Chapter 4 benchmarking (1)
- 1. Contemporary Techniques in TQM Chapter - 4 Prepared and Presented by Dr. Shyamal Gomes // XISS-Ranchi B E N C H M A R K I N G
- 2. Benchmarking The secret to benchmarking is the notion of ‘ best” - XEROX Prepared and Presented by Dr. Shyamal Gomes // XISS-Ranchi
- 3. Introduction: Xerox invented the photocopier in 1959, and maintained a virtual monopoly for many years to the extent that its name became a generic name for all photocopiers. However, by 1981, the company’s market shrank to 35% as IBM and Kodak developed high end machines and Canon, Richo and Savin dominated the low-end segment of the market. The Company was suffering from the “ not invented here” syndrome as its managers did not want to admit that they were not the best. The company then instituted the benchmarking process. However, this was initially resisted. When faced with the facts, reaction went from denial to dismay to frustration and finally to action. Once the process began, the company benchmarked virtually every function and task for productivity, cost, service and quality. The results of benchmarking were dramatic: Quality problem were cut back by two – thirds. Suppliers were reduced from 5,000 to 300. Manufacturing costs went down by half. Development time was cut by two - thirds. Concurrent engineering was practiced. Each product development group secured inputs from the design, manufacturing and services department from the initial stages of the project. Direct labour was cut by 50% and corporate staff went down by 35% while increasing volume. The hierarchical organizational structure was pared, and use of cross- functional “Teams Xerox” was established Prepared and Presented by Dr. Shyamal Gomes // XISS-Ranchi
- 4. Finally, Xerox became the only company worldwide to win all the three prestigious quality awards – The Deming Prize (JUSE) in 1980, The Malcolm Baldridge National Quality Award in 1989, and the European Quality Award in 1992. The Company’s document out-sourcing division, Xerox Business Services, also won the Baldridge Award in the service category in 1997. This success is mainly attributed to the “leadership through quality” initiative, and to the positive intervention of benchmarking practices. The success of benchmarking at Xerox motivated many companies to implement benchmarking practices. By the mid-1990s, many companies such as Ford, AT&T, IBM, GE, Motorola etc. implemented benchmarking practices at their divisions across the world and derived many benefits. During the 1990s, Xerox, along with Ford, AT&T, Motorola and IBM created the International Benchmarking Clearinghouse (IBC) to promote benchmarking and guide other companies and best practices through its electronic bulletin board. More than 1000 companies joined the IBC to gain access to its extensive database. By 2011, benchmarking had become a common phenomenon in many companies Globally. Prepared and Presented by Dr. Shyamal Gomes // XISS-Ranchi
- 5. What is a Benchmarking? Benchmarking can be defined as a process for improving performance by constantly identifying, understanding and adapting best practices and processes followed inside and outside the company and implementing the results. Simply it is “ the search of industry best practices that lead to superior performance”. The main emphasis of benchmarking is not on “ best performance” but on improving a given business operation or a process by exploiting “ best practices.” WHY Benchmarking? 1.To promote best practices and processes for superior performance 2.To build a culture for continuous Improvement 3.To gain competitive advantages Prepared and Presented by Dr. Shyamal Gomes // XISS-Ranchi
- 6. When Benchmarking? Where there is 8 Negative answers: 1.Is the company’s QMS properly developed, documented and implemented? No. 2.Is there any system to allocate appropriate resources and findings for the effective implementation of QMS? No. 3.Company’s great strength areas measured? No 4.Company’s great weakness areas measured? No 5.Company’s great opportunity areas measured? No 6.Areas have threats for its survival measured? No 7.Customer needs assessed & Rectified? No. 8.KSF application is central focus? No. Where Benchmarking? Operational Strategies Hr Practices Quality Improvement effects Marketing and SCM Prepared and Presented by Dr. Shyamal Gomes // XISS-Ranchi
- 7. How Benchmarking: Process IntegrationIntegration AnalysisAnalysis PlanningPlanning MaturityMaturity ActionAction Process • Planning: Identify the product, service or process to be benchmarked • Analysis: Determine the gap between the firm’s current performance and that of the firm’s benchmarked and identify the causes of significant gaps. • Integration: Establish goals and obtain the support of managers who must provide the resources for accomplishing the goals • Action: Develop action plans, and team assignment, implement the plans, monitor progress and recalibrate benchmark as improvements are made • Maturity: Leadership position attended, best practices fully integrated into process. Prepared and Presented by Dr. Shyamal Gomes // XISS-Ranchi
