Benchmarking

Session Three – Part B

Introduction
 What Is Benchmarking?
 Why Benchmark?
 What Should We Benchmark?
 How Do We Benchmark?
“Good artists
initiate……………….
……….Great artists
steal!”
Picasso
Benchmarking in the
Public Sector
“The Value of Benchmarking Is That
It Provides a Substitute for the
Efficiency Boosting Effect of
Market Forces for Organisations
That Are Not (Normally) Exposed
to Market Economies.”
Tony Bendell, Benchmarking for
Competitive Advantage
Key Areas in the Public
Sector
 Used by Government in
Purchasing
 whole life cost
 quality and reliability
 timeliness of supply
 risk and change
Why Benchmark?
 To Obtain an External Perspective of
What Is Possible
 To Assist in Setting Strategic Targets
 To Promote Improvements in
Performance
 To Establish a Competitive Edge
 To Enhance Customer Satisfaction
 To Reduce Costs
 To Improve Employee Morale
 To Achieve Quality Awards
 To Survive
Benchmarking in the Context of TQM
TQM Key principles include:
 Comparisons with best practice

 A Strong emphasis on meeting the needs of the

customer (internal and external)

 The importance of efficient, effective business

processes
 The need for continuous improvement

 Enhances a TQM programme

What should we Benchmark?
Performance in
 Services or products that we sell or provide to
internal and external customers
 Key business processes
 The internal structure of the organisation
How do we Benchmark?
 We should assess performance in
terms of :

Critical Success Factors

Critical Success Factors
Critical Success Factors (CSFs) Are the Key Indicators
That Inform Us That a Particular Task, Activity, Process,
Event, Function, Service or Endeavour Is Successful

CSF’s Are a Feature of All Levels of Business Activity;

From the Company As a Whole Down to the Activities
of Individuals in It

How Will Success Feel?

Planning a Benchmarking Exercise
Principal Requirements for Success
 Strong Commitment From Senior Management
 Willingness to Act on Any Major Opportunities for
Improvement Revealed by Benchmarking
 Resources
 Staff Capable of Running a Benchmarking Project
 Time for Employees to Spend on Benchmarking
Activities
Types of Benchmark
 Internal: Non-competitive, Branch With
Branch, Region With Region, Etc.
 Competitive: Dancing With the Enemy
E.G Rover
 Functional: External, Non Competitive,
Similar Activities
 Generic: External , Non Competitive, Key
Business Processes.
Choosing a benchmarking Partner
The Ideal Benchmarking Wil Be:
 Better or Best in Class in Our Chosen
Area Plus
 Focussed on Core Business

 Focussed on Improvements Rather Than

Power or Relations
 In Control of Costs
 In Close Contact With the Customer

 In Close Contact With the Supplier

 Using State of the Art Technology
Choosing a Benchmarking Partner
Sources of Help and Advice
 NI Quality Centre

 British Quality Foundation

 Department of Trade & industry

 Employment Department - TEC’s

 Trade Associations

 National Measurement Accreditation Service

 British Standards Institute (BSI)

Making Comparisons: key questions
 How Big Is the Gap Between Their
Performance and Ours?
 Are Their Methods and Experience
Applicable to Our Situation?
 Can We Adopt and Adapt Their
Methods and Learn From Them?
 Implementation
 Identify New Targets for
Performance
 Obtain Senior Management/board
Approval
 Identify and Obtain Adequate
Resources
 Design Project Plan
 Implement Project
 Report and Review Benchmark.
 What can go wrong?
 Unrealistic Assumptions
 Lack of Management Commitment
 Inadequate Planning
 Inadequate Documentation
 Inadequate Training
 A ‘Not Invented Here’ Mentality
 Resistance to Change
 A Desire for a ‘Quick Fix’ to a
Current Problem
 What can go wrong? contd

