Benchmarking
BENCHMARKING’s full form:
B: Barometer
E: Elemental
N: Norm
C: Criterion
H: Headship
M: Model/Measure
A: Arrant
R: Reassurance
K: Know-How
I: Improvement
N: Nonpareil
G: Gauge
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Benchmarking
Section I
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Benchmarking
What is Benchmarking?
A “benchmark” is a reference or measurement standard used
for comparison.
“Benchmarking” is the continuous activity of identifying,
understanding and adapting best practice and processes that
will lead to superior performance.
"Benchmarking is the process of identifying, understanding,
and adapting outstanding practices from organizations
anywhere in the world to help your organization improve its
performance."
The objective of benchmarking is to understand and evaluate the current position of a
business or organization in relation to "best practice" and to identify areas and means of
performance improvement.
Benchmarking measures an organization’s products, services and processes, to establish
targets, priorities and improvements, leading to competitive advantage and/or cost
reductions. The data and information collected and analysed as part of a self-assessment
can be used in a benchmarking exercise.
It is important to appreciate the difference between external comparisons, where just data
is collected, and benchmarking as described here, where the drivers of the performance
are identified.
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The benefits of conducting a benchmarking exercise can include:
1. Creating a better understanding of the current position
2. Increasing awareness of changing customer needs
3. Encouraging innovation
4. Developing realistic, stretching goals
5. Establishing realistic action plans
Benchmarking is a practical tool for improving performance by learning from best
practices and understanding the processes by which they are achieved. Benchmarking
involves comparing your performance with that of others you have analyzed and
implementing the necessary changes to close the performance gap.
Benchmarking is a continuous process of selecting the best practices and services against
which to judge. It is based on Japanese concept – DANTOTSU meaning ‘BEST OF
THE BEST.’ The underlying philosophy is if you seek out and watch best practice, there
is a possibility of the attainment of superiority. By identifying a guideline, benchmarking
will allow a company to what operating standards to apply.
In real life, useful benchmark is all about learning from others, not comparing
benchmarks. The goal is to learn as much as possible about how the best performing
companies do things. That means in – depth visits and conversations so that you
understand their methods and understand how it could apply you.
Benchmarking does not mean simply copying other’s practices, it requires the ability to
innovate and adapt what you have learnt from others, according to your organization’s
specific needs. It is a “dynamic process” that evolves with growing experience, and with
application to different organizational and cultural settings.
Benchmarking can be applied to many different areas and at many different levels,
ranging from manufacturing industry to public service administration, at individual
department or company level, as well as sectoral or policy level. Benchmarking has
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Benchmarking
Already been successfully implemented as a tool to improve performance in the private
sector and more recently, in the public sector by government administrations and other
public institutions.
Benchmarking can be carried out internally between different business units with in an
organization, between organizations within an industry sector or between organizations
across industry sectors.
The most powerful results are likely to be achieved across industry sectors, because this
encourages thinking outside normal industry paradigms. Out of industry, benchmarking
can assists organizations to leap ahead of their competitors.
Benchmarking is best done by small teams of people working in various aspects of a
particular practice or process. However, benchmarking also requires overall strategic
guidance to ensure that the right processes and practices are being improved for the most
overall benefit to the organization.
“THE COST IS LONG FORGOTTEN
BUT THE QUALITY IS REMEMBERED FOREVER”
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Benchmarking
Evolution Of Benchmarking
G.H. Watson outlines the development of benchmarking in five phases
Phase 1 1950-1975 Reverse Engineering
Phase 2 1976-1986 Competitive Benchmarking
Phase 3 1982-1988 Process Benchmarking
Phase 4 1988+ Strategic Benchmarking
Phase 5 1993+ Global Benchmarking
Reverse engineering was tearing things apart, examining them, improving them, and
putting them back together. Benchmarking really began in its modern form with the
introduction of competitive benchmarking began with Rank Xerox, and its
implementation of benchmarking in beginning around 1976. This was followed by
process benchmarking which included looking for ideas outside of the direct
competition. Strategic benchmarking involves fundamentally changing the business, not
just the process. Global Benchmarking is the newest and involves comparing your
organization on a global scale.
Xerox Case
Benchmarking started out in the corporate sector. It was originally started when Xerox
Corporation realized it was losing a lot of money and market share to its Japanese
competitors. Its competitors were able to sell photocopiers for the same price that it cost
Xerox to make them. Benchmarking was started by Xerox’s Manufacturing unit when it
analyzed its photocopier manufacturing compared to Fuji-Xerox.
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Benchmarking
In the 1970s, Xerox was the largest manufacturer of copiers in the world. However,
Japanese manufacturers were making better copiers, selling them for less, and making a
good profit. This prompted the company to directly compare itself with its direct and
best competitors to determine what it could do to increase productivity while decreasing
costs.
The results from their benchmarking were astonishing. They found:
Xerox's ratio of indirect to direct staff was twice that of direct competition
It had nine times the number of production suppliers
Assembly line rejects were in the order of ten times worse
Product time to market was twice as long
Defects per 100 machines were seven times worse.
However, Xerox's Japanese joint venture, Fuji Xerox, was performing well. The problem
was large, and forced some changes.
Over the next five years, Xerox would have to increase productivity 18% to keep up with
its competitors. It did this through a strategy known as leadership through quality, which
became the foundation of the revival of the company. For example, Xerox benchmarked
L.L. Bean, a Maine outdoor sporting goods retailer, because of their excellent warehouse
procedures that are now the standard at most companies. It also benchmarked almost 230
performance areas by the time it won the Malcolm Baldridge National Quality award in
1989.
Public Sector
Due to the relative infancy of benchmarking in the public sector, results of many cases
are still not fully known. The demand for better for less has many taxpayer wanting a
government that acts like a business, and treats them as a paying customer. In and age
when everything is available at the click of a mouse or a swipe of a card, no one wants a
government full of red tape and long waits.
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A couple of early federal examples are the Bureau of the Census and the IRS. The
Bureau of Census set up four teams that were each to do a specific task. One team
withdrew due to a lack of support from team members. Yet another withdrew because it
could not find sponsors. A third team took a very informal approach that proved of little
use. Only one team finished, but it proved difficult to even find a room to meet and get
all the team members to be there at the same time.
The IRS, however, succeeded in benchmarking its information system. The IRS hired
outside consultants. They started by speaking to top IRS executives. Then the executives
showed managers examples in benchmarking. The managers then decided what to
benchmark. This was followed by literature review and outside contacts. Finally, using a
method similar to Xerox’s they benchmarked four areas. These included software
measurement, picking and packing in form distribution centers, personnel recruitment
and retention, and assistance at walk-in taxpayer sites. As a best-in-class performer, the
Ogden, Utah site was emulated for its recognized service record. It went so well, that
they now require a benchmarking study as part of standard methodology.
Successful benchmarking was done by NASA in the early 1990s as well. NASA
conducted 47 separate benchmarking studies. They have been so successful that other
federal agencies have turned to NASA for help in benchmarking.