- 8. Phase 1: Planning 1. Identify what to benchmark; 2. Identify comparative companies; 3. Determine data collection method & collect data. Phase 2: Analysis 4. Determine current performance gap; 5. Project future performance levels. Phase 3: Integration 6. Communicate finding and gain acceptance; 7. Establish functional goals. XEROX ‘s twelve steps of benchmarking (1980) Prepared and Presented by Dr. Shyamal Gomes // XISS-Ranchi
- 9. Phase 4: Action 8. Develop action plans; 9. Implement specific actions & monitor progress; 10. Recalibrate benchmarks. Phase 5: Maturity 11. Attain leadership position ; 12. Fully integrate practices into processes. Prepared and Presented by Dr. Shyamal Gomes // XISS-Ranchi
- 10. What is our Performance level? How do we do it? Refine What are others’ Performance levels? How did they get there? Creative adaptation Compare and contrast (BORROW) For breakthrough PERFORMANCE How Benchmarking: Method Prepared and Presented by Dr. Shyamal Gomes // XISS-Ranchi
- 11. Types of Benchmarking There are Seven major types of Benchmarking: • Strategic benchmarking • Performance or competitive benchmarking • Process benchmarking • Functional / generic benchmarking • Internal benchmarking • External Benchmarking • International Benchmarking Prepared and Presented by Dr. Shyamal Gomes // XISS-Ranchi
- 12. BMBM Strategic BM: Org. seek to improve their overall performance for Long term by KSF Strategic BM: Org. seek to improve their overall performance for Long term by KSF Performance BM: Concentrate to Performance of Key products/ services Performance BM: Concentrate to Performance of Key products/ services Process BM: Critical Factors / Process Mapping Process BM: Critical Factors / Process Mapping Functional BM: Innovation and Dramatic improvement by seeing best processes from different sectors Functional BM: Innovation and Dramatic improvement by seeing best processes from different sectors Internal BM: Partners are sought from within organization Internal BM: Partners are sought from within organization External BM: Partners are sought from outside organization External BM: Partners are sought from outside organization Internal BM: Partners are sought from other countries Internal BM: Partners are sought from other countries
- 13. KEY SUCCESS FACTOR MATRIX (KSF) Key success factor Competitive analysis – Computer Industry …… Segment Performance Rating Weight Our Company Competitor A Competitor B Competitor C Sales Force Distribution Suppliers R&D Service Cost Structure Prepared and Presented by Dr. Shyamal Gomes // XISS-Ranchi
- 14. Therefore the simple methodology for effective benchmarking is Step – 1: Identify what to benchmark and determine what to measure Step – 2: Identify who to benchmark Step – 3: Collect the data. Step – 4: Analyze data and determine the performance gap Step – 5: Set goals and develop action plan Step – 6: Implement action plan Step – 7: Monitor / recalibrate / recycle the process Prepared and Presented by Dr. Shyamal Gomes // XISS-Ranchi
- 15. • Benchmarking must have the full support of senior management and they should actively involved. • Training is very important for benchmarking team and process • Benchmarking should be a team activity • Benchmarking is an ongoing process. • Benchmarking efforts must be organized, planned, and carefully managed. • Use correctly, benchmarking can lead you to the competitive edge in today’s business market place. Remember Prepared and Presented by Dr. Shyamal Gomes // XISS-Ranchi
- 16. Limitations • Some times Benchmarking comes from the idea of copying others. • BM is not a panacea. It is not a strategy nor is it intended to be a business philosophy. • It is an important technique. To be effective it must be used properly. It breaks down (waste money, time and energy and some times morale too) if process owners and managers feel threatened or do not accept and act on the findings. • BM is also not a substitute for innovation: however, it is a source of ideas from outside the organization. Prepared and Presented by Dr. Shyamal Gomes // XISS-Ranchi
- 17. Advantages • Benchmarking is a systematic comparison by which it promotes superior performance by providing an organized framework through which organization learn how the “ best in class” do things. • It helps for continuous improvement on current performance • Benchmarking inspire managers (and organization) to compete. • Through Benchmark, organization can borrow ideas and opting them to gain competitive advantages. Prepared and Presented by Dr. Shyamal Gomes // XISS-Ranchi
- 18. Conclusion • Benchmarking Ethics: – Keep it legal – Be willing to give what you get – Respect confidentiality – Don’t refer without permission – Select the right Bench mark Prepared and Presented by Dr. Shyamal Gomes // XISS-Ranchi
- 19. Prepared and Presented by Dr. Shyamal Gomes // XISS-Ranchi