CUSTOMER & COMPETITIVE INTELLIGENCE FOR
PRODUCT, PROCESS, SYSTEMS & ENTERPRISE EXCELLENCE
DEPARTMENT OF STATISTICS
DR. RICK EDGEMAN, PROFESSOR & CHAIR – SIX SIGMA BLACK BELT
REDGEMAN@UIDAHO.EDU OFFICE: +1-208-885-4410
Benchmarking is the process of continually searching for the
best methods, practices and processes, and either adopting
or adapting their good features and implementing them to
become the “best of the best.”
How is benchmarking used?
• Compare performance of an existing process against other
companies’ best-in-class practices
• Determine how those companies achieve their performance
• Improve internal performance levels
Use benchmarking both for comparison of performance as well as to
understand the potential for improvement
4. Types of Benchmarking
Best Practices Benchmarking
• Industry leaders
• Top performers with
• Top performers
regardless of industry
• Aggressive innovators
• Top performers
• Top facilities
7. Benchmarking Methodology
2. Select Organizations to Benchmark
Outline industries/functions which perform your
Formulate list of world class performers
Contact the organization and network through to
8. Benchmarking Methodology
3. Prepare for the Visit
Research the organization and ground yourself
in their processes
Develop a detailed questionnaire to obtain
Set up logistics and send preliminary documents
9. Benchmarking Methodology
4. Visit the Organization
Feel comfortable with and confident about
Foster the right atmosphere to maximize
Conclude in thanking organization and ensure
follow-up if necessary
10. Benchmarking Methodology
5. Debrief and Develop an Action Plan
Review team observations and compile report of
Compile list of best practices and match to
Structure action items, identify owners and
move into Improve phase
11. Benchmarking Methodology
6. Retain and Communicate
Report out to business management and 6σ
Post findings and/or visit report on local
server/6σ bulletin board
Enter information on benchmarking project
12. Library Database Internal Reviews
Internal Publications Professional Associations
Industry Publications Special Industry Reports
Functional Trade Publications Seminars
Industry Data Firms Industry Experts
University Sources Company Watches
Newsletters Original Research
Customer Feedback Supplier Feedback
Telephone Surveys Inquiry Service
Networks World Wide Web
Sources of Information
13. Benchmarking Compliance
Policy regarding benchmarking protocol should be
communicated to all employees involved, prior to
contacting external organizations. Guidelines should
address the following areas:
Misrepresentation – do not misrepresent your identity
in order to gather information
Information requests – a request should be made only
for information your organization would be willing to share with
Sensitive/proprietary information – avoid direct
benchmarking of sensitive or proprietary information
Confidentiality – treat all information as confidential
14. Benchmarking Compliance
Avoiding inappropriate communication and
contacts with competitors.
Never propose, enter, or engage in a discussion
related to any agreements with a competitor to fix
prices, in terms or conditions of sale, costs, profit
margins, or other aspects of the competition.
Keep communications with competitors to a
minimum – make sure there is a legitimate
business reason for all such communications
(A) The process of identifying and learning from best
practices anywhere in the world is a powerful tool in the quest
for continuous improvement.
(B) The systematic process of searching for best practices,
innovative ideas, and highly effective operating procedures that
lead to superior performance.
Learning by borrowing from the best and adapting their
approaches to fit your own needs is the essence of
benchmarking. It has broad applications in problem solving,
planning, goal setting, process improvement, innovation,
reengineering, and strategy setting. It is a fundamental
business skill that supports quality excellence.
17. Benchmarks & Benchmarking:
Ideas & Definitions
Benchmarking: is the on-going search for best practices that produce
superior performance when adapted and implemented in one’s own
Emphasis: On-going outreach activity
Goal: Identification of best operating practices
When Implemented: Produces superior performance.
Benchmarking: is the actual process of investigation and discovery that
emphasizes the operating procedures as the things of greatest interest and
Benchmarks: are measurements to gauge the performance of a function,
operation, or business relative to others.
