor every step. • Disadvantages: Costs came up to around Rs.480000 / 1 line/month More labor required

Continued…
• Post-benchmarking status:

• A single operator was equipped to deal with 4 systems simultaneously.. & • 2 unskilled manpower to assist him

ADVANTAGES
• Costs came down to only Total = 75,000/4Line/Month • Manpower requirement reduced • Efficiency is enhanced

CASE STUDY: XEROX

• The process of Benchmarking for Xerox was started in 1980s due to the companies fall in the share market value by 35% in 1981. • At first, Xerox met resistance by its employees who believe that someone else could never do it better. • When faced with the facts, reaction went from denial to dismay to frustration and finally to action.

PROBLEMS FACED BY XEROX
• Their unit manufacturing cost equalled the Japanese selling price in United States.
• Number of production suppliers was 9 times that of best companies. • Assembly line rejects were 10 times higher. • Product lead times were twice as long. • Defects per 100 machines were 7 times higher.

CONTD…

• Once the process began, the company benchmarked virtually every function and task for productivity, cost and quality. • Comparison made for companies both in and outside the industry.

RESULTS FOR XEROX
• Suppliers were reduced from 5000 to 300. • Concurrent Engineering was practised.

• Commonality of parts increased from about 20% to 60-70%.
• Hierarchical organisation structure was reduced and the use of cross functional teams were established.

RESULTS FOR XEROX

• Quality problems cut by 2/3. • Manufacturing costs cut by 50%. • Development time cut by 2/3.

• Direct labour cut by 50% and corporate staff cut by 35%.

CASE STUDY 2
PERFORMANCE MEASURE IN UK TEXTILE & CLOTHING INDUSTRIES. Methodology • A critical sample of companies has predominantly been carried out with 10 textile and clothing manufacturing manufacturers in the UK North West. • A checklist of questions on performance measurement and benchmarking was devised. • Each case study was carried out over a 3 day period.

RESULTS
• From the interview questions afore mentioned above, responses were codified for data analysis. • An inter-item (inter-theme) indicated a clear relationships between strategic direction of the organization in question and the main products offered; staff empowerment and the level of performance measurement and the criteria of production facility layout and production capacity planning; level of performance measurement and the logistics of the production facilities layout; turnover and the level of operating capital available as well as the level of skills.

DISCUSSION

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