Benchmarking for Superior Performance

© Operational Excellence Consulting. All rights reserved. 1
Benchmarking for
Superior Performance

Learning Objectives
1.  Gain a broad understanding of the key concepts of benchmarking.
2.  Learn how to identify, assess and implement various types of
benchmarking projects to meet the your organization’s goals
based on the Xerox Benchmarking model.
3.  Gain awareness of the code of conduct for benchmarking and
make preparations to get the most out of a site visit.
4.  Define the critical success factors in benchmarking
implementation.
5.  Kick-start benchmarking projects that are aligned to your
company’s strategic goals.

Outline
1.  Introduction to Benchmarking
2.  The Benchmarking Process
3.  Benchmarking Roles & Responsibilities
4.  Benchmarking Inspection Checklist
5.  Benchmarking Etiquette
6.  Benchmarking Site Visit
7.  Benchmarking Pitfalls & Success
NOTE: This is a PARTIAL PREVIEW. To
download the complete presentation, please
visit: http://www.oeconsulting.com.sg

“If you know the
enemy and know
yourself, you need not
fear the result of a
hundred battles.”
– Sun Tzu
The Art of War, 500 B.C.
Introduction to Benchmarking

Time
Performance
Continuous Improvement
Performance Gap
Customer Expectation Dilemma

Xerox Benchmarking Chronology
Year Activities
1979 Benchmarking as a competitive strategy introduced
1981 U.S. and Japan manufacturing studies initiated
1982 Benchmarking in non-manufacturing units begins
1983
Benchmarking integrated as part of a “Leadership-Through-
Quality” strategy
1984 Corporate-wide competitive benchmarking network formed
1984-89 Benchmarking application internalized
1989 Baldrige award winner
1990+ Benchmarking totally integrated at all levels

Xerox – Benchmarking Results
§  Winner of the Baldrige award in 1989
§  78% decrease in the number of defects per 100
machines
§  40% increase in product reliability (unscheduled
maintenance)
§  27% drop (nearly 2 hours) in service response time
§  First in the industry to offer a 3-year product warranty
§  “Leadership Through Quality” strategy as a means to
drive continuous improvement

© Operational Excellence Consulting. All rights reserved.
8
“Insanity is doing the
same thing, over and
over again, but
expecting different
results.”
Albert Einstein

Exercise: True or False?
1.  Obtaining “metrics” (or “benchmarks”) is the most
important facet of benchmarking.
2.  The SQA winners are always good organizations to
participate in a benchmarking study.
3.  The first step in benchmarking study is data collection.
4.  The best studies are those that have well-known name
organizations participating.
5.  The most important goal in benchmarking study is to
select the right “target” organizations.

Why Benchmark?
1.  Productivity improvement
2.  Meeting customer
requirements
3.  A goal-setting technique
4.  An on-going learning
process

Benchmarking – With & Without
Without Benchmarking With BenchmarkingVS
Source: Adapted from Benchmarking, Robert C. Camp
Internally focused
Concrete understanding
of competition
Not invented here Proactive search for change
Few solutions Many options
Evolutionary change
New ideas of proven practices
and technology
Average of industry progress Business practice breakthrough
Frantic catch up activity Superior performance

Selecting Benchmarking Topics
Back Burner
Do It!
Don’t Do It!
Benchmarking
Topics
Low High
Current Diﬃculty in Achieving Needed
Performance Improvement
High
Low
Impact of Performance
Improvement

Objective of Benchmarking
§  The primary objective of benchmarking is to understand
those practices that will provide a competitive
advantage; target setting is secondary

14
“Benchmarking is
the search for
industry best
practices that lead
to superior
performance.”
Robert C. Camp

Differences Between Approaches for Market Research,
Competitive Analysis and Benchmarking
Market Research
Competitive
Analysis
Benchmarking
Generic purpose
Analyze industry
markets, customer
segments or product
acceptance
Analyze competitive
strategies
Analyze what, why and
how well competition or
leading companies are
doing
Usual focus Customer needs Competitive strategies
Business practices
which satisfy customer
needs
Application Products and services
Marketplace and
products
Business practices as
well as products
Usually limited to
How customer needs
are met
Marketplace activities
Not limited;
competitive, functional
and internal
benchmarking are used
Information sources Customers Industry analysts, etc.
Industry leaders as well
as competitors

Four Phases of Benchmarking
Phase 1:
Planning
Phase 2:
Analysis
Phase 3:
Integration
Phase 4:
Action
Benchmarking Process