18. Best Practices - the Ends
Enablers - the Means to the Ends
SOFT MEDIUM HARD
Goals & Objectives
19. Benchmarks & Benchmarking:
• Best Practices Benchmarking can be described as
the process of seeking out and studying the best internal and
external practices that produce superior performance.
– Don’t reinvent what others have learned to do better!
– Borrow shamelessly!
– Adopt, adapt, advance!
– Imitate creatively!
– Adapt innovatively!
20. Process Benchmarking
• Process benchmarking focuses on discrete work processes
and operating systems, such as the customer complaint
process, the order-and-fulfillment process, or the strategic
• Process benchmarking seeks to identify the most effective
operating practices from many companies that perform
similar work functions.
• Its power lies in its ability to produce bottom-line results. If
an organization improves a core process, for instance, it can
then quickly deliver process improvement
21. Performance Benchmarking
• Performance benchmarking enables managers to assess
their competitive positions through product and service
• Performance benchmarking usually focuses on elements
of price, technical quality, ancillary product or service
features, speed, reliability, and other performance
• Reverse engineering, direct product or service comparisons,
and analysis of operating statistics are the primary techniques
applied during performance benchmarking.
22. Strategic Benchmarking
• Strategic benchmarking examines how
companies compete and is seldom industry-
focused. It roves across industries seeking to
identify the winning strategies that have enable
high-performing companies to be successful in their
• Strategic benchmarking influences the longer-
term competitive patterns of a company.
Consequently, the benefits may accrue slowly.
24. Benchmarking Whys & Hows
• Benchmarking represents a versatile process management
tool that helps organizations identify and understand what
constitutes best operating practices.
• Benchmarks are the operating statistics or measures that
define the achievement level of any given practice or system.
• These are not in and of themselves enough since they
provide no insight into the root causes of performance
• A flexible set of benchmarks reflects full process or
system capabilities. Performance indicators may include
dimensions such as cost, productivity, cycle time, yields,
error rates, waste and turnover.
25. Range of Benchmarks
FOCUS Benchmark Levels Type Improvement
STRATEGIC Best-in-World 7 Generic Processes 30%
* Product / Services
* Business Processes
* Business Function
Best-in-Country 6 Functional Areas 30%-40%
PERFORMANCE Industry Leader 5 Direct Competitor 15%-20%
* Customer Satisfaction Norm 4
* Output : Standard 3
--Products & Services
PROCESS Best-in-Company 2 Internal 15%
* Practices & Capability
-- Material/Supplier Baseline 1
27. Dashboard of New Performance
28. Designing Successful Benchmarks:
Effective Performance Benchmarks Reflect the Most Important
Operating Dimensions of a Business Process, System, or Function.
• MEASUREMENT FOCUS
– Determine where in a work area or process that value for the customer is created;
– Determine where value is detracted through high costs, errors, rework, or accidents;
– Target benchmarks in areas where performance diverges from designated
standards, or where variation above and below standards is greatest.
• MEASUREMENT PERSPECTIVE
– Leading indicators foreshadow or anticipate future system outcomes. Leading
indicators are thus “proactive” or “preventative”.
– Lagging indicators such as traditional financial measures are “reactive” or
“descriptive” of the actual results of a system or process in a given time period.
– Traditional companies employ lagging indicators while high-performance
companies embrace both types since leading indicators intervene
29. • MEASUREMENT CONTROL
– People are always the principal factor affecting the degree of measurement control.
Managers fail at performance improvement when they evaluate individual or system
performance using benchmark measures that are uncontrollable by the people
overseeing the process.
– Therefore benchmarks that are designed for performance improvement must be
crafted to reflect the individual level of authority, responsibility, and skills of those
people expected to work with the benchmarks.
• DATA COLLECTION
– After defining performance measures, managers must be able to readily collect the
data from which performance benchmarks are constructed.
