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Benchmarking is the process of improving performance by continuously identifying, understanding, and adapting outstanding practices found inside and outside the organization.

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  1. 1. Benchmarking<br />FarhadZargari, MD, PhD<br /><br />July 2010<br />
  2. 2. Outline<br />Benchmarking Definition<br />Benchmarking Background<br />Why Benchmarking?<br />Benchmarking, Dimensions & Types<br />Survey<br />Benchmarking Process<br />Benchmarking Essentials<br />Benchmarking Costs<br />Benchmarking Ethics<br />Benchmarking Pitfalls<br />References<br />
  3. 3. Definition<br />
  4. 4. What is Benchmarking?<br />Benchmarking is the process of improving performance by continuously identifying, understanding, and adapting outstanding practices found inside and outside the organization.<br />
  5. 5. What is Benchmarking?<br />Benchmarking is the process of comparing one's business processes and performance metrics to industry bests and/or best practices from other industries.<br />Why are others better ?<br />How are others better ? <br />What can we learn ? <br />How can we catch up ? <br />How can we become the best in our sector ? <br />
  6. 6. What is Benchmarking?<br />Benchmarking is an improvement process that is used to identify best practice within a peer group and facilitate it’s incorporation into your organization. Studying best practices provides the greatest opportunity for gaining a strategic, operational, and financial advantage.<br />
  7. 7. What is Benchmarking?<br />Benchmarking is the continuous search for and adaptation of significantly better practices that leads to superior performance by investigating the performance and practices of other organizations (benchmark partners). In addition, it can create a culture to facilitate the change process.<br />
  8. 8. What is Benchmarking?<br />Best practice refers to techniques, methods or processes that are more effective at delivering a desired outcome.Japanese Word “DANTOTSU” means striving to be the best of the best, captures the essence of Benchmarking. <br />Incorporating best practice into your organization can lead to greater efficiency and effectiveness and a happier customer.<br />
  9. 9. What is Benchmarking?<br />Benchmarking means to measure the best practices of leading businesses, and learn and adapt them for use in your business. <br />Benchmarking isMaking Best Practices Your Daily Practice.<br />
  10. 10. What is Benchmarking?(J. McEvilly-2008)<br /><ul><li>Benchmarking has three main features:</li></li></ul><li>What is Benchmarking?<br />“An organization’s ability to evaluate its practices against specific business strategies and objectives is critical to leveraging its knowledge capital” (Harper, 1996). Information is there for organizations and it should be evaluated, used, and shared. This is one of the primary goals of benchmarking.<br />
  11. 11. Operational Definition of Benchmarking <br />Comparing business processes, not only performance measures<br />A structured technique<br />Benchmarking is a technique of identifying, <br />understanding and adapting superior practices<br /> from organizations locally and world wide to<br />improve performance and achieve <br />priority business results.<br />Improvement, not evaluation<br />External focus<br />Learn from others<br />
  12. 12. What is Benchmarking?<br />Benchmarking goes beyond comparisons with competitors to understanding the practices that lie behind the performance gaps. More and more organizations are realizing how much more can be achieved if there is more collaboration between them and leaders in an industry.<br />
  13. 13. What is Benchmarking?<br />Benchmarking is not a method for 'copying' the practices of competitors, but a way of seeking superior process performance by looking outside the industry.<br />When Benchmarking a System, Adapt What You Find, Don’t Just Copy It<br />
  14. 14. What is Benchmarking?<br />Benchmarking = Copying<br />Conditions are never identical<br />You can pick up critical variables and apply them …<br />Create a system – a comprehensive set of reinforcing practices that are responsible for success<br />
  15. 15. What is Benchmarking?<br />Benchmarking is not just making changes and improvements for the sake of making changes, benchmarking is about adding value. Benchmarking makes it possible to gain competitive superiority rather than competitive parity.<br />
  16. 16. What is Benchmarking?<br />Benchmarking enables organizations to assess their own performance, compare it with that of others, analyse the gap between the two, identify and make fundamental changes in specific areas, in order to improve and enhance their own performance. <br />
  17. 17. What is Benchmarking?<br />Benchmarking is a tool for continuous improvement of the management of processes in companies to help them to gain world leadership. <br />Benchmark Purpose and Quality Maturity<br />Quality Maturity<br />World-class Leadership<br />III<br />Best-in-firm<br />I<br />Learning from success<br />VI<br />National leadership<br />II<br />Borrowing ideas<br />IV<br />Beating industry standards<br />V<br />Best-in-class<br />
