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Benchmarking

Benchmarking
refers to finding the best-in-class product or
process, measuring the performance of your
product or process against it, and making
recommendations for improvement based
on the results.

Four Forms
Generic
Functional

Competitive
Internal

Four Forms
Generic
compares processes or operations across non-related
industries. (For example, a generic benchmarking
study might compare the billing process of a hospital
with the billing process of a telecommunications
company.)

Functional
is the comparison of processes or operations against
like processes or operations in similar industries (e.g.,
comparing the application process for a loan at a bank
and insurance application at a life insurer).

Four Forms
Competitive

benchmarking

is the study & measurement of a competitor for the


purposes of process or product quality improvement

Internal

benchmarking

is the comparison of processes or operations within an


organization.

Types
Process

benchmarking
Financial benchmarking
Benchmarking from an investor perspective
Performance benchmarking
Product benchmarking
Strategic benchmarking
Functional benchmarking
Best-in-class benchmarking
Operational benchmarking

Prerequisites
Will

and commitment
Vision and strategic objective link
Goals to becoming the best
Openness to new ideas

Prerequisites (cont.)
Understanding

of existing processes,
products, services, practices, and customer
needs
Documented Processes
Process analysis
Research, communication, and teambuilding skills

Obstacles
Internal

Focus
Objective too broad
Unrealistic timetables
Poor team composition
OK-in-class
Improper emphasis
Insensitivity to partners
Limited top-management support

Rationale
Global

competition
Current standing of company
A best-in-class model
Customers are better informed
Support of total quality

Seven steps to benchmarking


1.
2.

3.
4.
5.
6.
7.

Identify what to benchmark


Determine what to measure
Identify who to benchmark
Collect the data
Analyze the data and determine the gap
Set goals and develop an action plan
Monitor the process

Seven steps to benchmarking


Step-1
Identify what to

benchmark
Activities involved in step-1 are
Clarifying the benchmarking objective
Decide whom to involve
Define the process
Consider the scope
Set the boundaries
Agree on what happens in the process
Flow chart the process

Step-1 continue
Identify

what to benchmark
Two approaches of benchmarking
1) Strategic benchmarking
Financial function could benchmark it activities
(billing process)
2) Organizational benchmarking
Considerable research is done. Like soldering
process, driver motor assembly benchmarking

Step-1 continue
As

a starting point benchmark your


customer interfaces by not limiting
benchmarking to products. Like contract
truckers, answering phone calls, accuracy of
bills.
Benchmarking Product, manufacturing
process, equipment, and business processes.

Benchmarking: A Practical Example


ATO,

INC., is a manufacturer of small to


medium air conditioners.
Approximately 60%- home and office use
only
The remaining 40%-trucking industry,
where ATOs unique respected position in
supplying units for refrigerated trucks and
trailer rigs.

ATO, Inc.,
ATO

Incs production supervisor for Model 724


series (home models) manufacturing areaSeth
Seths group is a customer for an outside
supplier of external control panel.
Responsibility of Seths production area
Building the chassis and housing for the units
Installing internal components and wiring
Assembling the final products

ATO, Inc.,
The

model 724 series manufacturing group is


organized into three work areas:

Chassis
Production

Component
Install

Final Assembly

Build

Install

Install

Chassis
Components
Build Housing

internallysupplied control wire


unit

Affix

vendor panels
product lables

Lastly.

Seths team processes the units


through the warehouse for packing and
shipping to final destination.

ATO, Inc.,
What

is cooking in ATOs
Each of the work area is organized into
work teams responsible for setting and
attaining their goals and managing their
work processes.
Seth handles most of the interaction
between the work team to ensure
coordination and planning.

ATO, Inc.,
Seths

production group members are working


towards continuously improving the process.
Revamping of the production line and
installation of new equipment. The feel they
have reached the plateau.
Steve, most experienced assembler, put it this
way Look, weve done all we can on this
process. Weve tried everything and our
numbers are as good as they are going to get.
Got it?

ATO, Inc.,
Ahmed:

Steves feelings are


understandable, you got to do something
Sethwake up.
They have been working hard and their
recent most improvement produced smaller
gains.
Seth wakes up
Let us do benchmarking study for the entire
assembly process.

