benchmarking bqs

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BENCHMARKING

&BEST PRACTICES

ACHIEVING SUSTAINABLE EXCELLENCE

BAHRAIN QUALITY SOCIETY

19-09-2007

BYAHMED A.HUSSAIN


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Benchmarking

Content: Definition of benchmarking

Why Companies use benchmarking

Types of benchmarking

What do we need to conduct benchmarking exercise

Steps of benchmarking

Critical success factors of benchmarking

Examples of benchmarking


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Definition of Benchmarking

Benchmarking is the process of improving performance by:

Continuously identifying, understanding, and adaptingoutstanding practices found inside and outside the

organisation.


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Benchmarking is:

Knowing your position and operation.

Adopting best practices which are the cause of best

performance. Studying best practices provides thegreatest opportunity for gaining a strategic, operational,and financial advantage.


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Benchmarking is NOT:

Tour visits to other competitors or organisations.

Performance measurement, its part of benchmarkingprocess. i.e. competitive analysis.

A cost-cutting exercise.

Imitating others practices or processes, its How to not

What is.

A public relations exercise.


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Why Companies Use Benchmarking?

Improve performance: Benchmarking identifies methods of

improving operational efficiency and product design.

Understand relative cost position: Benchmarking reveals

an organisations relative cost position and identifies.

Quality

ManagementSystem

Business

ExcellenceAssessment

Opportunity

forImprovement Benchmarking Best Practices

The Way to Achieve Business Excellence


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Why Companies Use Benchmarking?

Increase the rate of organisational learning:Benchmarking brings new ideas into the organisation

and facilitates experience sharing.

Gain strategic advantage: Benchmarking helpsorgan sa ons ocus on capa es cr ca o u ngstrategic advantage.


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Types of Benchmarking

There are several classifications for benchmarking, basedon partner type, adoption level and target process,following are the most used types:

Internal

External

Functional

Competitive

Generic


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Types of Benchmarking: Internal

benchmarking with another department or business unitwithin the same organisation, i.e. searching for the bestpractices internally.

The main advantages of internal benchmarking are:

access to sensitive data and information is easier.

standardised data is often readily available.

usually less time and resources are needed.


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There may be fewer barriers to implementation as practicesmay be relatively easy to transfer across the sameorganisation. However, real innovation may be lackingand best in class performance is more likely to be found

through external benchmarking.


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Internal benchmarking is most appropriate when there areseveral business units within the same organisation andmanagement want to spread internal expertise quickly,throughout the organisation.


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Types of Benchmarking: External

Benchmarking with an external partner, i.e. searching forbest practices with another organisation such as partnercompanies, suppliers and customers.

External benchmarking provides opportunities ofearning rom t ose w o are at t e " ea ing e ge".


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Types of Benchmarking: External

Can take up significant time and resource to ensure thecomparability of data and information, the credibility ofthe findings and the development of soundrecommendations.

other organisations and there is a lack of good practiceswithin internal business units.


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Types of Benchmarking: Functional

Functional benchmarking focuses on comparisons insimilar functions within the same broad industry or ofindustry leaders. It can lead to breakthroughs that willresult in major improvements. Example: L.L. Bean &

Xerox


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Types of Benchmarking: Competitive

Competitive benchmarking applies to companies thatproduced similar products or services. It is a specificcompetitor to competitor comparison for theproduct or function in question.

owever, as s usua y cu o n ou e u ureplans of business rivals, competitive benchmarking maynot yield information that can be used to gain acompetitive advantage over ones competitors.


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Types of Benchmarking: Generic

Generic benchmarking involves comparisons of businessfunctions or process that are the same regardless of theindustry.

It can be the most informative and can result in changed

paradigms in the current operations of an organisation.- - .

Example: an insurance company may Benchmark a bank loan applicationprocess against its insurance claims process. While the processes may

appear dissimilar, they both require timely and consistent adjudication.Therefore, generic benchmarking involves analysis across industries.


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What do we need to conduct benchmarking

exercise:

To ensure success of benchmarking activities in anyorganisation, certain requirements need to be fulfilled.Among the factors which will determine successfulimplementation of benchmarking are:

op managemen suppor an comm men .

Benchmarking as part of organisational strategy.

It is a team activity.

It is planned, organised and managed. Understanding of own process.


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Steps of Benchmarking:

There are several approaches to implement benchmarking,such as 12 steps of Xerox, and 9 steps of AT&T and 7steps Alcoa, in general, they are all based on Plan-Do-Check-Act cycle.