  18. 18. What is Benchmarking?<br />In Japan, benchmarking is a part of their manager's job descriptions (Boxwell, 1994). This is one of the ways that the Japanese are able to keep up with and surpass others in industries such as automobiles, motorcycles, electronics, etc.<br />
  19. 19. What is Benchmarking?<br />Benchmarking is critical to formulating a knowledge-based plan of action to achieve objectives. A benchmark is a standard that provides a measuring-stick for relative performance. <br />US Department of Energy<br />
  20. 20. Benchmark <br />A benchmark is an organization recognized for its exemplary operational performance. <br />There are many benchmarks in the world including:<br />Processes<br />Design<br />Training<br />Service<br />Rapid product development<br />
  21. 21. Benchmarking and Industries<br />Relationship between benchmarking and industry type (According to one research done in the UK ):<br />
  22. 22. Benchmarking and Organization Size<br />Moreover a tendency of benchmarking activity is a function of size. A larger organization is more likely to be benchmarking than a smaller one.<br />
  23. 23. Actual Benchmarking Examples<br />Target Firm<br />Improvement Sought<br />Initiator<br />Indy 500 pit crews<br />Faster plane turnaround time<br />Southwest Airlines<br />L. L. Bean<br />Warehousing operations<br />Xerox<br />Las Vegas Casinos<br />Employee theft reduction<br />IBM<br />
  24. 24. Benchmarking <br />is a tool for total quality management (TQM).<br />
  25. 25. Benchmarking is basically learning from others.<br />
  26. 26. Benchmarkingis the practice of being humble enough to admit that someone else is better at something and wise enough to try and learn how to match and even surpass them at it.”<br />American Productivity and Quality Center-1988<br />
  27. 27. What is Benchmarking?<br />At its simplest, benchmarking means:<br />"Improving ourselves by learning from others."<br />
  28. 28. Background<br />
  29. 29. Background of Benchmarking<br /><ul><li>The term benchmarking was first used by cobblers to measure people's feet for shoes. They would place someone's foot on a "bench" and mark it out to make the pattern for the shoes.</li></li></ul><li>Background of Benchmarking<br />Traditionally, the organizations used to enhance their products and performance by focusing on their internal functional activities (Kolarik, 1995). The organization, for example, may use techniques such as Quality Function Deployment to achieve their customer satisfaction.<br />
  30. 30. Background of Benchmarking<br />However, these traditional performance improvement trends seem not to be sufficient for the highly competitive markets (Juran, 1993). A significant technique facilitating improvement of organizational performance at a competitive environment is benchmarking. (Juran, 1993).<br />
  31. 31. Background of Benchmarking<br />In other words external environment and market conditions change rapidly; goal setting which is internally focused can’t be true reflection of customer’s expectations.<br />Out-Ward<br />Vision<br />
  32. 32. Background of Benchmarking<br />Customers’ expectations are highly liquid and are driven by standards set by best performer. Any product or service just below these standards may not catch the eyes of customer.<br />
  33. 33. Continuous and Breakthrough Improvement<br />Highly <br />Competitive <br />Situation<br />Continuous<br />Improvement<br />Improvement<br />Breakthrough<br />Improvement<br />Benchmarking<br />Accelerates<br />Innovation<br />and Change<br />Continuous<br />Improvement<br />Time<br />
  34. 34. Background of Benchmarking<br />Benchmarking was originally defined by D.T. Kearns, the CEO of Xerox Corporation, in 1981 as the continuous process of measuring products, services, and practices against the toughest competitors or non-competitors who is the leader in their industry (Kolarik, 1995).<br />
  35. 35. Why<br />Benchmarking?<br />
  36. 36. Why Benchmarking?<br />Survival lies in emulating best and not in lagging behind. Bench marking is time and cost efficient because it involves imitation and adaptation rather than pure invention. Prevents the “Re-inventing the wheel”.<br />
  37. 37. Why Benchmarking?<br />Benchmarking gives us the chance of gaining:<br />Better Awareness of Ourselves (Us)<br />What we are doing<br />How we are doing it<br />How well we are doing it<br />Better Awareness of the Best (Them)<br />What they are doing<br />How they are doing it<br />How well they are doing it<br />
  38. 38. Why Benchmarking<br />Performance<br />Improvement<br />Meeting<br />Quality <br />Standards<br />Creative<br />Thinking<br />Benchmarking<br />Innovation<br />In <br />Management<br />Methods<br />Keep Pace with<br />Science and<br />Technology<br />Changes<br />Cope with<br />Competitive <br />Markets<br />Meeting <br />Customers<br />Expectations<br />