Step-1
The

first step identify what to benchmark has


following sub steps
Clarify the benchmarking objectives
Decide whom to involve
Define the process
Consider the scope
Set the boundaries
Agree on the process
Flow chart the process

Clarify The Benchmarking Objective


We

have already discussed why we have


decided to benchmark-setting priorities for
improvement, addressing a specific problem
which needs attention and not meeting goals.
Why Seth has decided to do benchmark
They have upgraded equipment, everyone had
needed skills, and taken steps to improve
quality but they are still searching for way to
improve. Their objective was to have best in
class final assembly process.

Seth is deciding whom to involve in


benchmarking team
Management

support to the team


Include employees who are close to the
process. Include employees who have interest
and knowledge about what goes on outside the
boundaries of process.
Let us also consider internal suppliers and
customers of the process. Who supply products,
information, or other key inputs. Customers
receive our service, products or output.

Benchmarking team
Seth-Production supervisor for the Model 724 series.
Given decision making authority.
Steve- A senior assembler, member of the quality
improvement team.
Bill- An assembler a new employee at ATO
Maria-An inspector got promoted from the shipping
department and just completed training for final
assembly area. She installs the labels and information
plates at the end of the process (is some sense she is a
final customer for the process)
Simon-A former assembler who now works in
component installation area, but occasionally done
assembly when team requires backup (brings internal
supplier perspective)

Sub steps of step-1


Define

the process
One need to clearly define process. A
process is a series of interrelated task that
are organized to produce an output.
Consider the scope
Not to be too broad or too narrow.

ATO, Inc.s final assembly benchmarking


team
The

decide to benchmark control panel


installation because they had recently
experienced troubled with connections
coming loose.
Steve-Thats a good place to focus, and it is
broad enough to achieve something and
narrow enough that we can wrap our arms
around it

ATO, Inc.s final assembly benchmarking


team
Simon-

Sure. Let us define the starting and


ending point of the process so that we all know
exactly what we are working on?.
Set the boundaries
After a few minutes of discussion the team
reached an agreement.
Starting point-receive the panel from the
inventory clerk
Ending boundary-place the unit back to the
conveyor belt.

ATO, Inc.s final assembly benchmarking


team
Agree

on the process
1. Receive the panel from the inventory clerk
2. Unpack the panel as needed and visually check
for completeness (no broken wires etc)
3. Place the control panel on unit and attach
fasteners
4. Solder the connections
5. Test the circuitry and secure the cover
6. Place the unit back on the conveyor belt

Step-2 of seven step model


Determine

what to measure has three major


sub steps to consider
1. Examine the flow chart
2. Establish the process measures
3. Verify that measures match objectives

Flow chart
Review

the flow chart. Some of the measurable


items we are looking for might be
1. Overall time to complete the process
2. Completion time for each individual task
3. Time spent at each decision point
4. Number of loops or repeats
5. Variation of task time
6. Number of defects showing up
7. Costs
8. Scrap

Start

No
Verify
panels
OK

Unpack
panels
1 min.

Receive
panels
1 min.

Yes

1.5 min.

2 min.

Test
circuitry

Solder
connections

10 min.

Attach
fasteners

15-18 min.

9-13 min.

Place
panels in
position

Yes

No

Position
of
mounting
holes OK

.5 min.
No

Circuits
OK

Yes

Secure
Cover
4 min.

Place unit
on belt

End

.5 min.

5 min.
Total time = 45 - 52 min.

Step-2
Bill-

Since we know where our inputs and


outputs are coming from, shouldnt we
consider measuring that are important to our
internal suppliers and customers too?..
2)Establish process measures
Consider measures outside the process
Measures of your external customers should
influence the choice of process measures to
benchmark (even though it is distant from
customers contact)

Step-2
Measures

of your internal suppliers and


customers requirement. Since their
performance is linked to yours, your
measures should be linked as well
ATO, Inc internal customers are the
shipping and warehouse department and
their internal suppliers are component
installation area and inventory department.

Step-2
Link

supplier and customer measures with


in-process measures.(fig)
Seths benchmarking team took the
interview of both internal suppliers and
customers.
As the team looked back they concluded
based on the flow chart, internal suppliers
and customer measures.
They concluded that the total time for the
process varied due to several reasons.

Step-2
Seths

decided to benchmark three measures


Time for completion.
Downtime
Number of reworks
Verify that measures match objectives
For example, if a groups goal was to increase
productivity, they would need to look at
measures such as time quantities of output,
cost per unit

Step-3 Identify who to


benchmark
Conduct

general research
Choose the level to benchmark
Internal
Competitive and noncompetitive
World class
Seths team considered their ATOs plant in
northwest region and best in class Bestco,
Inc.

