Bench Marking

Total quality management

Assignment on benchmarking

- Suresh Kumar Sen.

Benchmarking

Benchmarking is defined as “measuring our performance against that of best in class companies, determining how the best in class achieve those performance levels and using the information as a basis for our own company’s targets, strategies and implementation.” (Or) more, “the search of industry best practices that leads to superior performance”.

The essence of benchmarking Essence of benchmarking is the continuous process of comparing a company’s strategy, product and processes with those of world leaders and best in class organizations in order to learn how they achieved excellence and then setting out to match and even surpass it. In other words, it is “moving from where we are to where we want to be”.

The evolution of benchmarking The concept of benchmarking is not new. In the early 1800s, Francis Lowell, a New England industrialist, traveled to England to study manufacturing techniques at the best British factories. Toyotas just in time production system was influenced by the replenishment practice of U.S supermarkets. Modern benchmarking was initiated by Xerox (in the 1980s) an eventual winner of the Malcolm Baldrige national quality award. IBM, Motorola and Xerox became the pioneers and instituting the bench marking process.

Advantages of benchmarking A primary advantage of benchmarking practice is that it promotes a thorough understanding of the companies own processes i.e. the companys current profile (strength and weakness) is well understood. (I) It involves limitation and adaptation of the practices of superior competitors, rather than invention, thereby saving time and money for the company practicing benchmarking. (II) Intensive studies of existing practice often lead to identification of none value added activities and plans for process improvement. (III) It enables comparison of performance measures in different dimensions, each with best practices for that particular measure. (IV) It focuses on performance measure and processes and not on products. (V) It is not restricted to the industry to which the company belongs. It extends beyond these boundaries and identifies organization in other industries that are superior with respect to chosen measures. (VI) I t allows organizations to set realistic, rigorous new performance targets and this process helps convince people of the credibility of these targets. (VII) It allows organization to define specific gaps in performance and to select the gap between what they are doing and what best in class are doing. Closing the gap emphasizes the need for personal to be involved in technique can of problem solving and process improvement.

Limitations (I) Benchmarking is the fact that best in class performance is not a static but a moving target. (II) New technology can create quantum leap performance improvements.

(III) Benchmarking is not an “instant pudding”. It will not improve performance if the proper infrastructure of a total quality program is not in place. Benchmarking is not a panacea that can replace all other quality efforts or management processes that can improve the competitive advantage of a company.

Pitfalls of benchmarking The potential pitfalls of benchmarking include the failure to do the following. (I) involve the employees who will ultimately use the information and improve the process. (II) Relate process improvement to strategy and competitive positioning. (III) Define the firms own process before gathering data for the purpose of comparison. (IV) Perceive benchmarking as an ongoing process and not as a one time project with a finite start and completion dates. (V) Perceive benchmarking as a means to process improvement, rather than an end itself. (VI) Empower employees to achieve improvement that they identify and for which they solve problems and develop action plans.

Levels of benchmarking To compare ones business practice with those of other organization, four common approaches to benchmarking are adopted. They are: (I) internal benchmarking (II) Competitive benchmarking (III) Non competitive benchmarking (IV) World class benchmarking Internal benchmarking is done within ones organization or perhaps in conjunction with another division or branch office. It is the easiest to conduct since data and information should be readily available and confidentiality concerns are minimized. Competitive benchmarking involves analyzing the performance and practice of best in class companies. Their performance becomes a benchmark to which a firm can compare its own performance and their practice is used to improve that firms practices. Non competitive benchmarking is learning something about a process a company wants to improve by benchmarking includingA related process in the industry with a firm, the company does not directly compete with. A related process in a different industry. An unrelated process in a different industry. An advantage of the type of benchmarking is that new processes which could easily be adapted to ones organization might be discovered. World class benchmarking is an approach to benchmarking is the ambitious. It involves looking towards the recognized leader for the process being benchmarked – an organization that does it benchmarking it better than any other.

Type of benchmarking

Performance benchmarking or Operational benchmarking It involves pricing, technical quality, features and other quality of performance characteristic of products and services. Performance benchmarking is usually performed by direct comparisons or “reverse engineering” in which competitors products are taken apart and analyses. This process is also known as “operational benchmarking” or “competitive benchmarking” and involves studying of products and processes of competitors in the same industry.