  39. 39. Three Major Benefits of Benchmarking<br />Product and Process Improvement<br />Cost Reduction<br />Competitive Strategy<br />
  40. 40. Product and Process Improvement<br />In general, by implementing benchmarking activity, organizations can improve their operation process (Slack et al, 2001). For instance, South African Breweries plc had encountered the problem of poor employee skill, which is a significant difficulty to implement the world-class processes. As such, they decided to benchmark strategy from an organization in Geneva. They, consequently, attained the solution (Slack et al, 2001).<br />
  41. 41. Cost Reduction<br />Benchmarking facilitates a reduction of operation costs (Delpachitra et al, 2002). For example, benchmarking helped Australian Financial Institutes to reduce operation costs by outsourcing some operation and alternating distribution channels (Delpachitra et al, 2002).<br />
  42. 42. Competitive Strategy<br />The most significant benefit from benchmarking is that it helps the organization planning and implementing competitive strategies (Kolarik, 1995). In other words, as benchmarking provides an ability to compare and learn from the best practices in any particular industry, organizations can develop their system to achieve competitive advantages or eliminate their competitive disadvantages. <br />
  43. 43. Competitive Strategy<br />Build core competencies that will help to sustain competitive advantage<br />Access to a variety of markets<br />Perceived benefit of product or service will increase<br />Product or service is hard to imitate<br />Low-cost leader<br />Target specific shift in strategy<br />Entering new markets<br />Developing new products<br />To create a firm more adaptable to change<br />
  44. 44. Why Benchmarking?<br />Benchmarking stimulates seeking new ways of doing things and promotes a culture that is receptive to fresh approaches and ideas. <br />Benchmarking provides opportunities for staff to learn new skills and be involved in the transformation process from the outset. <br />
  45. 45. Why Benchmarking?<br />It is an effective ‘wake-up call’ and helps to make a strong case for change.<br />Offers practical ways in which step changes in performance can be achieved by learning from others who have already undertaken comparable changes.<br />
  46. 46. Benchmarking Becoming More Common<br />There are three reasons that benchmarking is becoming more commonly used in industry (Boxwell, 1994). <br />Benchmarking is a more efficient way to make improvements. Managers can eliminate trials and errors. <br />Benchmarking speeds up organization’s ability to make improvements. Today, time is of the essence.<br />Benchmarking has the ability to bring your performance up as a whole significantly. <br />
  47. 47. Why Benchmarking?<br />Those who benchmark do not have to reinvent the wheel (Parker, 1996).<br />
  48. 48. When organizations want to improve their performance, they benchmark.<br />
  49. 49. Benchmarking,<br />Dimensions & Types<br />
  50. 50. Dimensions of Benchmarking<br />Benchmarking encompasses Total Quality aspects of the organization leading to Business Excellence:<br />Vision and<br /> Mission<br />Management <br />Systems<br />Leadership <br />Style<br />Benchmarking<br />Organizational <br />Structure<br />Employee <br />Behavior<br />
  51. 51. What to Benchmark?<br />In practice, selecting the appropriate activity to benchmark is significant to an effectiveness of benchmarking (Peppard, 1999). As noted by Porter (1985), the process or activities in value chain, which are primary activities (inbound and outbound logistics, operations, marketing and sales, and service) and support activities (firm infrastructure, human resource management, technology development and procurement) should be considered for benchmarking.<br />
  52. 52. Types of Benchmarking<br />On the basis of “What” is being compared with other organizations and “Who” is being compared with our organization, we can classify benchmarking. <br />“What” is being compared with other organizations<br />Who” is being compared with our organization<br />vs.<br />
  53. 53. Types of Benchmarking<br />On the basis of “What” is being compared with other organizations we have four main types. These four major types of benchmarking are evolutionary beginning with product, through to functional (performance), process and strategic benchmarking. <br />Strategic<br />Process<br />Performance<br />Product<br />
  54. 54. Types of Benchmarking<br />On the basis of “Who” is being compared with our organization, we have these categories:<br />Best of the Best<br />Best in Class<br />International<br />Generic<br />Internal vs. External<br />
  55. 55. What<br />
  56. 56. 1-Product Benchmarking<br />The process of designing new products or upgrades to current ones. This process can sometimes involve reverse engineering which is taking apart competitors products to find strengths and weaknesses.<br />
