Benchmarking
Ahmed Mohammed
Seth Shafer
Shou-Jen Steve Wang
Benchmarking
► Chalk
and bench activity
Who
► Robert
C. Camp 1989
► Bachelors degree in civil
engineering from Cornell
University
► MBA from Cornell University's
Johnson School of Management
► Ph.D. in logistics and operations
research from The Pennsylvania
State University
Benchmarking
► Is
a process
► Is secrets of success
Four Forms
► Generic
► Functional
► Competitive
► Internal
Types
► Process
benchmarking
► Financial benchmarking
► Benchmarking from an investor perspective
► Performance benchmarking
► Product benchmarking
► Strategic benchmarking
► Functional benchmarking
► Best-in-class benchmarking
► Operational benchmarking
Activity
Connect the dots
► Rules
1. Draw in a straight line.
2. Pen does not leave the blackboard.
3. All dots have to be connected
Goal:
As few lines as possible.
►
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
Examples
► Xerox
► Computer
Hardware
Computer Hardware
► Comparison
of performance
Xerox
► Started
in 1908
► Big company by the 1960s
► Rapid expansion of the middle management
► Competition from Japanese companies by
1980s
Benchmarked Processes
► Supplier
management system
► Inventory management
► Manufacturing system
► Marketing
► Quality
Benefits of benchmarking
► Fewer
customer complaints
► Reduction of defects
► Reduction in service response time
► Reduction in defective incoming parts
► Reduction in inventory costs
► Reduction in labor costs
► Reduction in billing errors
Benefits of benchmarking
► Increase
in
► Increase in
► Increase in
► Increase in
customer satisfaction
marketing productivity
distribution productivity
product reliability
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 ATO’s unique respected position in
supplying units for refrigerated trucks and
trailer rigs.
ATO, Inc.,
► ATO
Inc’s production supervisor for Model 724
series (home models) manufacturing areaSeth
► Seth’s group is a customer for an outside
supplier of external control panel.
► Responsibility of Seth’s 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
► Lastly.
internallysupplied control wire
unit
vendor panels
►Affix product lables
Seth’s team processes the units
through the warehouse for packing and
shipping to final destination.
ATO, Inc.,
► What
is cooking in ATO’s
► 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.,
► Seth’s
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, we’ve done all we can on this
process. We’ve tried everything and our
numbers are as good as they are going to get.
Got it?”
ATO, Inc.,
► Ahmed:
“Steve’s feelings are
understandable, you got to do something
Seth…wake 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-”That’s 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
5 min.
Total time = 45 - 52 min.
.5 min.
End
Step-2
► Bill-”
Since we know where our inputs and
outputs are coming from, shouldn’t 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)
► Seth’s 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
► Seth’s
decided to benchmark three measures
► Time for completion.
► Downtime
► Number of reworks
► Verify that measures match objectives
► For example, if a group’s 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
► Seth’s team considered their ATO’s plant in
northwest region and best in class Bestco,
Inc.
Step-4 :collect the data
► It’s
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
► Seth’s
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
2
3
4
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
► Seth’s
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 wouldn’t 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
► Seth’s
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)
Discussion
Conclusion
► VS
continuous improvement
► VS reengineering
► 7 Step benchmarking model
Thank you for your time.