Benchmarking Process Steps
1. IDENTIFY WHAT IS TO BE BENCHMARKED
2. IDENTIFY COMPARATIVE COMPANIES
3. DETERMINE DATA COLLECTION METHOD AND COLLECT DATA
4. DETERMINE CURRENT PERFORMANCE “GAP”
5. PROJECT FUTURE PEROFMANCE LEVELS
6. COMMUNICATE BENCHMARK FINDINGS AND GAIN ACCEPTANCE
7. ESTABLISH FUNCTIONAL GOALS
8. DEVELOP ACTION PLANS
9. IMPLEMENT SPECIFIC ACTIONS AND MONITOR PROGRESS
10. RECALIBRATE BENCHMARKS
v  LEADERSHIP POSITION ATTAINED
v  PRACTICES FULLY INTEGRATED INTO PROCESSES
Phase 1:
PLANNING
Phase 2:
ANALYSIS
Phase 3:
INTEGRATION
Phase 4:
ACTION
MATURITY
Benchmarking Process
Source: Business Process Benchmarking, Robert C. Camp

Step 1: What to Benchmark?
Identifying the Subject for Benchmarking
Basic Question:
§  Determine the significant
area/activities that will
improve performance and
enable the business units
to achieve operation
vision and objectives

Selecting What to Benchmark Using the Process
Model Approach
§  What is supplied
§  Sequence of work steps
§  Best practices at each step
§  What is delivered
§  Performance
measure
Market Customer inquiries Problem resolution process Satisfied customers
Percent customer
repurchasing
Produce
Customer
requirements
Product development process Product features
Unit manufacturing
cost
Deliver Orders Order picking process Order complete Percent accuracy
Service Maintenance request Broken call (for parts) process Uptime increased
% parts filled from
service-person’s
inventory
Invoice Completed orders Billing process Billing quality
Percent invoices error
free
Source: Business Process Benchmarking, Robert C. Camp
Inputs OutputsProcess
Feedback
Results

Examples of Critical Success Factors
Level 1 Level 2 Level 3
Manufacturing cost Assembly cost Maintenance cost
Employee satisfaction Recognition
Schemes to attract
technical staff
Quality Billing % of error-free invoices
Customer satisfaction Call center Average call waiting time
Innovation Product development % of ideas implemented
Step 1: What to Benchmark?Step 1: What to Benchmark?

Activity 1: Brainstorming what to
benchmark
1.  Brainstorm ideas (subjects or topics) on what to
benchmark.
2.  Group similar ideas together.
3.  Define a set of prioritization criteria to select
the most important subjects or topics.
4.  List your ideas on the flip chart.
5.  Present your ideas to the class.
15 mins

Summarize Purpose of Study
§  A brief statement of the purpose of
study
§  The subject of study
§  The measurement involved
§  Indicate how output will help run the
business
Step 1: What to Benchmark?Step 1: What to Benchmark?

Value of Information-Gathering Methods
(5 = most favorable; 1 = least favorable)
Selecting Methods of Conducting Research
Mail Phone Visit
Focus
Group
Amount of data 2 3 5 5
Accuracy of data 2 4 5 5
Sample size 5 3 2 3
Response rate 2 4 5 5
Cost per interview 5 4 2 3
Time requirements 2 5 2 1
Flexibility 1 4 5 1
Special skills 3 4 5 1
Administration 5 4 2 1
Step 3: Data Collection

Example – Presenting Benchmarking Data
Benchmark
(“World-class” from
another industry
with similar activity)
Best Competitor
Industry Average

COMPANY A COMPANY B COMPANY C

Operational Definition Calculation Formula Operational Definition Calculation Formula Operational Definition Calculation Formula
1. Asset
Utilization
“Financial” Equipment
Utilization
Earned Hrs/total available
hrs
Machine uptime included
No WIP
(Manufacturing Time *
100% + Billable
Engineering + Billable
Retest + Billable QA ) /
Total Time
The measure of how
efficiently a company asset
is utilize
(Total Available Hrs - Total
Downtime)/Total Available
Hrs
Earned Hrs = Actual
Starts/Pure UPH
Pure UPH = 3,600/(Test
Time + Index Time)
2. OEE
Overall Equipment
Effectiveness
%In-use x % Consumption
Efficiency
Overall Equipment
Efficiency
(Availability% *
Performance Efficiency%)
– Retest%
OEE is an all-inclusive
measurement of
semiconductor equipment
and manufacturing
OEE = Availability *
Performance

productivity. OEE
approaches the problem of
equipment manufacturing
complexity with a
(less yield)
In-use = % of hrs used for
testing fresh units

methodology to deduce
and implement permanent
productivity improvement

Consumption Efficiency =
Actual UPH / Pure UPH

3. Availability
“Equipment Availability” is
the Total Time per week
excludes Planned and
Unplanned Downtime (168hrs – (PD+UD))/
168hrs
Total time excluded
Scheduled and
unscheduled downtime
(Total Time – Downtime) /
Total Time
Total available time
Equipment is available for
use
(Total Available Hrs – Total
Equipment Downtime)/
Total Available Hrs
For OEE calculation, we
are using % In-use
Partial Questionnaire Showing Comparison of
Definitions and Formulas ILLUSTRATIVE