  57. 57. 1-Product Benchmarking<br />Many firms perform productbenchmarking whendesigning new productsor upgrades to currentproducts. Providing an external perspective on opportunities to improve products, technology, manufacturing and support processes, the product development process, and engineering practices are core activities of product benchmarking.<br />
  58. 58. Performance benchmarking focuses on assessing competitive positions through comparing the products and services of other competitors. When dealing with performance benchmarking, organizations want to look at where their product or services are in relation to competitors on the basis of things such as reliability, quality, speed, and other product or service characteristics.<br />2-Performance Benchmarking<br />
  59. 59. Assessing relative level of performance in key areas or activities in comparison with others in the same sector and finding ways of closing gaps in performance.<br />2-Performance Benchmarking<br />
  60. 60. Process benchmarking focuses on the day-to-day operations of the organization. It is the task of improving the way processes performed every day. Some examples of work processes that could utilize process benchmarking are the customer complaint process, the billing process, the order fulfillment process, and the recruitment process (Bogan, 1994).<br />3-Process Benchmarking<br />
  61. 61. “Process Benchmarking" is generally higher-level and less number-intensive than metrics.<br />Demonstrate how top performing companies accomplish the specific process in question. <br />Takes form of research, surveys/interviews, and site visits. <br />By identifying how others perform the same functional task or objective, firms gain insight and ideas they may not otherwise achieve. <br />A true value-added feature of benchmarking<br />3-Process Benchmarking<br />
  62. 62. Process benchmarking - the initiating firm focuses its observation and investigation of business processes with a goal of identifying and observing the best practices from one or more benchmark firms. Activity analysis will be required where the objective is to benchmark cost and efficiency; increasingly applied to back-office processes where outsourcing may be a consideration.<br />3-Process Benchmarking<br />
  63. 63. 3-Process Benchmarking<br />Wisdom from “Texas Instruments”:<br />“Unless you change the process, why would you expect the results to change”<br />
  64. 64. By process benchmarking companies achieve improvements in key processes to obtain quick benefits. This provides an analysis of best practice processes and functions irrespective of industry or sector.<br />3-Process Benchmarking<br />
  65. 65. Strategic benchmarking deals with top management. It deals with long term results. Strategic benchmarking focuses on how companies compete. This form of benchmarking looks at what strategies the organizations are using to make them successful. This is the type of benchmarking technique that most Japanese firms use (Bogan, 1994). This is due to the fact that the Japanese focus on long term results.<br />4-Strategic Benchmarking<br />
  66. 66. This is concerned with comparing different companies' strategies and assessing the success of those strategies in the marketplace.Analyzes the strategies with particular reference to:<br />strategic intent<br />core competencies<br />process capability<br />product line<br />strategic alliances<br />technology portfolio<br />4-Strategic Benchmarking<br />
  67. 67. Strategic benchmarking is a proactive analysis of emerging trends and options in different markets, processes, technologies and distributions which could significantly affect the strategic direction of economies. It is the broadest form of benchmarking and involves observing how others compete. This type is usually not industry specific, meaning it is best to look at other industries.<br />4-Strategic Benchmarking<br />
  68. 68. Who<br />
  69. 69. This refers to the analysis and comparison of one or more units within the same organization. It is often the case when organizations have an in-house best practice area.<br />1-Internal Benchmarking<br />Sharing opinions between departments within the same organization.<br />Advantage:<br />Easier to implement<br />Easier to access data<br />Disadvantage:<br />External ideas blocked<br />
  70. 70. Where examples of good practices can be found in other organizations and there is a lack of good practices within internal business units. Comparison with external organizations leads to discovery of new ideas, methods, products and services. <br />1-External Benchmarking<br />The gap between internal and external practices displays the way where to change and if there is any need to change.<br />Advantage:<br />Helps to measure one’s own performance<br />Helps to search for best practices<br />Disadvantage:<br />Takes time<br />Requires support<br />Legal/ethical issues<br />Industrial espionage<br />
