Benchmarking: Benchmarking is the process of comparing and measuring an organization’s operations or its internal processes against those of a best-in-class performer from inside or outside its industry.

Process benchmarking is a systematic and continuous improvement process; a process of continually MEASURING and COMPARING an organization’s BUSINESS PROCESSES against business pro LEADERS anywhere in the world to gain INFORMATION which will help the organization take ACTION to IMPROVE its PERFORMANCE.

Key Points:

• Benchmarking is an increasingly popular improvement tool.
• Benchmarking concerns processes and practices.
• Benchmarking is a respected means of identifying processes that require major change.
• Benchmarking is done between consenting companies that may or may not be competitors.
• Benchmarking compares your process or practice with the target company’s best-in-class process or practice.
• The goal of benchmarking is to find “secrets of success” and then adapt and improve for your own application.

Benchmarking as it Relates to Continuous Improvement:

• Today’s competitive world does not allow time for gradual improvement in areas in which a company lags way behind.
• Benchmarking can tell a firm where it stands relative to best-in-class practices and processes, and which processes must be changed.
• Benchmarking provides a best-in-class model to be adopted, or even improved upon.
• Modern customers are better informed and demand the highest quality and lowest prices. Companies have a choice to either perform or go out of business.
• Benchmarking supports total quality by providing the best means for rapid, significant process/practice improvement.

Benchmarking Approach and Process:

• Obtain management commitment.
• Baseline your own processes.
• Identify your strong and weak process and document them.
• Select processes to be benchmarked.
• Form benchmarking teams.
• Research best-in-class.
• Select candidate best-in-class benchmarking partners.
• Form agreements with benchmarking partners.
• Collect data.
• Analyze data and establish the gap
• Plan action to close the gap/surpass.
• Implement change.
• Monitor.
• Update benchmarks; continue the cycle

Benchmarking Versus Re-Engineering: Process re-engineering should only be considered when it is impossible to use benchmarking.

• No known process available for benchmarking (rare).
• Best-in-class not willing to partner.
• Best-in-class inaccessible due to geography or expense

Role of Management in Benchmarking:

• For benchmarking to be productive, management must be committed to change.
• Management must provide the necessary funding.
• Management must allocate the appropriate personal.
• Information to be disclosed to benchmarking partners can only be cleared by management.
• Top level managers must themselves be directly involved in benchmarking activities.

Process Documentation:

• All people associated with the process should have a common understanding of it, and that can come only from documentation.
• A documented starting point is needed against which to measure performance improvement after benchmarking changes have been implemented.
• The organization will be dealing with people (the partners) who are not familiar with its processes. With an understanding of where the benchmarking organization is, the partner will be better able to help.

Settling for “OK-in-Class”: Reasons organizations too often choose benchmarking partners who are not best-in-class:

• The best-in-class is not interested in partnering.
• Research identified the wrong partner.
• The benchmarking company got lazy and picked a handy partner.

Obstacles to Successful Benchmarking:

• If a company is too internally focused it may not be aware that their processes are less efficient than best-in-class.
• An overly broad benchmarking objective can guarantee failure.
• Unrealistic timetables.
• Poor team composition–the people who use the process day in and day out, must be involved.
• Improper emphasis–A frequent cause of failure in benchmarking is that teams get bogged down in collecting endless data and put too much emphasis on the numbers.
• Insensitivity to partners–If you fail to observe protocol and common courtesy in all transactions, your organization runs the risk of being cut off.

BENCHMARKING CASE STUDY: XEROX (MANUFACTURING)

• Xerox’s success is the first one in the history of benchmarking.
• From a critical situation in 1972, Xerox became what we call today a “top benchmarking partner”.
• In 1979, Xerox starts benchmarking.
• In 1989, Xerox wins the Malcolm Baldrige National Quality Award.
• Product performance during the first 30 days of installation has increased 40%
• Manufacturing lead times have been reduced 50%.
• Manufacturing labor and material over-head rates have been improved by 31% and 46% respectively.
• Customer retention rate is 20% better than U.S. industry average
• A company wide performance measurement covering 240 key areas of product, service and business performance.
• The targets of world leaders.
• Tremendous gains in quality (78% defect reduction, increased reliability with 40% decrease in unscheduled maintenance, increased copy quality, 27% decrease in service response time).
• Significant reductions in labor and material over-heads.
• First company to offer three year product warranty.

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