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Benchmarking
Benchmarking Basics
The goal of benchmarking is to identify the weaknesses within an organization and
improve upon them, with the idea of becoming the "best of the best." The benchmarking
process helps managers to find gaps in performance and turn them into opportunities for
improvement. Benchmarking enables companies to identify the most successful strategies
used by other companies of comparable size, type, or regional location, and then adopt
relevant measures to make their own programs more efficient. Most companies apply
benchmarking as part of a broad strategic process. For example, companies use
benchmarking in order to find breakthrough ideas for improving processes, to support
quality improvement programs, to motivate staffs to improve performance, and to satisfy
management's need for competitive assessments.
Benchmarking targets roles, processes, and critical success factors. Roles are what define
the job or function that a person fulfills. Processes are what consume a company's
resources. Critical success factors are issues that company must address for success over
the long-term in order to gain a competitive advantage. Benchmarking focuses on these
things in order to point out inefficiencies and potential areas for improvement.
A company that decides to undertake a benchmarking initiative should consider the
following questions: When? Why? Who? What? And How?
Why to benchmark?
This is the most important question in management's decision to begin the benchmarking
process.
Benchmarking is a key concept in modern management. At its simplest level,
benchmarking consists of comparing your organization with another. In this way you can
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Benchmarking
decide whether your organization performance is in some way falling short of the
standard against which you compare yourself.
Benchmarking is not only “competitive analysis” or “number crunching”, nor is it
spying, espionage, or stealing. It is truly a process of organizational learning. Comparing
yourself with competitors is important, of course your customers too. But if you only try
to match your competitors, you will never leave then in dust.
Benchmarking is an important element in strategic planning as well as operational
improvement. Long-range strategies require an organizational to continuously Change
and adapt to the market plae to remain competitive. In order to motivate and energies its
people, and organization must:
Believe there is a need for a change
Determine what need to be hanged.
Create a picture of how the organization should look after the change and;
Benchmarking facilitates all the three. It creates a need for change by identifying gaps
between an organization and its competitors. It helps identify what needs to be changed
by revealing how industry leaders do things. It motivates and energies people by showing
what is possible and what other organizations have done.
Benchmarking is essentially a learning experience. It helps an organization to focus and
drive for consensus on what needs to be done and how to achieve it. It can provide the
much-needed stimulus for improvement by people at all the levels through an externally
focused, competitive situation to achieve world-class performance. Effective use of
benchmarking can help organizations achieve a superior level of customer service and
satisfaction. This in turn will lead to increased market share and better performance.
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Benchmarking
By Benchmarking you will find out;
Who performs the business process very well and has process practices that are
adaptable to your own organization
Who is the most compatible for you to benchmark with
If you need to conduct a comprehensive benchmark study or if you can obtain 80-
90% of what you need from just using the telephone, email, or an electronic
survey to communicate your needs with other members on The Benchmarking
Exchange
Most business processes are common throughout industry. For example; NASA has the
same fundamental Human Resources requirements for hiring and developing employees,
as does American Express. British Telecom has the same Customer Satisfaction Survey
process as Brooklyn Union Gas. These processes, albeit from different industries, are all
common and can be benchmarked very effectively. It's called "getting out of the box".
When To Benchmark?
Benchmarking can be used at any time, but is usually performed in response to needs that
arise within a company.
Quality programs
Cost reduction/budget process
Operations improvement efforts
Management change
New operations/new ventures
Rethinking existing strategies
Competitive assaults/crises
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Benchmarking
Who To Benchmark
Companies may decide to benchmark internally, against competitors, against industry
performance, or against the "best of the best." Internal benchmarking is the analysis of
existing practice within various departments or divisions of the organization, looking for
best performance as well as identifying baseline activities and drivers. Competitive
benchmarking looks at a company's direct competitors and evaluates how the company is
doing in comparison. Knowing the strengths and weaknesses of the competition is not
only important in plotting a successful strategy, but it can also help prioritize areas of
improvement as specific customer expectations are identified. Industry benchmarking is
more trend-based and has a much broader scope. It can help establish performance
baselines. The best-in-class form of benchmarking examines multiple industries in search
of new, innovative practices. It not only provides a broad scope, but also it provides the
best opportunities over that range.
What To Benchmark?
Benchmarking can focus on roles, processes, or strategic issues. It can be used to
establish the function or mission of an organization. It can also be used to examine
existing practices while looking at the organization as a whole to identify practices that
support major processes or critical objectives. When focusing on specific processes or
activities, the depth of the analysis is a key issue. The analysis can take the form of
vertical or horizontal benchmarking. Vertical benchmarking is where the focus is placed
on specific departments or functions, while horizontal benchmarking is where the focus is
placed on a specific process or activity. Concerning strategic issues, the objective is to
identify factors that are of greatest importance to competitive advantage, to define
measures of excellence that capture these issues, and to isolate companies that appear to
be top performers in these areas.
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Benchmarking
How To Benchmark?
Benchmarking uses different sources of information, including published material, trade
meetings, and conversations with industry experts, consultants, customers, and marketing
representatives. The emergence of Internet technology has facilitated the bench-marking
process. The Internet offers access to a number of databases-like Power-MARQ from the
nonprofit American Productivity and Quality Center-containing performance indicators
for thousands of different companies. The Internet also enables companies to conduct
electronic surveys to collect bench-marking data. How a company benchmarks may
depend on available resources, deadlines, and the number of alternative sources of
information
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Benchmarking
Merits & Demerits
Merits
Benchmarking has many advantages. Xerox's experience with benchmarking led them to
the following benefits:
Benchmarking brings out the newness and innovative ways of managing
operations.
It is an effective team-building tool.
It has increased general awareness of costs and performance of products and
services in relation to those of competitor organizations.
It brings together all the divisions and helps to develop a common front for facing
competition.
It highlights the importance of employee involvement and, as such, encourages
recognition of individual/team efforts.
These illustrate the benefits of competitive benchmarking, which is used in both the
business sector and the public sector. Some of the advantages that will be discussed
below are team building, comprehensibility, flexibility, creativity, and evolution
Team Building
Benchmarking cannot be successful without the full involvement of everyone in contact
with a project. It creates a united front for an organization and gives those who work
within it a common goal to accomplish. It also includes the ideas and concerns of those
affected.
Along with good work on such a project comes recognition. As mentioned there are
several awards for an organization to receive. Within an organization may be yet more
awards for individuals, teams, or agencies that have exemplary performance. This is
achieved by setting goals, then meeting, or exceeding them. ‘
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Comprehensibility
Unlike some methods, benchmarking is easy to understand. This is due largely to the fact
that benchmarking produces a direct comparison to another organization. After
determining whom to follow, you study what they do, and emulate it. There is no
misunderstanding of the overall goal of being the best.
Flexibility
Benchmarking is flexible and can be interdisciplinary. Benchmarking can be used on
almost any organization, public, private, or, non-profit. It can be fitted to a large
multinational corporation or a local shop, from a federal agency to the government of a
small village.
Identifying the best does not necessarily mean that a competitor has the best solution. It
may be a company who just does something well. When Xerox needed to make it’s
shipping better, it relied on L.L. Bean. This sort of out-of-the-box thinking can create
new standards rather than emulating someone else's practices.
Creativity
Sometimes an organization might know where their goals are, but the path to meet them
is not clear. Furthermore, even if another organization is perceived to be doing
something the best, it does not mean it couldn't be done better. After clearly defining
goals, however, it can be easier to come up with new, innovative ways of getting there. It
could also create news ways of obtaining information or making partnerships, such as
Remington, a shotgun shell manufacturer, getting information on how to make shinier
shells from Maybelliene’s lip stick containers.