  71. 71. Comparisons of business process or functions that are very similar, regardless of industry. <br />2-Generic Benchmarking<br />
  72. 72. 3-Best-in-class Benchmarking<br />Best-In-Class<br />Generally, initiator firms will choose to benchmark the best-in-class.<br />Best-in-class refers to those firms or organizations that have been recognized as the best in an industry based on some criterion.<br />Objective<br />The objective of best-in-class is to provide a basis for continual improvement.<br />
  73. 73. Best-of-the-Best<br />After becoming a best-in-class firm, it may be difficult to gain new insight and information from direct competitors.<br />Therefore, the next level of improvement is called best-of-the best or best-in-the-world.<br />4-Best of the best Benchmarking<br />Don’t limit your effort to players inside the industry only! <br />
  74. 74. Other<br />Types of <br />Benchmarking<br />
  75. 75. Types of Benchmarking<br />There are several other classifications for benchmarking, based on partner type, adoption level and target process, etc. Following are the most used types:<br />Internal<br />External<br />Competitive<br />Functional <br />Generic<br />
  76. 76. Competitive benchmarking is the most difficult type of benchmarking to practice. For obvious reasons, organizations are not interested in helping a competitor by sharing information. This form of benchmarking is measuring the performance, products, and services of an organization against its direct or indirect competitors in its own industry. Competitive benchmarking starts as basic reverse engineering and then expands into benchmarking. <br />1-Competitive Benchmarking<br />
  77. 77. Competitive benchmarking is an analysis of strategies, processes and practices with competitors and companies in the same industry. Therefore, it is industry or business type specific. It is especially beneficial to organizations managing a specialized type of operation.<br />1-Competitive Benchmarking<br />
  78. 78. Competitive Benchmarking is the continuous measurement of the company’s products, services, processes and practices against the standards of best competitors and other companies who are recognized as leaders. It is also important to remember when using competitive benchmarking that the goal is to focus on your direct competitors and not the industry as a whole.<br />1-Competitive Benchmarking<br />
  79. 79. Functional benchmarking - a company will focus its benchmarking on a single function to improve the operation of that particular function. Complex functions such as Human Resources, Finance and Accounting and Information and Communication Technology are unlikely to be directly comparable in cost and efficiency terms and may need to be disaggregated into processes to make valid comparison.<br />2-Functional Benchmarking<br />
  80. 80. Comparative research to seek world-class excellence by comparing business performance not only against competitors but also against the best businesses operating in a different industry. <br />2-Functional Benchmarking<br />Comparing functions<br />Advantage:<br />Discovering innovative practices<br />Disadvantage:<br />Not suitable for every organization or every function<br />
  81. 81. Benchmarking, originally described as a formal process by Rank Xerox, is usually carried out by individual companies. Sometimes it may be carried out collaboratively by groups of companies (e.g. subsidiaries of a multinational in different countries). One example is that of the Dutch municipally-owned water supply companies, which have carried out a voluntary collaborative benchmarking process since 1997 through their industry association. <br />3-Collaborative Benchmarking<br />
  82. 82. With collaborative benchmarking, information is shared between groups of firms. It is a brainstorming session among organizations. It is important to realize that not all collaborative efforts are considered benchmarking. It is sometimes called “data sharing."<br />3-Collaborative Benchmarking<br />
  83. 83. Performing a financial analysis and comparing the results in an effort to assess your overall competitiveness and productivity.<br />4-Financial Benchmarking<br />
  84. 84. Benchmarking Methodology<br />Best Practice<br />Overlap<br />Competitive<br />• Industry leaders<br />• Top performers withsimilar operatingcharacteristics<br />Functional<br />Internal<br />• Top performersregardless of industry<br />• Aggressive innovatorsutilizing newtechnology<br />• Top performers within company<br />• Top facilities within company<br />Look for Benchmarking Opportunities Everywhere<br />
  85. 85. Commonly Benchmarked Performance Measures<br />
  86. 86. Commonly Benchmarked Performance Measures<br />
  87. 87. Commonly Benchmarked Performance Measures<br />
  88. 88. Commonly Benchmarked Performance Measures<br />
  89. 89. Commonly Benchmarked Performance Measures<br />
  90. 90. Survey<br />
  91. 91. Survey (Slide 1 of 3)<br />In 2008, a comprehensive survey on benchmarking was commissioned by The Global Benchmarking Network, a network of benchmarking centers representing 22 countries. Over 450 organizations responded from over 40 countries. The results showed that:<br />