Step-4 :collect the data


Its

time to gather information on the


performance level of your benchmarking
target and how they mange their processes.
Three main sources
Internal
Public information
Other companies: this is the most exciting
part, we actually go out and discover new
ideas and make careful observation.

Step-4
The

techniques for gathering benchmarking


information.
Using a questionnaire
Conducting a benchmarking site visit
Using a questionnaire: things to remember
Include a detail information of the process
List task included
List problem or concerns relating to it

Step-4
Including

information and questions on the


how the process is measures and
performance criteria
1. Quality
2. Time
3. Cost, etc.

Step-4
Focus

on process improvement the benchmark


target has developed
1. What kind
2. How
3. Cost versus the best result
4. Technical difficulties
5. Determine the area of support for the process
like training, methods, technology,
6. Staff background and documentation methods

Step-4
Conducting

a benchmarking visit:
Prepare for the visit
Organizational climate
How many and who will be going
How will the visit be conducted
Who will take notes and how
Document the visit

Process
Product or services that is
produced (output)
Key characteristics of
output
Measures that will be
compared
Measurement data
(findings, comparisons)

Gaps between our


process and another
organizations
(positive or negative)

Your Process

Organization #1

Step-4
Seths

team have the results

Measurement data (findings, comparison)


Key
measures

Total time

ATO, Inc.
Model 724

ATO, Inc.
Bestco, Inc.
Northwest
Region
Plant
45 52 min. 44- 46 min. 22.5 min.

Downtime
(per unit)

3 5 min.

3 5 min.

1 2 min.

Percentage
of reworks

4%

3.5%

0.25%

Step-5: Analyze data and determining


gap

60
40
20
0
1

Our
Organizati
on

Our Organization
Orginazation A
Organization B

Average Process Time


50
45
40
35
30
25
20
15
10
5
0

ATO, Inc. ATO, Inc. Bestco, Inc.


Model 724 Northwest
control panel Region Plant
installation

Average Downtime Per Unit


4
3.5
3
2.5
2
1.5
1
0.5
0

ATO, Inc. ATO, Inc. Bestco, Inc.


Model 724 Northwest
control panel Region Plant
installation

Average Percent of Reworks


5
4
3
2
1
0

ATO, Inc. ATO, Inc. Bestco, Inc.


Model 724 Northwest
control panel Region Plant
installation

Step-5
Seths

team was surprised after looking at


the gap between their processes and that of
Bestco, Inc.
Steve added You know, if someone have
told me a month ago that you could get
these kind of numbers, I wouldnt have
believed it,
Seth we thought we have improved our
process as much as we could.

Step-6: Set goals and develop and action


plan
Set

performance goal
Goal should be achievable in
increment( 3*5=15 hrs)
Goals should realistic (time, res, abilities, skills
and budget)
Goal should be measurable ( reducing three
hours)
Goal should be finite (starting and ending pt)
Goal should be supported

Step-6
Seths

team benchmarking goals


Reduce total task time to 30 minutes (5m
per Q)
Reduce downtime from three to one minute
per unit (end goals to be reached in 9 m)
Reduce reworks from 4 percent to 2.5
percent (6m)

Step-6
Developing

action plan
Step One-determine tasks, timelines, and
responsibilities
Points to consider-who will be affected and
responsible for implementation?
What resources will the person responsible
for task need. How the information will be
shared
Step Two-develop contingency plan

Action Plan
Action Step

Responsible
Person or
Group

Begin End
Date

Estimated
Duration

1. Feasibility
study to install
new technology
in final
processing area

Benchmark
Team

10/1 10/30

One Month $5,000

Estimated
Cost

Action Plan
Action Step

Responsible
Person or
Group

Begin End
Date

Estimated
Duration

Estimated
Cost

2. Vendor
selection for
new technology

Final
assembly

10/1 10/7

35 hours

$600

3. Design
project plan for
installation

Senior
management

10/7 10/14

28 hours

$1,200

Action Plan
Action Step

Responsible
Person or
Group

Begin End
Date

Estimated
Duration

Estimated
Cost

4. Purchase and
install new
equipment

Vendors plus
three staff
members

11/1 3/2

1,280
hours

$44,800

5. Test

Vendor plus 2 1/30 2/15


staff
members

40 hours

#1,200

Step-7: Monitor the process


Track

the change
Make benchmarking a habit
Benchmarking progress report
Regular progress meeting
Monitor customers (internal and external)
Monitor suppliers (internal and customer)