– Many organizations develop interesting performance measures only to discover that
they currently do not collect the required information and do not have the resources
to do so.
– The best performance benchmarks can be collected without excessive investment of
time, systems, staff, or capital.
Designing Successful Benchmarks
30. A Benchmark Design Architecture
The first step in designing a performance
benchmark system is to create measures that will
enable management to achieve the organization’s
The second step in designing a benchmark
architecture requires managers to create an
agreed upon vocabulary describing performance
measurement in your organization.
The third step is to develop plans to collect,
process, and analyze the performance measures.
31. Designing a Benchmark Architecture:
Ten Generic Benchmark Categories
Product / service performance;
Core business process performance;
Support processes and services performance;
New product/service development and innovation performance;
32. Customer-Service Performance Measures:
The Best Customer-Related Measures Come from Objective and
Valid Data Collected Directly from Customers
Customer-service performance measures typically probe
organizational performance in the following areas:
Overall Customer Satisfaction with Products & Services;
Customer Evaluations of Sales & Service Representatives;
Customer Assessments of Your Organization’s Understanding of Customer Needs;
Customer Ratings of How Clearly Your Organization Communicates Cost Information
& How Well the Organization Suggests Customer Solutions
Customer Appraisals of Delivery Timeliness;
Customer Impressions About the Usefulness of Your Organization’s Product &
Customer Feelings Concerning How Easy it is to Conduct Business with Your
The Value Customers Place on Your Organization’s Products & Services.
Product & Service Performance Benchmarks
Include Measures of:
Accuracy, Reliability, Timeliness, Order Ease, Delivery,
Packaging, Ease of Assembly & Use, Documentation, Billing,
After-Sales Service, and Effective Complaint Management.
These May Also Include:
Warranty Exchanges and Returns,
Unit Productivity & Cost, Cycle Time for Key Intervals,
and Market Share.
34. Business Process Performance Measures
A simple process analysis model can help identify your
organization’s most important workflows. This model
reveals that all work can be viewed in
four sequential stages:
1. Inputs (including those from both employees & suppliers);
2. Processes (including internal operations & support services);
3. Outputs (your organization’s products, services, and
4. Customer Satisfaction.
In the following graphic (the input-output process model) we begin with
inputs that can be tangible (such as supplies, raw materials, and
component products) or intangible (such as information) which are
delivered to the work process, which transforms them into some final
output which might be a product or service. The goal of the output is to
create satisfied and loyal customers.
36. Common Performance Measures of
Input-Output Process Analysis Model
Enhanced customer value - often observed through added product features or
Production costs, frequently described as cost per hundred, thousand, or
Responsiveness and/or process cycle time;
Defect, error, waste, problem, or failure rates, often formatted as defects per
1000 or million output units;
Productivity & resource utilization, often reflected in transactions per person,
inventory turn rates, or projects operating within budget;
Public safety and / or legal responsibilities, sometimes observed in accident
rates, employee absentee rates, regulatory citations, or litigation rates.
37. Examples of Key Business Processes
IBM Xerox British Telecom
Marketing Information Capture;
Customer Fulfillment/ Relationship;
Service Customer Feedback;
Inventory Mgt. & Logistics;
Product Design / Engineering;
Production & Operations Mgt.
Human Resources Management;
Leased & Capital Asset Mgt.
Manage Process Operations;
Provide Personnel Support;
Market Products & Services;
Provide Customer Service;
Manage Products & Services;
Provide Consultancy Services;
Plan the Network;
Operate the Network;
Provide Support Services;
Manage Information Resource;
Provide Technical R&D
38. Support Processes / Services
Support services are activities and operations that
enable your organization’s core production and
They include functions such as finance, software
services, marketing, public relations, information
services, purchasing, legal services, and facilities
Examples for various areas follow.