  92. 92. Survey (Slide 2 of 3)<br />Mission and Vision Statements and Customer (Client) Surveys are the most used (by 77% of organizations of 20 improvement tools, followed by SWOT analysis(72%), and Informal Benchmarking (68%). Performance Benchmarking was used by (49%) and Best Practice Benchmarking by (39%).<br />
  93. 93. Survey (Slide 3 of 3)<br />The tools that are likely to increase in popularity over the next three years are Performance Benchmarking, Informal Benchmarking, SWOT, and Best Practice Benchmarking. Over 60% of organizations that are not currently using these tools indicated they are likely to use them in the next three years.<br />
  94. 94. Top-10 Benchmarked Business Processes<br />
  95. 95. TOP-10 Benchmarking Organizations <br />The following is a ranking of organizations that are heavily engaged in benchmarking. These organizations have implemented internal benchmarking methodologies to support their entire organizations' efforts to improve their products and services.<br />These organizations are excellent role models for you to learn how to deploy benchmarking throughout your workgroup, department, division or entire organization. They are leaders!<br />
  96. 96. TOP-10 Benchmarking Organizations <br />
  97. 97. Benchmarking<br />Process<br />
  98. 98. Benchmarking in Business Excellence Model<br />Vision<br />Mission<br />Objectives <br />Areas to be Addressed<br />Measurement Indicators<br />QUALITYINITIATIVES<br />ISO<br />Benchmarking<br />Quality Circles<br />BSC<br />KM<br />5S<br />Six Sigma<br />Suggestion Schemes<br />Kaizen<br />Professional Circles<br />
  99. 99. Parties to Benchmarking Relationship<br />There are two parties to each benchmarking relationship: an initiator firm and a target firm.<br />The initiator firm is the firm that initiates contact and studies the other firm.<br />The target firm is the firm that is being studied (also called the benchmarking partner). <br />Initiator<br />Target<br />
  100. 100. Benchmarking Process<br />There are various methods of benchmarking and a variety of methodologic processes in benchmarking mechanisms and implementation. Some important organizations have developed their own benchmarking process.<br />
  101. 101. Analyze<br /><ul><li>Collect Data
  102. 102. Establish the gap
  103. 103. Identify process changes
  104. 104. Target future goals</li></ul>Plan<br /><ul><li>Select Process
  105. 105. Understand Process
  106. 106. Select Partners</li></ul>Act<br /><ul><li>Communicate actions
  107. 107. Develop improvement plan
  108. 108. Implement
  109. 109. Review Progress</li></ul>General Benchmarking Process<br />
  112. 112. Gap Analysis<br />When done well, benchmarking prominently reveals gaps between the performance of the benchmarker and that of a “best practices” leader, and that leads to developing sustainable competitive advantage. <br />
  113. 113. Gap Analysis (Spider chart)<br />
  114. 114. Methodology of Benchmarking<br />AT&T <br />Vs <br />XEROX<br />
  115. 115. Xerox Experience-1(Brogan, 1994)<br />The Xerox of today is not the Xerox of the sixties and seventies. During that time period the organization experienced market erosion from competitors, primarily Japanese. These competitors were marketing higher quality products in the United States at the same price or lower as Xerox. Xerox found that the Japanese were able to assemble quality products at a low price. This was hard for Xerox to grasp because they were the first to develop the photocopy and their name had come to be synonymous with photocopies. <br />
  116. 116. Xerox Experience-2 (Brogan, 1994)<br />How could the Japanese be beating them at their own game? Xerox found that they had to regroup. In doing this they made competitive benchmarking a fundamental part of their operations. Xerox began to study other organizations within and out of their industry. By 1983, Xerox had bench marked more than 230 process performance areas in their operation. Identifying the best processes used by others, Xerox adapted them for their own use. This is how they regained their core competency and strategic advantage in the photocopying industry. <br />
  117. 117. Xerox 12-Step Benchmarking Process-1<br />Phase 1: Planning<br />1. Identify what to benchmark;<br />2. Identify comparative companies;<br />3. Determine data collection method & collect data.<br />Phase 2: Analysis<br />4. Determine current performance gap;<br />5. Project future performance levels.<br />Phase 3: Integration<br />6. Communicate finding and gain acceptance;<br />7. Establish functional goals.<br />
  118. 118. Xerox 12-Step Benchmarking Process-2<br />Phase 4: Action<br />8. Develop action plans;<br />9. Implement specific actions & monitor progress;<br />10. Recalibrate benchmarks.<br />Phase 5: Maturity<br />11. Attain leadership position ;<br />12. Fully integrate practices into processes.<br />
  119. 119.