 Team Members Not Free to

Participate in the Project
 Lack of Contingency Plan
 Failure to Update the Plan
 Failure to Communicate the Plan
 Inadequate Project Definition
 Inadequate Process
Understanding
 Team Too Insular
 Key Personnel
Project Sponsor:
 Focus on Business Process
 Select Team From Wide Range of Skills
 Involved in Visits and Lessons Learned Seminars
 Sees Project Through to Implementation
Team Leader
 Planning and Managing the Project
 Holds Meetings; Reviews Progress Against Plan,organises Visits
Recommends Improvement
 Communicates Outside the Team
Team Members
 Determines Customers and Suppliers
 Decides on Success Criteria and Measures
 Collates Data and Recommends Changes
BENCHMARKIN
G
CUSTOMER SUPPLY CHAIN
 PARAMETERS FOR
SUCCESS
 Focus On A Process
 Permeate The Entire Company
 Roles & Responsibilities
 Performance Measurement & Reward
 Organisational Design
 Organisational Culture
 Information Technology
 BENCHMARKING
DEFINED
“A Method For Continuous Improvement That
Involves An Ongoing And Systematic Evaluation
And Incorporation Of External Products, Services
And Processes Recognized As Best Practice”
Macneil Et Al. (1994)
 BENCHMARKING
DEFINED
“Strategic Benchmarking Provides Strategic Data And
Information That Can Be Compared To Similar Information
From Other Global Manufacturing Companies…[Strategic
Benchmarking] Is Just One Of Several Ways To Benchmark
- An Activity That Varies Depending On Whether A Product,
A Process, Customer Needs Or Global Strategies Are Being
Compared”
Miller Et Al. (1992)
TYPES OF
BENCHMARKING
 Product Benchmarking
 Functional Benchmarking
 Best Practices Benchmarking
 Strategic Benchmarking
 BENCHMARKING
PROCEDURES
 Identify the Function to Benchmark
 Identify the Best-in-class Company
 Identify the Key Performance
Variables to Measure and Collect the
Data
 Analyse and Compare the Data to
What Happens in Your Own Company
 Project Future Performance Levels
of the Benchmark Company
 Establish Functional Goals
 Communicate Benchmark Findings
 Develop Action Plans
 Implement Specific Actions and
Monitor Progress
 Recalibrate Benchmarks
 BENEFITS OF
BENCHMARKING
 It Enables the Best Practices From Any Industry to Be
Creatively Incorporated Into the Processes of the
Benchmarked Function
 It Can Provide Stimulation and Motivation to Professionals
Whose Creativity Is Required to Perform and Implement
Benchmark Findings
 Benchmarking Breaks Down Ingrained Reluctance of
Operations to Change
 SERVICE
BENCHMARKING
Define the Competitive Area

Determine Customer Based Definitions of Service

Utilise Trade-off Analysis to Identify Key Service Factors

Benchmark Performance Against Key Competitors

Develop Service Profile and Service Performance Matrix

 TRADE-OFF
MATRICES
ORDER CYCLE TIME ORDER CYCLE TIME
2 Days 3 Days 4 Days 2 Days 3 Days 4 Days
DELIVERY RELIABILITY

CREDIT TERMS
+/- 3 Days 9 40 Days 1
30 Days 6
+/- 1 Day
DELIVERY RELIABILITY
+/-3 Days +/-2 Days On-Time
On Time
1 Credit Terms

40 Days 1
30 Days
6
 Completed Trade-off
Matrices
ORDER CYCLE TIME ORDER CYCLE TIME
2 Days 3 Days 4 Days 2 Days 3 Days 4 Days
DELIVERY RELIABILITY

CREDIT TERMS
+/- 3 Days 6 8 9 40 Days 1 3 5
30 Days
2 4 6
+/- 1 Day 3 5 7
DELIVERY RELIABILITY
+/-3 Days +/-2 Days On-Time
On Time
1 2 4 Credit Terms

40 Days 4 2 1
30 Days
6 5 3
 Weights From Trade off
Analysis
Importance Weight
Delivery Reliability +/- 3 Days - 0.480
+/- 1 Day 0
On-Time + 0.480

Delivery Time 2 Days + 0.456

3 Days 0
4 Days -0.456

Credit Terms 40 Days + 0.239

30 Days - 0.239
 Benefits of Trade off
Analysis
 Objective Measure of the “Utility” That a Customer or
Potential Customer Places on Each Aspect of Service
 By Assigning Weights Preferred Service
Combinations Can Be Assigned
 Facilitates Distinction Between Different Types of
Customers
 Company Position Vs The
Competition
How Would You Rate ABC On The Following:
(Score From 1 to 5: 1 = Very Poor, 5 = Excellent)
Please Circle
Order Cycle Time 1 2 3 4 5
Stock Availability 1 2 3 4 5
Order Size Constraints 1 2 3 4 5
Frequency of Delivery 1 2 3 4 5
Delivery Reliability 1 2 3 4 5
Quality of Documentation 1 2 3 4 5
Claims Procedure 1 2 3 4 5
Order Completeness 1 2 3 4 5
Technical Support 1 2 3 4 5
Order Status Information 1 2 3 4 5
 Customer Service
Benchmarking
Importance to Customer Elements Performance