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Benchmarking
Evolution
Benchmarking evolves with the consumer and doesn't require a large up-front cost. As
things change in the world, so does who is the best. Because benchmarking involves
constant reiteration, evaluating and changing, it changes as the market or consumer does.
Although benchmarking is constantly in change, it isn't a big price tag up-front. All one
needs are office supplies and a list of the best performers to get started.
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Demerits
Benchmarking can require a large investment in time, labor, and capital. Costs for a
large project can easily reach into the hundreds of thousands of dollars. These can be
minimized through careful, thoughtful, and deliberate planning.
As Robert Graham of Medrad notes, “Typically, there are expenses related to travel as
well as indirect costs associated with employee time devoted to trips and team
meetings. With careful planning benchmarking costs can be kept to a minimum.”
Size
The size and scope of a benchmarking project is related directly to the cost. An easy way
to minimize costs is to take on a stepwise approach. This minimizes the amount of
investment and risk taken concurrently.
Dividing Costs
Organizations can pool resources by taking joint benchmarking projects and dividing
costs accordingly. This is more easily done in organizations that are not directly
competing, such as government agencies. Various organizations have pooled their
resources and knowledge into benchmarking groups.
Consultants
Many consultant firms will also aid an organization in a benchmarking project. These
organizations have the technical knowledge and experience to more efficiently gather and
interpret data. Careful background research of a consultant must be made to make this
process more effective and it comes at a price. However, this does not require hiring
additional staff or expanding roles of current staff.
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Education and Travel
Benchmarking does require education and travel costs. Once a team is chosen, they often
need to be educated on the methods of benchmarking. This is accomplished through
workshops, seminars, meetings, and courses. Then, this information must be
disseminated to others. When researching organizations, sometimes it is best to see the
organization in action and meet with the team that performed and implemented the
changes to gain first-hand knowledge of the processes involved.
Communication
One of the most important methods of keeping benchmarking costs low is effective
communication. This involves knowing what you need and where your own deficiencies
are and sharing information about yourself. Also, informing others inside of your
organization of what has been learned through reports, analyses, etc. and its method of
implementation involving flowcharts, matrices, schematics, etc. is critical. Clear
communication also lets management know how the project is going and its status. This
reduces confusion and conflicts among management and the team and among team
members themselves.
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Section II
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Benchmarking
Types of Benchmarking
Benchmarking is a very versatile tool that can be applied in a variety of ways to meet a
range of requirements for improvement. Different terms are used to distinguish the
various ways of applying benchmarking. The first word in each term relates to either the
type of partner or the purpose for benchmarking. At the outset of benchmarking projects,
it is vital to be clear on exactly what is to be achieved through benchmarking and apply
an appropriate methodology.
There are a number of different types of benchmarking, which are driven by different
motivating factors and thus involve different comparisons.
Strategic Benchmarking
It is used where organizations seek to improve their overall performance by examining
the long-term strategies and general approaches that have enabled high-performers to
succeed. It involves considering high-level aspects such as core competencies,
developing new products and services; changing the balance of activities; and improving
capabilities for dealing with changes in the background environment. The changes
resulting from this type of benchmarking may be difficult to implement and the benefits
are likely to take a long time to materialize.
Performance Benchmarking or Competitive Benchmarking
It is used where organizations consider their positions in relation to performance
characteristics of key products and services. Benchmarking partners are drawn from the
same sector. However, in the commercial world, it is common for companies to
undertake this type of benchmarking through trade associations or third parties to protect
confidentiality.
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Process Benchmarking
It is used when the focus is on improving specific critical processes and operations.
Benchmarking partners are sought from best practice organizations that perform similar
work or deliver similar services. Process benchmarking invariably involves producing
process maps to facilitate comparison and analysis. This type of benchmarking can result
in benefits in the short term.
Functional Benchmarking or Generic Benchmarking
It is used when organizations look to benchmark with partners drawn from different
business sectors or areas of activity to find ways of improving similar functions or work
processes. This sort of benchmarking can lead to innovation and dramatic improvements.
Internal Benchmarking
It involves seeking partners from within the same organization, for example, from
business units located in different areas. The main advantages of internal benchmarking
are that access to sensitive data and information are easier; standardized data is often
readily available; and, usually less time and resources are needed. There may be fewer
barriers to implementation as practices may be relatively easy to transfer across the same
organization. However, real innovation may be lacking and best in class performance is
more likely to be found through external benchmarking.
External Benchmarking
It involves seeking outside organizations that are known to be best in class. External
benchmarking provides opportunities of learning from those who are at the leading edge,
although it must be remembered that not every best practice solution can be transferred to
others. In addition, this type of benchmarking may take up more time and resource to
ensure the comparability of data and information, the credibility of the findings and the
development of sound recommendations. External learning is also often slower because
of the ‘not invented here’ syndrome.
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International Benchmarking
It is used where partners are sought from other countries because best practitioners are
located elsewhere in the world and/or there are too few benchmarking partners within the
same country to produce valid results. Globalization and advances in information
technology are increasing opportunities for international projects. However, these can
take more time and resources to set up and implement and the results may need careful
analysis due to national differences
When to use these types of benchmarking?
When selecting which type of benchmarking to use, the following aspects are considered:
Objectives to be achieved and aspects to be reviewed
Time and resources available
Level of experience in benchmarking
The likely sources of good practice.
There are circumstances in which the different types of benchmarking are likely to be
more suitable than other types.
Organizations starting out with benchmarking often opt for internal benchmarking first to
build up experience of the benchmarking process before attempting external or functional
benchmarking.
Organizations also progress through the various types of benchmarking, for example,
using Performance or Competitive Benchmarking to highlight gaps in overall
performance before deploying Process Benchmarking to bring about improvements in
key process that will, in turn, impact on overall performance.
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When the focus is on It could be appropriate to use
Re-aligning strategies that have become inappropriate.
For example, in the light of changes in the background
Strategic Benchmarking
such as technology or customer requirements.
The relative level of performance in key areas or
activities in comparison with others in the same sector
Performance or Competitive
and finding ways of closing gaps in performance. Benchmarking
Improving key processes in order to make a difference
Process Benchmarking
to performance in a short time.
Improving activities or services for which counterparts
do not exist.
Functional or Generic
When pressures prevent benchmarking within the Benchmarking
same sector.
When radical change is needed.
When It could be appropriate to use
Several business units within the same organization
exemplify good practice.
Exchanging information and data with external
Internal Benchmarking
organizations would be undesirable.
Inexperienced in applying benchmarking.
Time and resources are limited.
Examples of good practices are to be found in other
organizations and there is a lack of good practices
External Benchmarking
within individual companies.
Innovation is sought.
Good practice organizations are located in other International Benchmarking
countries.
There are few partners within the same country.
The aim is to achieve world-class status.
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Benchmarking & Other Methods
Benchmarking v/s TQM
Total Quality Management, or TQM for short, consists of three main points. First,
collaboration with suppliers to ensure that the supplies utilized in work processes are well
designed and fit for use. Second, taking continuous employee analysis of work processes
to improve their functioning and reduce process variation. Third, maintaining close
communication with customers to identify and understand what they want and how they
define quality.