Process benchmarking or functional benchmarking It centers on work processes such as billing, order entry or employee training. This type of benchmarking identifies the most effective practices in companies that perform similar functions, no matter in what industry. Strategic benchmarking examines how companies compute and seeks the winning strategies that have led to competitive advantage and market success. One way to determine how well a company is prepared to complete in a segment and to help define a best in class competitor is to construct a key success factor matrix. Areas to benchmark: specific areas to benchmark at the operating level might include the following: Customer services levels Inventory management Inventory control (extent of automation) Purchasing Billing and collection Purchasing practices Quality process Warehousing and distribution and Transportation

Guidelines to benchmarking: companies approach benchmarking in different ways. IBM has a four step approach. AT & T has a nine step approach and Xerox a ten step approach. All these approach have the general guidelines given below:

Do not go on a fishing expendition: When preparing a benchmarking study, pick-up specific area in the organization that needs improvement. This may be quality, customer satisfaction, accounts payable or delivery time. Then do your homework, including thoroughly reviewing your own process and procedures before picking a company that excels in the particular area chosen.

Use company people: The people who are to implement changes need to see and understand for themselves, so it is they who should make the visits to other firms which are benchmarked and have the discussions with the concerned people. Further the visits should be short and the working teams small.

Exchange information: You should be ready to exchange information and provide answers in turn to any questions you might ask another company.

Legal concerns: avoid legal problems which might arise as a result of discussions that might imply price fixing, market allocations or other illegal activities. This could lead to problems. Do not expect to learn much about new products of competitors by the benchmarking process. Most benchmarking missions focus on existing products, business practices, human resources and customer satisfaction.

Confidentiality: Respect the confidentiality of data obtained. Companies that agree to share information with you may strongly object if that information leaks out to a competitor.

Four phases of benchmarking The four phases of benchmarking are: I) Planning: identify the product, service or process to be benchmarked and the firm(s) to be used for comparison determine the measures of performance for analysis and collect the relevant data. ii) Analysis: determine the gaps between the firm’s current performance and that of the firm(s) benchmarked and identify the causes of significant gaps. iii) Integration: establish goals and support of managers who must provide the resources for accomplishing the goals. iv) Action: develop cross-functional teams of those most affected by the changes, develop action plans and team assignments, implement the plans, monitor progress and recalibrate benchmarks as improvements are made.

Benchmarking process: Specific steps in benchmarking vary from company to company but the fundamental or basic step is the same. One company’s benchmarking may not work at another organization because of differences in their operating concerns. Successful benchmarking reflects the culture of the organization, works within the existing infrastructure and is harmonious with the leadership philosophy. Motorola Inc., winner of the Malcolm Baldrige Award for 1988, uses a five step benchmarking process: (i) Decide what to benchmark (ii) Select companies to benchmark (iii) Obtain data and collect information (iv) Analyze data and form action plans and (v) Recalibrate and start the process again. AT & T, which has two Baldrige winners among its operating units, uses a nine step process:

(i) (ii)

Project conception: identify the need and decide what to benchmark. Planning: determine the scope and objectives and develop a benchmarking plan. (iii) Preliminary data collection: collect data on industries companies and similar processes as well as detailed data on your own processes. (iv) Best-in-class selection: select companies with best-in-class processes. (v) Best-in-class collection: collect detailed data from companies with best in class processes. (vi) Assessment: compare your own and best-in-class processes and develop recommendations. (vii) Implementation planning: develop operational improvement plans to attain superior performance. (viii) Implementation: enact operational plans and monitor process improvements. (ix) Recommendations: update benchmark findings and access improvement in processes. Xerox divided its initial benchmarking procedure into ten steps but other experts have noted successful programs based on as few as four defined stages. What matters is not the number of steps but all necessary actions are completed in the benchmarking process.