Low Medium High Poor Satisfactory Good

Order Cycle Time
Delivery Reliability
Frequency of Delivery
Stock Availability
Document Quality
Order Completeness
Technical Support

Benchmark Competitor Company

 Service
Performance Matrix
IMPORTANCE TO CUSTOMER
(1 = UNIMPORTANT, 5 = HIGHLY IMPORTANT)
1 2 3 4 5
PERCEIVED PERFORMANCE

2 1 ORDER CYCLE TIME

1 2 ORDER COMPLETENESS
3 DOCUMENTATION QUALITY
3 4 DELIVERY RELIABILITY
2 4 5 TECHNICAL SUPPORT
6 SALES SUPPORT
4
3

5 5 6
Management Indicators
IMPORTANCE TO CUSTOMERS
LOW HIGH
UNDER-
HIGH
PERCEIVED PERFORMANCE

PERFORMANCE

TARGET
AREA
LOW

OVER-
KILL
 Competitive
Position Matrix
Competitive Competitive Competitive
Disadvantage Parity Advantage
Major Major
5 Weakness 4* Strength
1*

Importance
3*

Minor Minor
1 Weakness 2* Strength
6* 5*
0.2 1.5 5.0
Relative Performance
 Pipeline From Supplier to
Customer

SUPPLIERS PROCESS CUSTOMERS

Requirements & Feedback Requirements & Feedback

 CUSTOMER ORDER
PATH
Sales & Customer Ship
Marketing Order Order
Function Status To
Customer

Purchasing Accounting

Back Invoice
Inventory Order
Available

Credit Warehouse
Inventory Process
Check Withdrawal
File Order
Customer Production
Order Schedule Transportation
Production Shipping
Scheduling
Documentation
 Process Control &
Service Quality Customer Specific
Service Levels
Supplier Material Production Finished On-Time Consumer
Delivery Stock Plan Goods Delivery Availability
? ?
Performance Availability Vs Actual Availability
Order Fill
?

SUPPLIER FACTORY CUSTOMER END USER

Finished
Materials Goods
Inventory Inventory
Level Level
 Supplier & Distributor
Benchmarking
 Willingness to Work As a Partner
 Commitment to Continuous Improvement
 Acceptance of Innovation & Change
 Focus on Throughput Time Reduction
 Utilisation of Quality Management Procedures
 Use Regular and Formal Benchmarking Processes Themselves
 Flexibility Is Seen As the Prime Goal
 Employees Share Common Core Values of Customer Concern
 Actively Seek to Improve Communication
 Leadership Emphasize the Primacy of Total Quality Management
 TYPICAL
MEASURES
SUPPLIER INTERNAL DISTRIBUTOR

Quality Throughput Times Value Added Services

On-Time Performance On-Time Performance Customer Concern
Stock Availability Stock Availability Delivery Performance

Communications Communications
Schedule Integration Requirements Planning
Co-Makership Partnership
 SETTING
PRIORITIES
 Are of Strategic Performance?
 Have a High Relative Impact on
the Business
 Where There Is a Choice Between
“Make” or “Buy”
 Where There Is Internal Readiness
To Change
 Benchmarking
Performance
Strategic Performance
Processes That Are Likely to
Play a Major Role in the Future
Success of the Company

Relative Impact on Business Economies

Processes That Have a Disproportionate Organisational Readiness
Impact on: Total Cost Benchmark Processes Executed By
Revenue Generation Properties Personnel Who Are “Ready To
Fixed Asset Productivity Improve”
Human Productivity

Strategic Performance
Processes Determined to Have a
High Impact on Product
Performance / Profitability and
Which Are Hard to Source From
Quality Suppliers
 STRATEGIC GOALS
RELATIVE DIFFERENTIATION

High
(EFFECTIVENESS)

Low

Low High

RELATIVE DELIVER)ED COST

(EFFECTIVENESS
 TYPES OF
BENCHMARKING
APPROPRIATE AND INAPPROPRIATE AND
EFFECTIVE BENCHMARKING INEFFECTIVE BENCHMARKING

EXTERNAL INTERNAL Unthinking and Direct

Understanding Why Measuring How Close Copying of What Others Do
What Others Do Is We Are to Achieving
Appropriate for the What Is Our Ideal Goal Leads to Fads Which
Circumstances Often Fail Due To

Copying the Providing a Basis Generalising Not Understanding

Appropriate Way of for Internal From What Is
Thinking and Continuous Subjective Appropriate
Adapting to Our Improvement Experience For the Given
Specific Problems Circumstances