TQM works by either one of two processes, consultant-oriented TQM or project-oriented
TQM. Consultant-oriented TQM typically involves the creation of separate quality
control bodies that oversee the implementation of improvement and the control of quality
improvement procedures. This process is generally problematic in the public sector
because the TQM bodies exist outside the chain of command, confusing accountability.
These bodies often fail to become a part of the hierarchical structure of government
organizations. In project-oriented TQM, some of the shortcomings of consultant-oriented
TQM are addressed. This entails including all employees in the process and including
their needs as well as the customer's, as well as using established procedures as a
foundation instead of implementing new ones.
In general, TQM uses internal methods and the ideas of people within an organization to
improve itself from the inside out. This does not include comparing one's organization to
that of another, which is critical in benchmarking. However, due to the potential
unwillingness of employees to accept ideas without understanding their logic, both TQM
and benchmarking require the input of everyone in an organization and a general
resistance to change must be overcome.
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Benchmarking vs. Reengineering
Another type of method of performance review and improvement is reengineering.
Reengineering has been defined as "the fundamental rethinking and radical redesign of
business processes to achieve dramatic improvements in contemporary measures of
performance, such as cost, quality, service, and speed. This generally involves discarding
old practices with completely new ones. The new practices are usually determined from
a process that requires a team and consultant to come up with, measure, and convince
others to take up new ideas.
Reengineering can be problematic in government because they are don't have profits and
completely discarding old processes and breaking down barriers between departments run
into political, trade union, or other pressures. This sometimes results in the creation of
new agencies rather than overhauling old ones. Reengineering is very expensive and
prone to failure rates in over fifty percent of cases. It also requires TQM after its
successful implementation.
While reengineering is cutting-edge and dramatic, and encourages employees to think
big, it is still an internal process. It does not involve the practices of one organization to
compare itself to those of another. While benchmarking may result in the use of
completely new ideas similar to reengineering, it often is simply improving on existing
ones. In addition, after performing reengineering, organizations often turn to TQM, to
maintain their success.
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Benchmarking vs. Performance Measurement
“Performance Measurement is government's way of determining whether it is
providing a quality product at a reasonable cost.”
Performance measurement can be used to measure such things as productivity,
effectiveness, quality, and timeliness. When performance measures are used extensively
and consistently they can be quite effective improving an organization’s output.
Companies can use for the following reasons:
Better decision-making: it provides managers with information to perform their
management control functions.
Performance appraisal: it links both individual and organizational performance to
aspects of personnel management and motivates employees.
Accountability: it fosters responsibility on the part of managers.
Service delivery: Improvements in public service performance.
Public participation: clear reporting of performance measures can stimulate the public
to take a greater interest in and provide more encouragement for employees to provide
quality services
Improvement of civic discourse: it helps to make public deliberations about service
delivery more factual and specific.
What benchmarking does is to use data collected as performance measures and compare
it to other organizations that perform those duties or processes. By comparing to other
organizations through benchmarking, performance measurement becomes something
other than "bean counting". However, since performance measurement is a prerequisite
to benchmarking, the two have become intertwined, but they are not the same.
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Benchmarking
Performance
TQM Re-engineering Benchmarking
Measurement
Focus Internal Internal Internal External
Develop
Develop Compare processes
dialogue within Take
completely new with others who do
Main a process to measurements for
methods for the same and
Principles improve it comparison and
obsolete or determine best
through gradual improvement
failing processes methods
increments
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Benchmarking
Benchmarking stages
Stage 1: Planning
Identify the subject area to be reviewed.
Define the objectives for the study and the criteria that will be used to assess
success.
Select the approach and type of benchmarking.
Identify potential partners.
Produce a project plan.
Develop a communications strategy.
Assign resources and appoint a project team.
Seek approval, commitment and support of senior managers.
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Benchmarking
Stage 2: Collect Initial Data
Compile information and data on performance. This may include mapping
processes.
Select and contact partners.
Develop with partners, a mutual understanding about the procedures to be
followed and, if necessary, prepare a Benchmarking Protocol.
Prepare questions and agree terminology and performance measures to be used.
Distribute schedule of questions to each partner.
Undertake information and data collection by chosen method for example,
interviews, site visits, telephone, fax and e-mail.
If benchmarking visits are to be undertaken, develop a programme of visits and
agree their purpose.
Collate the findings to enable analysis.
Stage 3: Benchmark
The flow chart below shows the Benchmarking Continuous Improvement Cycle
presenting the various steps involved in an effective benchmarking process. Following
the process as diagrammed, review of the institutional and comparative data leads to
identification of strengths and problem areas. This provides the opportunity to explore
various options available for addressing the issues that are identified. Then a careful plan
based on study results can be developed, implemented and the cycle begins again.
To identify if the plan has been successful in bringing about improvement, it is necessary
to re-assess. Reassessment puts the cycle of continuous improvement in place.
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Stage 4: Analysis & Findings
Review the findings and produce tables, charts and graphs to support the analysis.
Identify gaps in performance between your organization and better performers.
Seek explanations for the gaps in performance.
Ensure that comparisons are meaningful and credible. Where necessary,
normalise the measures used - that is apply correction factors to take account of
reasons for differences in performance other than inefficiencies.
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Communicate the findings as outlined in the communications strategy at the
beginning of the project.
Identify realistic opportunities for improvements.
Stage 5: Making Recommendations
Examine the feasibility of making the improvements in the light of the conditions
that apply within your own organization.
Agree on the improvements that are likely to be feasible.
Produce a report on the Benchmarking Project in which the recommendations are
included.
Obtain the support of key stakeholder groups for making the changes needed.
Develop action plan for implementation.
Stage 6: Implementing Recommendations
Implement the action plan.
Monitor performance.
Reward and communicate successes.
Keep key stakeholders informed of progress.
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Benchmarking
Stage 7: Monitoring & Reviewing
Evaluate the benchmarking process undertaken and the results of the
improvements against objectives and success criteria plus overall efficiency and
effectiveness.
Document the lessons learnt and make them available to others.
Periodically re-consider the benchmarks in the light of changes in those
conditions that impact on performance relative to good practice.
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Benchmarking
Benchmarking Roadmap
The diagram below illustrates the roles and involvement of staff throughout the
benchmarking project.
Stakeholders Trigger for
Executive change
champions Support
Process
sponsor Step 1 Step 2 Step 3 Step 4 Step 5
Planning Collect Analyse Adapt Review
Benchmarking
the Data Data
team Study
Functional
experts
Research
resource
Benchmarking
part ners
Time
The ‘Trigger for Change’ normally comes either form external stakeholders such as
government ministers, customers, or from the executive champions for change. It is vital
that the Executive Champions have an understanding of the objectives and resource
requirements of the project, and the benchmarking approach to be used. They can then
provide sustained support for the benchmarking team throughout the duration of the
project.
The trigger for change will normally identify the process to be benchmarked, and the
process owner or sponsor is responsible for the management and improvement of the
process. Other roles are defined according to the scope and duration of the benchmarking
project, and the Roadmap illustrates their involvement in the 5-phase approach.
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Benchmarking
Benchmarking Process Of Different Companies
Benchmarking is flexible to almost any application. The process of how to go about
benchmarking varies as much as organizations themselves and their ideologies do.