The seven step benchmarking model Benchmarking is an ongoing process that requires data gathering, goal setting and analysis. These are accomplished by seven step model. The seven steps are: Step 1: identify what to benchmark Step 2: determine what to measure Step 3: identify who to benchmark Step 4: collect he data Step 5: analyze data and determine the gap Step 6: set goals and develop action plans and Step 7: monitor the process

Step 1: identify what to benchmark? Benchmarking can be very powerful vehicle for driving peal process performance but if the approach to benchmarking is not targeted, well planned or organized, it can be a very costly investment of resources with minimal return on investment. The first step which keeps the efforts of the company focused involves the following sub-steps: (i) clarify the benchmarking objective (ii) decide whom to involve (iii) define the process (iv) consider the scope

(v) (vi) (vii)

set the boundaries agree on the process and flow chart the process

(i)

clarify the benchmarking objective : benchmarking decision may be driven by any one or more of the following factors: • • • •

(ii)

An organization wide strategy, setting priorities for improvement. The need to address a specific problem that requires immediate attention. A new business requirement (a new product line or a modification to the existing one). Not meeting goals in previous attempts to improve a process. Decide whom to involve: after deciding what to benchmark, decide who will be on the team. Even though benchmarking can be done individually, best results typically come from team effort. the team members are selected on the following considerations: • • •

It is critical for management to be actively involved with the team. Include employees involved with the day-to-day flow of the process and Include employees who have an interest in and knowledge about what goes on just outside the boundaries of the process.

(iii)

Define the process: the process should be clearly defined. A process is a series of interrelated tasks that are organized to produce an output. An output might include a product or a service. It is important to know as much about your process before you benchmark it against another organizations process.

(iv)

Consider the scope: the scope should not be too broad or too narrow. if the scope of your focus is too large, you might not be able to tackle it effectively . For example, benchmarking the “human resources function” at another organization might be too broad in scope. A narrower focus, such as the “recruiting and interviewing process” is more realistic.

If the scope is too narrow, your benchmarking efforts might miss important opportunities. For example, benchmarking the “prospective employee interview scheduling process” might miss critical information and opportunities not related to this narrow focus.

(v)

Set the boundaries: every system is made up of separate and distinct processes. Boundaries of each process can be defined by identifying its inputs and outputs. Boundaries exits at the point where inputs are received from

(vi)

(vii)

internal suppliers and outputs go to internal customers. Defining the boundaries more specially will make you more successful in improving the process. You will be better able to stay focused make plans and stay on track as you benchmark. Agree on the process: once your team has defined the process, you agree on the tasks involved. It is a good idea to brainstorm the tasks first and put them in the right order later. The objective is to include all the major tasks in the process from start to finish. Flow chart the process: a flow chart is a step by step picture of the task in your process. Use it as a “working document” to help define the process. Later, it can be used as the tool to continuously improve the process.

Step 2: Determine what to measure Once the process to be benchmarked has been defined, you are almost ready to look at similar processes in other organizations. Comparison of your processes with those in other organizations should be meaningful. This requires clear and accurate measures before looking at processes in other organizations. Three sub steps (i) Examine the flow chart. • Overall time to complete the process • Complete time at each individual task • Time spent at each decision point • Number of repeat • Variation of task time • Costs and • Scrap. (ii) Establish the process measures and (a) Consider measures outside the process(b) Comparing and selecting your benchmarking measures. (a) Determine customer “result” measures (b) Determine supplier “input” measures (c)Brainstorm in process measures (d) Link supplier and customer measures with in process measures (iii)

Verify that measures match objectives.

Step3: Identify who to benchmark (a) Conduct general research through sources: (i) trade magazines (ii) industry publications (iii) professional journals (iv) market research (v) government studies (vi) telephone or mail surveys and (vii) Benchmarking consultants. (b) Choose the level to benchmark.

Step 4: Collect the data

(a) internal (b) public information (c) other companies

Step 5: Analyze data and determine gap (a) quantitative data (b) qualitative analysis

Step 6: Set goals and develop an action plan (a) Set performance goals (b) Develop an action plan

Step 7: Monitor the process  Track the changes (i) evaluate measures in increments (ii) publish periodic benchmarking progress reports (iii) hold regular progress meetings (iv) monitor customers (internal and external) (v) monitor suppliers (internal and external) (vi) implement benchmarking as on ongoing process  Make benchmarking a habit Benchmarking is process of discovering and adapting new and innovative practices to improve overall organizational effectiveness. It is also a “learning process” – learning and adapting new practices by establishing new goals and introducing new ideas.