1. Organize Data
§  Do not…
•  Over analyze the data (“analysis
paralysis”)
•  Be overly precise
§  Most important is...
•  To recognize the factor and its
significance by estimating the
relative value or effect of these
unique factors
Step 4: Determine the Current Performance Gap

4. Check for Gap
0
20
30
40
50
Yesterday Today
THEM
US
Tomorrow
Future
gap
= 42%
Current
gap
= 39%
Step 4: Determine the Current Performance Gap

Projection of Gap
Years
Summary
Measure
BIC Practice
Your Practice
Superior
Performance
Benchmark
Gap
Today End-Point
Step 5: Project Future Performance

Spider or Radar Chart
M1
M6 M4
M5
M7 M3
M2M8
Total customer
satisfaction
(ultimate goal)
Best of best
(benchmark)
Current performance
(baseline)
Step 5: Project Future Performance

Guidelines for Organizing Analysis Information
§  Executive summary
•  Key results
•  Conclusions
•  Recommendations
§  Study process
•  Respondent selection
•  Methods employed to gather data
•  Analysis techniques
Step 6: Communicate Findings & Gain Acceptance

BENCHMARK
PROJECTS
IMPLEMENTED
BENCHMARK
PRACTICES
FINDING
INCORPORATED
Mission
Planning
Principles
Performance
Goals
Strategies
Implementation Tasks
Goal Setting, Action Planning Process &
Relationship to Benchmarking
Step 8: Develop Action Plan

Ways of Implementing Benchmark Practices
§  Line Management
§  Project Team
§  Process Manager
§  Work Team
Step 9: Implementing Action & Monitoring Progress

Benchmarking Roles & Responsibilities
§  Customers of benchmarking
•  Functional managers
•  Vice presidents
•  Process owners
§  Suppliers of benchmarking
•  Corporate benchmarking
competency
•  Division benchmarking
competency
•  Benchmarking networks
•  Functional benchmarking
representatives
Benchmarking Roles & Responsibilities

Benchmarking Protocol
Policy regarding benchmarking protocol should be
communicated to all employees involved, prior to contacting
external organizations. Guidelines should address the following
areas:
§  Misrepresentation – do not misrepresent your identity in
order to gather information
§  Information requests – a request should be made only for
information your organization would be willing to share with
another company
§  Sensitive / proprietary information – avoid direct
benchmarking of sensitive or proprietary information
§  Confidentiality – treat all information as confidential
Benchmarking Etiquette

Site visit
IS NOT
“Industrial
Tourism”
Benchmarking Site Visit

Sample Summary
Processes A B C D E F G
Senior executive leadership of quality efforts ++ ++ ++ ++ + - ++
Change management ++ ++ ++ ++ ++ - ++
Corporate identity and embedded values ++ ++ ++ ++ ++ = ++
Clear constancy of purpose in quality initiatives ++ ++ ++ ++ ++ = +
Self-assessment as a business driver ++ ++ ++ ++ ++ + ++
Policy deployment ++ ? ++ -- ++ + =
Explicit commitment to learning and training + ++ ++ ++ ++ + ++
Disciplined use of benchmarking (strategic & teams) ++ ++ ++ ++ ++ + ++
High performance work organizations + ++ + + + = =
Use of common measures to reinforce focus + ? + ++ ++ = =
++ Significantly better than XYZ
+ Better than XYZ
= Essentially equal to XYZ
- Worse than XYZ
-- Significantly worse than XYZ
Benchmarking Site Visit

Attributes of Benchmarking Studies:
Success vs. Failure
Success Failure
Process Owner Involvement
Customer Driven Objectives
Linked to Strategic Plan
Best Practices & Enablers
Consider Cultural Attributes
Disciplined Methodology
Quantum Change
Clear Project Life Cycle
Integrated with Existing
Quality Efforts
Sponsorship Uncertain
Amorphous Objectives
No Strategic Integration
Performance Metrics Only
“Hard” Data Only
Arbitrary / Casual Approach
Incremental / No Change
Keep Going and Going and …..
A la carte Program
Benchmarking Pitfalls & Successes

About Operational Excellence
Consulting
§  Operational Excellence Consulting is a management
training and consulting firm that assists organizations in
improving business performance and effectiveness.
§  The firm’s mission is to create business value for
organizations through innovative operational excellence
management training and consulting solutions.
§  OEC takes a unique “beyond the tools” approach to enable
clients develop internal capabilities and cultural
transformation to achieve sustainable world-class excellence
and competitive advantage. For more information, please visit
www.oeconsulting.com.sg

To download this presentation,
please visit us at:
www.oeconsulting.com.sg
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