Processes vary widely by goals, philosophies, industry, cultures, management plan, and
organizational structure. This section will explain some of the explicit processes
developed by companies that have benchmarked. The most general and best for a first-
try at benchmarking is the most general process, which is the Motorola Five-Step Process
Xerox Process
Xerox revolutionized business thinking with its benchmarking plan. It had a clear goal
and determined upper management team. A five-phase, twelve-step process was
developed by Robert C. Camp, Manager of Benchmarking Competency Quality and
Customer Satisfaction at Xerox:
Xerox Twelve-Step Process
Phase 1: Planning
1. Identify what to benchmark
2. Identify comparative companies
3. Determine data collection method and collect data
Phase 2: Analysis
4. Determine current performance gap
5. Project future performance levels
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Benchmarking
Phase 3: Integration
6. Communicate findings and gain acceptance
7. Establish functional goals
Phase 4: Action
8. Develop action plans
9. Implement specific actions and monitor progress
10. Recalibrate benchmarks
Phase 5: Maturity
11. Attain leadership position
12. Fully integrate practices into processes
AT&T Processes
Two-time, Baldrige Award winning AT&T, an active benchmarker, has developed a
nine-step model:
AT&T Nine-Step Process
1. Identify what to benchmark
2. Develop a benchmarking plan
3. Choose data collection method
4. Collect data
5. Choose best-in-class companies
6. Collect data during a site visit
7. Compare processes, identify gaps, and develop recommendations
8. Implement recommendations
9. Recalibrate benchmarks
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Benchmarking
Motorola five-step process and the seven-step process
Motorola Five-Step Process
1. Decide what to benchmark
2. Find companies to benchmark
3. Gather data
4. Analyze data and integrate results into action plans
5. Recalibrate and recycle the process
Seven-Step Process
1. Determine which function to benchmark
2. Identify key performance variable to measure
3. Identify best-in-class companies
4. Measure performance of best-in-class companies
5. Measure your own performance
6. Specify programs and actions to meet and surpass
7. Implement and monitor results
SPI Five Phase Model
The model produced by the Strategic Planning Institute's (SPI) Council on Benchmarking
produced the Simple Consensus Model summarizing the five phases of benchmarking in
generic terms. This can then be mapped over the above-mentioned processes. These
fives steps are:
Step Description
1 Launch
2 Organize
3 Reach Out
4 Assimilate
5 Act
These steps can then be "mapped" onto the Motorola Five-Step Process as follows:
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Benchmarking
Description Launch Organize Reach Out Assimilate Act
1. Decide what to benchmark X
2. Find companies to benchmark X
3. Gather the data X
4. Analyze data and integrate X
5. Recalibrate and recycle the process X
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Benchmarking
Benchmarking Tools
The Global Best Practices benchmarking tools are surveys used to gauge an
organization's success with a particular business process. Companies complete these
benchmarking tools to help them see whether their performance of a particular process is
at the level it should be.
Types of Benchmarking Tools
There are two types of tools in the Best Practices knowledge base:
1. Qualitative
2. Quantitative
Qualitative tools are subjective, judgmental, and focused on activities behind a particular
business process. Quantitative tools are objective and focused on measurements. They
compare those measurements to other companies' measurements.
The qualitative tools in the knowledge base are used to gauge where an organization
stands in relation to best practices for a particular business process, such as accounts
payable. The process appraisal tool helps you zero-in on the best practices you can
apply to more quickly reach your performance goals.
Quantitative tools are used to see how an organization compares itself to other
organizations for a particular business process. For quantitative tools, the respondent
completes a proprietary survey that is a detailed questionnaire on many aspects specific
to the business process. After the data is processed, the respondent receives a
personalized report that serves as a high-level reference point showing how they are
doing in comparison to the benchmark group.
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Benchmarking
Process Appraisal Tool
The process appraisal tools are Internet-based questionnaires that help companies narrow
their search for practices that will improve company’s overall performance of a business
process. For example, company may know that their payroll process needs improvement.
By taking the process appraisal tool for the payroll process, company will be able to
quickly determine where to focus its attention.
The tools ask a series of Yes/No questions to determine how well organization performs
against a best practices-weighted algorithm created by PricewaterhouseCoopers'. For
each question, the algorithm considers the complexity of the business issue and how
integral that issue is to executing the best practice. The responses are then rated on a scale
of 1 to 5, 5 being closest to the best practice. A summary explanation page is available so
users can compare their answers to the ideal answers.
Benefits
1. Benchmarking tools create interaction between the end users, process owners,
management, and tool administrators.
2. They offer value-added creative insight.
3. They facilitate prioritisation of the use of scarce resources for the next steps in
analyzing the process.
4. They are an excellent door opener for orienting organizations and process owners
to best practices and benchmarking concepts.
5. They stimulate a healthy discussion about relevant business issues that may not
otherwise be addressed.
6. They are great starting points for business process improvement initiatives and
projects.
7. They can stimulate additional business process improvement initiatives and
projects.
8. They are efficient and effective to administer.
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Benchmarking
Limitations
1. They are high level in scope and are not the answer to the problem.
2. Qualitative tools are universal and not industry, geographic, or size centric.
3. Quantitative tools may not have a sufficient amount of data for very specific
benchmark group comparisons.
4. Some questions may not be relevant to the organization or business process.
5. They are not detailed enough to be used for implementation phases of projects.
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Benchmarking
Section III
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Benchmarking
Government vs. Private Sector Benchmarking
Benchmarking in the government is inherently different than in the private sector. This
happens because of differences in goals and differences in how government relates to
labor and the media.
Quality and Profit
Both the government and private sector strive to provide quality services at lower
costs. The goal of government is not to produce a profit, but to reach some level of utility
or benefit. This is both a plus and a minus. Since there is no competition, information
and ideas are rarely held secret and are shared freely and casually most of the time. But,
on the other hand, there is no defined measurement of success such as stock prices.
Labor, Media and Other Issues
As in all organizations, there is a resistance to change and a general lack of pressure for
improvement. This can include organized labor, politicians, and other employees. In
benchmarking, this can be countered by starting at the top and involving everyone from
the bottom up, thus creating a team atmosphere dedicated to getting the job done.
The public sector is under constant scrutiny from the media, politicians, and citizens.
Many feel that benchmarking is an expensive waste of money, resources, labor, and time
or other matters are more pressing. In addition, failures can be very public and result in
harsh criticism. Therefore, careful planning should be implemented and public input
sought on all benchmarking projects to prevent confusion and waste at taxpayer expense.
Also, benchmarking, if done properly, will save resources that can then be used for other
matters without increasing taxes or fees.
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Benchmarking
A not-invented-here mentality is also hard to overcome. Many agencies have difficulty
accepting new ideas that have been implemented elsewhere. There is a suspicion that
what others do is not necessarily the same and would therefore be ineffective or fail. A
thorough understanding of the case involved and communication with the organization
and individuals responsible is always important to understanding the process being
studied.
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Benchmarking
Benchmarking Do’s and Don’ts
Do’s
1. As a general rule, the process or function selected should be one of the most critical
to your business strategy.
2. Projects should be well defined, and generally they should require less than a year to
complete the research, analysis, action planning, and preliminary implementation.
3. Management must support the project, provide adequate resources, and be prepared to
champion implementation of the best practice findings.