39. Performance Measure Examples
Percentage of Late Payments
Time to Respond to
Number of Billing Errors
Number of Payroll Errors
Purchase Order Errors
Downtime Due to Shortages
Cycle Time (from start of
purchase to receipt in-house)
Number of Errors / Code Line
Percent of Reports Received
Number of Rewrites
Number of Errors Found After
System Accepted by Customer
Project Completion Cycle Times
Engineering Changes/ Document
Number of Errors Found During
Number of Errors Found in
Percentage of Lots Rejected
Number of Engineering Changes
Detected After Design Review
Errors in Reports
Cycle Time for Corrective Action
Accuracy of Forecast
Number of Incorrect
Overstocked Field Supplies
40. Employee Performance Measures
Employee Performance Benchmarks Cover a Wide
Range of Employee Activities that May Include:
Employee Development; Employee Education;
Employee Empowerment; Employee Recognition;
Employee Recruitment; Employee Absenteeism;
Employee Turnover; Employee Grievances;
Employee Safety/Accidents; Employee Involvement;
Employee Morale; Employee Performance Appraisal;
Employee Succession Planning.
41. Technology & Innovation Related
Technology-related measures reflect the productivity,
deployment, and effective use of computers and other
technology in an organization.
Measure range broadly from processing speeds,
deployment percentages, network down time and error
In turn, innovation-related performance indicators reflect
issues such as product development times, employees’
suggestion rates, new product sales as a percent of total
sales, and process improvement rates.
42. Supplier Performance Measures
Supplier performance measures help an organization
qualify or certify the vendors with which it will work.
These benchmarks then help the organization monitor
and manage on-going supplier performance.
Supplier performance metrics often include measures of
cost, quality, reliability, speed or responsiveness, agreed-
upon service levels, and product specifications.
43. Cost Performance Measures
Cost performance measures are broad and flexible. They
include balance sheet liability requirements and
information drawn from cost centers throughout the
Companies can develop useful benchmarks by producing
cost ratios for specific products, services, organizational
units, processing steps, inputs, and labor.
A mortgage company, for instance, might use such
measures as cost per loan application, cost per loan
processing,human resources cost per loan, data processing
costs per 100 bills, and service cost per loan.
44. Financial Performance Measures
Financial measure include performance indicators
required by stock exchanges, security analysts, public
accounting firms, regulatory agencies, and other
organizations that may oversee reporting standards in
your organization’s industry.
Many of these measures make up the items on income
statements, balance sheets, and cash flow statements,
including measures such as revenue, gross profit,
operating income, net income, earning per share, long-
term debt, book value, cash flow, debt/equity ratio,
days/ receivables ratio, current ratio, and so on.
Critical Success Factors
Adopt, Adapt, and Advance: A well-designed
performance measurement and benchmark system is
essential, but there are other critical success factors:
Senior management support;
Benchmarking training for the project team;
Useful information technology systems;
Cultural practices that encourage learning;
Resource dedication - especially in the form of
time, funding, and useful equipment.
47. A Generic Benchmarking Process:
The Simple, Consensus Model
From the Strategic Planning Institute’s (SPI)
Council on Benchmarking has developed the
3. Reach Out
48. Xerox 12-Step Benchmarking Process
Phase 1: Planning
1. Identify what to benchmark;
2. Identify comparative companies;
3. Determine data collection method & collect
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.
49. The Xerox 12-Step Benchmarking Process
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.
50. Attributes of Benchmarking Studies:
Success vs. Failure
Process Owner Involvement
Customer Driven Objectives
Linked to Strategic Plan
Best Practices & Enablers
Consider Cultural Attributes
Clear Project Life Cycle
Integrated with Existing
No Strategic Integration
Performance Metrics Only
“Hard” Data Only
Arbitrary / Casual Approach
Incremental / No Change
Keep Going and Going and …..
A la carte Program
51. Management’s Benchmarking Challenge
Commit required resources to key projects;
Provide focused training / facilitation to project
Proactively manage the direction and momentum of
benchmarking within the organization;
Create visibility of the benchmarking process;
Recognize benchmarking team efforts.