  120. 120. Benchmarking Process-APQC<br />American Productivity & Quality Center defines benchmarking process in four steps:<br />Planning<br />Data collection<br />Analysis<br />Adapting & Improving<br />
  121. 121. Benchmarking Process<br />In benchmarking “metrics" give numerical standards against which a company’s own processes can be compared. Some examples of metric benchmarks are:<br />Finished-product first-pass yield of 97% <br />Scrap/rework less than 1% of sales <br />Cycle time less than 25 hours <br />Customer lead times less than 20 days <br />Productivity levels of $150,000 or more per employee <br />Plant-level ROA better than 15%<br />
  122. 122. Benchmarking Process<br />In benchmarking: <br />Measure what’s needed, not what’s easy.<br />Broad measures of performance fail to give you actionable information.<br />You don’t need a 1000 measures, just find the key indicators that serve as critical factors.<br />Finding balance is important..don’t let a non-benchmarked metric go bad.<br />
  123. 123. Six Principles of Benchmarking<br />Any acceptable benchmarking should have these six features:<br />Comprehensive<br />Credible<br />Comparative<br />Performance-oriented<br />Confidential<br />Continuous assessment<br />
  124. 124. Benchmarking Process<br />Why businesses are not willing to do multi-step benchmarking?<br />Takes too long often six to nine months<br />Its costly<br />The lessons learned may or may not get translated to practice and improvement <br />Reports that get shelf space, not action<br />Cumbersome process to complete<br />Limits Flexibility - procedures oriented<br />
  125. 125. Creative Benchmarking*<br />Creative Benchmarking:<br />Start from the customers point of view<br />List each step of the customers buying experience<br />Next, determine which factors most influence customers perception of value at each step<br />Finally, identify companies that excel at each factor – without regard to their industry!<br />* (Derived from the work of Dawn Lacobucci and Christie Nordhielm, Kellogg Graduate School of Management)<br />
  126. 126. Fast-Cycle Benchmarking<br />Fast-Cycle Benchmarking is:<br />Less elaborate than traditional multi-step<br />More tactical <br />What do concrete trucks and pizza have in common?<br />Useful to Identify specific operation problems or opportunities<br />Instead of copying from others, use the data to stimulate generation of creative ideas<br />
  127. 127. Fast-Cycle Benchmarking<br />Figure out what you are looking for and bring it in.<br />Look for practices that can spark ideas, don’t just replicate what you find.<br />Figure out where benchmarking fits in your tool chest, and make an informed decision about the outcome you are really after.<br />
  128. 128. Fast-Cycle Benchmarking<br />Benchmark companies roughly at your own level!<br />College physics before high school math doesn’t make any sense…<br />Forget the world class company (unless you are one!)..find a firm of similar size and situation as yours<br />Benchmark companies with similar business needs<br />Common concerns promote a more productive exchange or transportability of the information learned<br />
  129. 129. Benchmarking<br />Essentials<br />
  130. 130. Benchmarking Essentials <br />
  131. 131. Benchmarking Essentials <br />
  132. 132. Benchmarking Essentials <br />
  133. 133. Benchmarking<br />Costs<br />
  134. 134. Benchmarking Costs<br />The three main types of costs in benchmarking are:<br />Database <br />Costs <br />
  135. 135. Benchmarking Costs<br />Time Costs - Members of the benchmarking team will be investing time in researching problems, finding best practice companies to study, visits, and implementation. This will take them away from their regular tasks for part of each day so additional staff might be required.<br />
  136. 136. Benchmarking Costs<br />Visit Costs - This includes hotel rooms, travel costs, meals, a token gift, and lost labor time.<br />
  137. 137. Benchmarking Costs<br />Benchmarking Database Costs - Organizations that institutionalize benchmarking into their daily procedures find it is useful to create and maintain a database of best practices and the companies associated with each best practice now.<br />
  138. 138. Benchmarking<br />Ethics<br />