4. The organization must be willing to change.
5. The team must understand who the customer is for the study. The customer’s
expectations from the study are established by direct interaction.
6. It is very useful to have an explicit mission statement which documents the project’s
deliverables, purpose and metrics.
7. Identify all that may be affected by the project and secure their ideas, contributions,
and support.
8. Consider implementation issues early in the planning phase and throughout the
project.
Don’ts
1. Don’t initially benchmark areas where the organization already performs well.
2. Don’t benchmark topics or processes that aren’t important.
3. Don’t benchmark processes that are so broad in scope, so poorly defined, or so poorly
circumscribed, that the team cannot agree on its mission and cannot focus its efforts.
4. Don’t undertake benchmarking projects with a team that is too large to be effective
(10 or more) or too small to be credible (1 to 2).
5. Don’t undertake complex process benchmarking efforts with team members that
don’t understand the benchmarking process and don’t have access to and experienced
benchmarking facilitator.
6. Don’t benchmark unless all those affected by likely changes are represented on the
benchmarking team or are given opportunity to contribute their ideas and interests to
the benchmarking process.
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Benchmarking
Successful Benchmarking
There are several keys to successful benchmarking. Management commitment is one that
companies frequently name. Since management from top to bottom is responsible for the
continued operation and evaluation of the company, it is imperative that management be
committed as a team to using and implementing benchmarking strategies. A strong
network of personal contacts as well as having an open mind to ideas is other keys.
In order to implement benchmarking at all stages, there must be a well-trained team of
people in order for the process to work accurately and efficiently. Based on the
information gathered by a well-trained team, there must also be an effort toward
continuous improvement.
Other keys include a benchmarking process that has historical success, sufficient time
and staff, and complete understanding of the processes to be benchmarked.
In almost any type of program that a company researches or intends to implement, there
must be goals and objectives set for that specific program. Benchmarking is no different.
Successful companies determine goals and objectives, focus on them, keep them simple,
and follow through on them. As in any program, it is always imperative to gather
accurate and consistent information. The data should be understood and able to be
defined as well as measured. The data must be able to be interpreted in order to make
comparisons with other organizations.
Lastly, keys to successful benchmarking include a thorough follow-through process and
assistance from consultants with experience in designing and establishing such programs.
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Benchmarking
Keys to Effective Benchmarking
Planning and resourcing benchmarking and engaging the support of
member and directors:
Make sure that staffs involved have time to carry out the project. Engage the support of
senior management and members early in the process
Having clear objectives:
Be clear about the improvements wanted - for example cost, value for money, customer
satisfaction, or the implementation of good practice. Be open to changing service
delivery
Focusing on important issues:
Choose a service (or part of a service) that is significant in terms of the importance to the
overall service or good of the organization. Use national data or research into good
practice to check whether there is scope to compare performance. Consider the potential
benefits and costs. Consider whether the organization will be able to make changes.
Identifying partners:
Use existing information to identify an organization that you can learn from without
necessarily forming a club. See what can be learnt from within your organization. Seek
partners from outside the local authority world
Organizing the process of benchmarking:
Make sure that there is someone who will keep the club focused on the work in hand.
Ensure that the club has the necessary resources and expertise to ensure consistent
definite - and robust - objective analysis. Consider the benefits of employing and
external’ facilitator or analyst. Agree protocols for the working of the club particularly
regarding confidentiality and attendance.
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Benchmarking
Defining the measures of comparison:
Use existing data first. Develop sound definitions. Consider the cost of collecting and
analysing additional data. Will the effort be worthwhile? Make sure that extraneous
factors do not invalidate comparisons. Remember that the use of data is to identify
opportunities for learning.
Understanding why performance varies:
Understand your own processes and take a central view of them. Have a clear idea of the
differences you are looking for. Review the benefit of discussions with other club
members. Invite the better performing organizations to give presentations to the club.
Involve front line staff in visits.
Implementing change:
Ensure that you have sufficient management backing to make changes. Involve service
users in identifying changes. Engage all staff in the change programme. Create a climate
where existing practices can be challenged. Produce an action plan for the change
project. Manage the change project identifying the person responsible, the time scale and
key methods. Publicise and share the change - it will provide help and inspire others.
Monitor projects and provide feedback on progress to staff.
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Benchmarking
Section IV
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Benchmarking
To Deliver A World – Class Experience
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Benchmarking
Company Profile
Blue Star is India’s largest central air-conditioning company with an annual turnover of
Rs 930 crores, a network of 23 offices, four modern manufacturing facilities and around
1800 employees. It fulfils air-conditioning needs of a large number of corporate and
commercial customers and has also established leadership in the field of commercial
refrigeration equipment ranging from water coolers to cold storages.
Late Mohan T Advani, an entrepreneur of exemplary vision and drive, founded blue Star
in 1943. It started as a modest three-man operation, which was engaged in reconditioning
of refrigerators and air conditioners. In 1969, Blue Star became a public limited company
with its corporate headquarters at Kasturi Buildings in Mumbai.
Corporate Headquaters
Blue Star manufactures and markets a wide range of air-conditioning and commercial
refrigeration systems and products. These include large central air-conditioning plants,
packaged air-conditioning systems, split and window air conditioners, water coolers,
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Benchmarking
bottle coolers, bottled water dispensers, ice-cube machines, deep freezers and cold
storages. Blue Star's other businesses include marketing and maintenance of hi-tech
professional electronic and industrial products such as testing machines, data
communication equipment, medical and analytical instruments and special control valves.
Thus, the core businesses of Blue Star are air-conditioning, commercial refrigeration and
distribution of professional electronic and industrial equipment.
The company has manufacturing facilities at Thane, Dadra, Bharuch and Himachal which
use state-of-the-art manufacturing equipment to ensure that the products have consistent
quality and reliability.
Blue Star has business alliances with world-renowned technology leaders such as Rheem
Mfg Co, USA; Hitachi, Japan; Eaton Williams, UK; Thales –Security, UK; Jeol, Japan
and many others, to offer superior products and solutions to customers.
The International Software Services business was spun-off into a separate company, Blue
Star InfoTech Limited in April 2000.Blue Star InfoTech is a global provider of Offshore
Product Development (OPD) and Enterprise Services. Since its inception in 1983, it has
been instrumental in helping organizations leverage IT.
Using a collaborative approach, Blue Star InfoTech provides end-to-end services across a
range of legacy and contemporary technologies for software product companies,
enterprises and hardware technology vendors. Its Travel Practice has worked with leaders
in the travel and hospitality industries (solution and service providers) and has enabled
them to deal with the challenges of globalization and consolidation.
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Benchmarking
Thane Plant
Introduction
Thane Factory is the oldest of the three manufacturing units of Blue Star. Established in
1968 the factory has land of about 35,000 sq.mtrs. Out of which built up shed area is
about 13,000 sq. mtrs.
The first products to come out of the Thane plant were water coolers, bottle coolers and
deep freezers. The plant has stayed with the times and has evolved to compete with the
best in the industry. We have been modernizing the manufacturing process continuously
by adding modern machines and processes. The people at Thane are well-qualified and
driven to excellence in whatever they do which is reflected in the high quality of products
that roll out.
Products Manufactured
I. Central Plants Products.
II. Refrigeration Equipments Products
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Benchmarking
The following central plant products are manufactured at thane plant.