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1) Plan:

It is necessary to select and define the process that is to bestudied and benchmarked and then to identify themeasures of process performance, followed by an

evaluation of own capability at this process and

against.


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2) Do:

Conducting primary and secondary research. Learning asmuch as possible about the target company's particularprocess through public disclosures in press and trade

publications. Direct communication may include, .


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3) Check:

In this step all the gathered information is analysed todetermine study findings and recommendations andidentifying process gaps and enablers that contribute to

improve performance and develop the own best practice.


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4) Act:

Communicate, adapt and monitor the new process. Theobjective of benchmarking is to change an organisationin a way that improves its performance. Finally,

recalibrate benchmarking and look for new.


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Critical Success Factors of Benchmarking:

Organisations to achieve its vision with the help ofbenchmarking, they need to have critical success factors(CSFs), that are core competencies or capabilities, thatmust be accomplished. The major CSFs are:

o ng e r g s u y.

Being committed to implementing the results.

Using an appropriate benchmarking process.


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Critical Success Factors of Benchmarking:

Choosing and empowering the right team members.

Knowing its own process first.

Adherin to the code of conduct.

Testing adaptability of practices and enablers

Verifying the results of implementation.


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Examples of Benchmarking: Xerox & L.L. Bean

Xerox: is photocopiers manufacturer.

L.L. Bean: is mail order clothing company relays heavily onlogistics.

In 1980s, Xerox performance of warehouse and logisticswas behind technology, Xerox faced financial difficultydue to the Japanese competitors.


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There was potential for the elimination of the bottleneckin the warehouse.

Technology was thought to be a key, but there was

insufficient data to confirm any of the theories. L. L.ean was oug o ave e es per ormance, u s

function was totally manual.


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Xeroxs order filling procedures were Benchmarkedagainst L. L. Beans and found to pose the greatest

opportunity.


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Through a series of follow-up interviews and site visits,Xerox determined that L. L. Bean organised itswarehouse so that the fast moving inventory (shirts,promotional items, etc.) were located near the loadingdock. This minimised the amount of time it took to pick

an order and et it loaded on a truck


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Additionally, incoming inventory was stored using anautomated system for maximizing space moreefficiently.

Xerox took these findings and implemented them ate r ware ouses. s overa or er ng e c ency

improved and costs were reduced.


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Examples of Benchmarking: Ford & Mazda

A Ford Motor Company team visited Mazda, in Japan (acompany in which Ford has a 25% interest).

Their mission was to make an in-depth analysis of

processes. It was found that its accounts payableepar men a near y 500 peop e n e n e a es

while Mazda had only nine. A gap like this was just toohard to ignore.


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As a first step, Ford identified further Benchmarksimpacting accounts payable performance which assistedthem in identifying three important business differences

Ford had more suppliers than Mazda.

Ford captured and matched more data elements on eachpayment transaction.

Fords payments were triggered by invoices from its suppliers -Mazdas processes did not.


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Action: Instituting a supplier review.

Re-engineering the requisitioning, receiving, and paymentprocesses.

Automating the information flow between Ford and its suppliers.


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They mapped out the basic business processes and foundthat Mazda was missing some steps. Japanesecompanies did not invoice each other -- instead they paidwhen they received the goods


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Ford decided on a program of:

Redefining the terms of the relationship with suppliers

Standardise payment terms on a total payment.

Instituting disciplined receiving practices for inventory

and payment control purposes.

Ensuring that all the terms and conditions were on thepurchase order and understandable by all parties.


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Ford Motor Company found that the results ofBenchmarking were not achieved overnight. It has takenthem over 10 years of effort to educate the suppliers tochange their practices.

s pro ec was an exerc se o c ang ng eenvironment, not changing internal practices, and hasresulted in an 80% reduction in accounts payable staffingrequirements.


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Bibliography:

Bogan, C. E., & English, M. J. (1994). Benchmarking for best practices :winning through innovative adaptation. New York: McGraw-Hill.

Camp, R. C. (2006). Benchmarking : the search for industry best practices thatlead to superior performance. Milwaukee, Wis.: Quality Press.

, ., , . . .handbook (1st ed.). New York, N.Y.: HarperBusiness.

Clifford Jamison, The Channel Practice.

Benchmarkingbooks.com

National Productivity Corporation.

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