  139. 139. Benchmarking Ethics<br />Since the concept of benchmarking can lead to unscrupulous and sometimes unethical behavior, the SPI Council on Benchmarking and the International Benchmarking Clearinghouse have established a general code of conduct (Thompson). The code is as follows:<br />
  140. 140. Benchmarking Code of Conduct<br />
  141. 141. Benchmarking Code of Conduct<br />
  142. 142. Benchmarking<br />Pitfalls<br />
  143. 143. Benchmarking Pitfalls<br />Benchmarking is NOT:<br />Tour visits to other competitors or organizations.<br />Performance measurement, it’s part of benchmarking process. i.e. competitive analysis.<br />A cost-cutting exercise.<br />Imitating others’ practices or processes, it’s “How to” not “What is”.<br />A public relations exercise.<br />
  144. 144. Benchmarking Pitfalls<br />Failure to consider organizational cultures or circumstances leads to a wrong direction.<br />Insufficient preparation usually results in MBWAA (management by wandering around aimlessly!).<br />What are you trying to learn about?<br />Why do you want to learn it?<br />What will you do with it to make your processes better once you have it?<br />
  145. 145. Benchmarking Pitfalls<br />
  146. 146. Benchmarking Pitfalls<br />
  147. 147. When not to Benchmark<br />
  148. 148. Specialized Organizations<br />There are international organizations specialized in benchmarking services, e.g., <br />Global Benchmarking Council<br />American Productivity and Quality Center<br />Asian Benchmarking Clearinghouse <br />Hong Kong Benchmarking Clearing house<br />
  149. 149. Final Remarks<br />Benchmarking does not come as a natural process for many – competitiveness does, but not benchmarking, because benchmarking requires a team approach. <br />In Benchmarking The Key is to <br />“Adapt not Adopt” – Professor Deming<br />
  150. 150. Give Benchmarking a Chance - <br />It’s Worth It.<br />
  151. 151. REFERENCES<br />Anderson, B. (1999), “Industrial benchmarking for competitive advantage”, Human Systems Management, Vol. 18 No. 3.<br />Bogan, C.E. and M.J English (1994), Benchmarking for Best Practices: Winning Through Innovative Adoption, New York: McGraw-Hill.<br />Boxwell, Robert (1994), Benchmarking for a Competitive Advantage, McGraw Hill, 1994<br />Delpachitra S. and D. Beal. (2002) “Process benchmarking: an application to lending products”, Benchmarking: An International Journal, Vol. 9, No. 4. <br />Davies, A. J. and Ashok K. K. (1999), “Why British companies don’t do effective benchmarking”, Integrated Manufacturing Systems, Vol. 10, No.1.<br />Graham, Anne (1997), “Association Publications: Benchmarking Common Problems,” The Magazine for Magazine Management, v25,<br />
  152. 152. REFERENCES<br />Harper, Kim (1996), “Benchmarking: International Clearinghouse Plays Matchmaker for Companies That Want to Improve,” Arkansas Business, vol.9, (1996).<br />Hinton M. et al. (2000), “Best practice benchmarking in the UK”, Benchmarking: An International Journal, Vol. 7, No. 1. <br />Hurmelinna P. et al. (2002), “Attaining world-class R&D by benchmarking buyersupplier relationships”, International Journal of Production Economics, Vol. 80, No. 1. <br />Juran, J.M. (1993), Quality planning and analysis: from product development through use (Third Edition), United States of America: McGraw-Hill, Inc.<br />Keegan, R. (1988), “Benchmarking Facts: A European Perspective”, Dublin: Oak TreePress<br />
  153. 153. REFERENCES<br />Kolarik, W. J. (1995), Creating Quality: Concepts, Systems, Strategies, and Tools (International Edition), Singapore: McGraw-Hill Book Co. <br />Peppard, J. (1999), “Benchmarking, process re-engineering and strategy: some focusing frameworks”, Human Systems Management, Vol. 18 No. 3.<br />Porter, M.E. (1985), “Competitive Strategy: Techniques for Analysing Industries and Competitors”, Free Press, New York<br />Ralston D. et al. (2001), “Process benchmarking as a market research tool for strategic planning” Marketing Intelligence & Planning, Vol. 19, No. 4. <br /><br /><br />
  154. 154. REFERENCES<br /><br /><br />Benchmarking for Best Practices: Winning Through Innovative Adaptation, Christopher Bogan and Michael English, McGraw Hill<br /> – Bogan’s website<br />The International Benchmarking Clearinghouse,<br /><br />The Business Gateway<br />David Stauffer, (2003) “Is Benchmarking Doing the Right Work?”, Harvard Business School Publishing<br />