Scroll Chillers. (Air cooled and water cooled)
Reciprocating Chillers. (Air cooled and water cooled)
Reciprocating compressors 4, 6 and 8 cylinders.
Air Handling Units
Fan coil Units.
Coils
The following Refrigeration and Freezing products are manufactured at thane plant.
Cold rooms using PUF sandwiched panels for cooler (+ve
temp) or freezer (-ve temp) applications.
Walk in cold rooms and freezers
Mortuary chambers
Cooling units meant for maintaining temperatures required
in cold rooms for cooler (+ve temp) or freezer (-ve temp)
applications.
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Benchmarking
BLUE STAR’s Vision About
Benchmarking
Benchmarking as per BLUE STAR means
comparing the performance with the best
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Benchmarking
Area’s covered under Benchmarking
BLUE STAR LIMITED covers two areas of benchmarking. These areas are explained in
detail as below.
1. Product wise benchmarking
In simple words, I can say that product wise benchmarking means comparing the
products of the organization with its competitor’s products.
As you all know that consumers hold a key place in market that requires variety of
products. So, for consumer’s satisfaction the organization have to provide variety to him
for satisfying his needs. He won’t be purchasing the product, which will not satisfy his
requirements. Sometimes, just for providing variety to consumers, organizations may not
maintain proper standard of their products. Therefore, there are lots of chances for
rejection. So it requires lot of attention. In that case the organizations should follow these
steps as are followed by BLUE STAR LIMITED. These are as follows.
1. The first thing required will be knowledge about consumer’s needs, their behaviour
and taste.
2. The second thing required is the proper knowledge of competitor’s products in terms
of its shape, color and design.
3. The third thing required is the formation of various policies with which the cause of
production can be controlled or you can say that the higher productivity will be
achieved at the minimum expenses.
4. The fourth thing required is the changing of the whole process as per the new policies
framed.
5. The fifth thing required is the proper packaging.
6. And the last thing for which the organization is eagerly waiting is the feedback about
their products.
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Benchmarking
After getting the feedback, if it is realized that still the organization is lacking in terms of
providing standard goods, then the whole process will be repeated but with some
changes.
“PRODUCT MANUFACTURED IS ONCE, IMPORVEMENT
NEEDED IS AGAIN & AGAIN & AGAIN”
2. Process wise benchmarking
The process of every organization differs from product to product. The process
benchmarking is a routine activity of organization. They do process benchmarking for
finding out the amount of accuracy in their processes. All the organizations wants to
provide standard products to its customers but if they realize that their products are
defective then they find the cause of that problems and are trying to overcome from that
problems.
The thane plant of BLUE STAR LIMITED manufactures PUF (rigid polyurethane foam)
insulated panels for prefabricated cold rooms, mortuary chambers and warehouses &
shelters. The process of manufacturing walk – in – cold room panels is as follows:-
Cut to length machine
Firstly the panel sheets are engraved to required size with the help of cut to length
machine.
Punching
After cutting, the above – dimensioned sheets ate punched (i.e. holes are made) as per
requirement for sliding purpose.
Hydrolic bending
Here panels are folded breath wise.
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Benchmarking
Cascading
Here rubber is attached to all sides of panel sheet.
Hydrolic process
The two sheets of panels are put into the Hydrolic press through seizer lift. Then the
liquid foam is injected into it and the one part of walk – in – cold room is created.
Through process wise benchmarking, organizations come to know about its drawbacks in
the process. After realizing its drawbacks, they are trying to improve its process. For
example, following technical changes were made in the process of blue star limited,
which are as follows:
Sr. No. OLD NEW
1 Manual Drilling Hole Punching
2 Press Brake Bending Roll forming
3 Amada Punching Hydraulic Punching
4 Side Bending End folding
5 Manual lifting Conveyor
6 Use of tape Fixed scale
7 Add on settings Modular settings
8 Hand bending Die bending
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Benchmarking
Observations
When I visited thane plant of blue star limited, the first question I asked them was, what
is benchmarking according to them? Apart from this, I tried to gather information about
other areas and methods, which were taken into consideration by them while going for
benchmarking.
I found that earlier company faces problems of quality, increased cost and in spite of their
innovations and initiatives company earns less profit as compare to their competitors but
now with a systematic approach of identifying superior products, services, processes and
practices they have reduced cost, improved quality, cut inventory and greater satisfaction
to customers.
They consider benchmarking as continuous process of measuring products, services and
practices against the company’s toughest competitors or industry leaders so as to obtain
and implement ideas for performance improvement. Now benchmarking for blue star is
practice of measuring and comparing key aspects of your organization with those of
industry leaders to establish measures of performance and discover ideas for
improvement.
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Benchmarking
Case Study
MTRC (Hong Kong)
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Benchmarking
MTRC (Hong Kong)
Mass Transit Railway Corporation (MTRC) in Hong Kong carries millions of passengers
daily and is one of the largest urban metros in the world but they benchmark. This is
because “Top Management is committed to a policy of continuous improvement.”
Since 1993, MTRC has focused on three objectives:
1. To develop a system that facilitates continuous improvement through regular use.
2. To identify areas of excellence and make improvements to reach the level of best
practice.
3. To build a system that can be used to in public to demonstrate the value of its services
to passengers.
MTRC then began to benchmark key processes. The key processes are:
1. Identify the critical success areas of the business.
2. Define key performance indicators of each critical success area.
3. Submit data to the administrator.
4. Consolidate benchmarking results. Identify the gaps of each performance indicator
with the best performer.
5. Conduct process benchmarking for high-priority improvement areas.
This process benchmarking is done through Community of Metros, which includes mass
transit systems from Mexico City, New York City, Paris, London, Moscow, Sao Paulo,
Berlin, and Hong Kong. Each year all members gather uniform performance data to
compare in semiannual meetings.
Five key areas of interest were:
1. Service quality
2. Reliability
3. Efficiency
4. Asset utilization
5. Financial performance.
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Benchmarking
These areas of interest led to the development of eighteen Key Performance Indicators
from five categories including:
Categories Key Performance Indicators
Financial Performance 1) Total cost/passenger
2) Operations cost/passenger
3) Maintenance cost/revenue car operation km
4) Fare revenue/passenger
5) total commercial revenue/operations cost
6) Operations cost/revenue care operating km
7) Total cost/revenue car operating km
Efficiency 8) Passenger journey/total staff + contractor hours
9) Revenue capacity km/total staff + contractor hrs.
10) Revenue car km/total staff hours
Asset Utilization 11) Passenger km/capacity km
12) Capacity km/track km
Reliability 13) Revenue car operating hours between incidents
14) Car operating hours/total hours delay
15) Trains on time/total trains
16) Revenue operating car km/total incidents
Service Quality 17) Total passenger hours delay/1000 passenger
journeys
18) Passenger journeys on time/total passenger
journeys
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Benchmarking
To continue their success, MTRC set up task forces for potential improvement areas.
MTRC also used case studies and site visits to other metros. Then by studying others
MTRC compare itself to other metros. However Major changes are not achievable in the
short term due to regulations and safety procedures.
MTRC has conducted several process benchmarking studies in the past, such as closed
loop customer satisfaction process, supplier management/purchasing process, information
technology and system function, asset management process, a safety case study, and a
reliability case study. They did so with companies such as IBM, Xerox, American
Express, Federal Express, Hong Kong Telecom, Chase Manhattan Bank, and Orient
Overseas Container Line.
