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)