MTRC was able to net its biggest gains through benchmarking its suppliers. MTRC
implemented eight different changes in the supplier purchasing process to improve this
area and were able to reduce material supplier base by 40 percent. They were also able to
save $16.5 million by means of alternative sourcing and $6 million by identifying and
adopting a noise-damping wheel for its electrical multiple units.
According to Andrew McCusker, operations engineering design manager,
“Benchmarking is not easy when you attempt to compare full-service delivery and
organizational performance. The set of measures can be taken on board by each metro
and used as an indicator of business proficiency over the long term. It is dynamic and
helps to keep conservative organizations like railways keep moving.”
By maintaining long-term relationships with benchmarking
partners and recalibrating the measures, it will generate the
opportunity for MTRC to win in competitive battles.
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Benchmarking
Case Study
TISCO
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Benchmarking
TISCO rolls steel power with SAP technology
Benchmarking enables seamless remodeling of Tata Steel from product-
driven to a customer-driven enterprise of the economy
Introduction
Tata Iron and Steel Company Ltd., is Asia's first and India's largest integrated private
sector steel company. It has a state-of-the-art 3.5 million tonne steel plant and is capable
of meeting the most rigorous demands of its customers worldwide.
Problem
The existing technology was a simple replication of the manual system. Not only did it
operate as individual islands of information but the technology had outlived its lifetime
and was completely obsolete. The employees and management at Tata Steel faced a
cumbersome task exchanging and retrieving information from the system.
Further the reliability of information obtained was questionable because of inconsistency
and duplication of data from different departments. Also there was no built-in integrity
check for various data sources. Besides, several times the information against certain
items was found missing.
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Benchmarking
TISCO wanted to bring forth a culture of continuous learning and change. This would
enable TISCO to achieve a world-class status for its products and services and strengthen
its leadership position in the industry. Besides this, TISCO also wanted the software to
result in quick decision-making, transparency and credibility of data and improve
responsiveness to customers across all areas.
Course Of Action
In 1998-99 a small cross-functional in-house team along with consultants from Arthur D.
Little (Strategy Consultants) and IBM Global Services (BPR Consultants) re-designed the
two-core business processes, Order Generation & Fulfillment and the Marketing
Development processes, to improve customer focus facilitating better credit control and
reduction of stocks. This was done because of BENCHMARKING, they firstly identified
and analyzed problem area and compared themselves with the best (foreign competitor).
BENCHMARKING ASSISTED TISCO TO HAVE A NEW ROBUST
SOLUTION
The path was set to achieve success through SAP. All the branches, which had huge
numbers of transactions and complexity, were identified as a HUB while the smaller
branches along with the consignment agents were defined as SPOKES which were
attached to these branches. In January 99 the team from TISCO was decided and
christened 'TEAM ASSET' an acronym for Achieve Success through SAP Enabled
Transformation The TEAM ASSET had two simple axioms:
1. Go-Live date - 1st November 1999
2. There are only 24 hours a day
Preparatory task forces activities were conducted and core business processes were
mapped to SAP modules. Also another parallel activity called 'Change Management'
was initiated within the company. The prime objective of 'Change Management' was to
reach out to people involved non-directly in the project to apprise them of the
developments taking place. "We wanted that Tata Steel be the number one in the steel
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Benchmarking
industry…we wanted to be the first to have the latest systems…" said Mr. Sandipan
Chakravortty, GM (Sales), TISCO.
Tata Steel planned a big-bang approach of going live with all the modules at the same
time, in just a span of eight months. Driven against the speed of time, the pace of
implementation was fast with all activities backed by a lot of thought process and
meticulous planning. On 1st November 1999 Tata Steel pulled off a big bang
implementation of all SAP modules at one go across 46 countrywide locations, as per the
set deadline.
The Result
The introduction of SAP solutions due to benchmarking within Tata Steel has led to
efficient business processes, enhanced customer service, reduced costs, improved
productivity, accelerated transaction time, workflow management and reduction in the
number of credit management errors.
"Post the introduction of the SAP solution, the results have been terrific. The company
has spent close to Rs 40 crore on SAP implementation, and has already saved Rs 33
crore," said Mr. Ramesh C. Nadrajog, Vice President (Finance). The manpower cost has
reduced from over $ 200 per ton two years ago, to about $140 per ton in 2000. The
overdue outstanding has been brought down from Rs 5170 millions in 1999 to Rs 4033
millions by June 2000. The inventory carrying cost has drastically deflated from Rs 190
per ton to Rs 155 per ton. To add to this, there have been significant costs savings
through management of resources with the implementation of SAP.
With SAP's solution Tata Steel can now update their customers on a daily basis and
provide seamless services across the country improving customer management. The
availability of online information has facilitated quicker and reliable trend analysis for
efficient decision-making. Besides the streamlined business process reduces the levels of
legacy system and also provides consistent business practices across locations and
excellent audit trail of all transactions.
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Benchmarking
Conclusion
A benchmark is a standard of performance. Benchmarking helps organizations identify
standards of performance in other organizations and to import them successfully to their
own. It allows organizations to discover where they stand in relation to others. By
identifying, understanding, and comparing the best practices and processes of other
organizations with its own, an organization can target problem areas and develop
solutions to achieve best levels of performance. A public-sector organization can borrow
the best practices of the private sector, and vice versa.
Organizations that accomplish a particular activity at the highest value, that is, at the
lowest cost and/or highest quality or efficiency, are considered "Best-in-Class." In
determining what qualifies as world-class, benchmarking asks the question: "who are we
now, and who do we want to be?" The best benchmarking efforts don’t simply match
the performance of others; they exceed it.
The Japanese, who do not have a word for benchmarking and yet are considered world
leaders in benchmarking, owe much of their success to ‘dantotsu’, which means striving
to be the best of the best. They also pay great attention to external learning and have
active networks for exchanging information that embrace companies, public sector
organizations and academia.
Typically performed by internal personnel who already have a thorough knowledge of the
process under review, benchmarking looks beyond performance measures and cost ratios.
It considers the total organizational impact.
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Benchmarking
Bibliography
Books
BOOKS AUTHORS
Benchmarking For People Managers John Bramham 1st Edition, 1997
Service Sector Management L.N. Woodruff
Corporate Planning & Policies C.B.Gupta
Service Sector Management Romeo Mascrenhas
Benchmarking Basics James. G. Petterson
Magazines
HRM Review – ICFAI publications
Business & economics – IIPM publications
Times shipping journal – Times Of India
General Management Review
Websites
http://www.uwm.edu/Dept/CUTS/bench/bm-desc.htm
http://www.valuebasedmanagement.net/methods_benchmarking.html
www.aihw.gov.au/publications/ health/fnrhspi/fnrhspi-c04.pdf
http://units.sla.org/division/dmil/mlw97/gohlke/sld018.htm
http://www.benchmarking.gov.uk/about_bench/theprocess.asp
www.benchmarking.gov.uk/about_bench/types.asp
www. hr.com
www. benchmarkingnetwork.com
Places Visited
IMC (Indian Merchant Chambers) library – Churchgate.
BLUE STAR LIMITED – THANE.
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