Benchmarking
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What is Benchmarking?

Benchmarking is the process of comparing
the cost, cycle time, productivity, or quality of
a specific process or method to another that is
widely considered to be an industry standard
or best practice.
Why best practice?


Best practice refers to techniques, methods or
processes that are more effective at delivering a
desired outcome.
Incorporating best practice into your
organization can lead to greater efficiency and
effectiveness and a happier customer.
Types of Benchmarking

Comparison: (Partner Selection)
◦ Internal – Best in Firm
Comparing a similar process, product, or service in internal company or
organization
◦ Competitive – Best in Industry
Comparing with the toughest external competitor or against world-class companies
in similar industry
◦ Functional/Generic
Comparing against a world-class company that is not even in similar industry, but
that uses a process similar with internal company or organization
Types of Benchmarking

Form:
◦ Performance Benchmarking
usually focuses on elements of price, technical quality, product or service
features, speed, reliability, and other performance characteristics.
◦ Process Benchmarking
focuses on discrete work processes and operating systems, such as the
customer complaint process, the order-and-fulfillment process, or the
strategic planning process.
◦ Strategic Benchmarking
influences the longer-term competitive patterns of a company.
Consequently, the benefits may accrue slowly
Benefits of Benchmarking



Benchmarking helps identify the gaps between
the organization that is undertaking the
benchmarking assessment and best practice.
Undertaking benchmarking can lead to
improvements being incorporated into
processes and systems delivering gains in
efficiency and effectiveness.
Benchmarking can help align improvement
activity with strategic goals and objectives.
The Benchmarking process
The Benchmarking process
The Benchmarking process
Benchmarking Process
Benchmarking Standards
Benchmark Practices
Benchmark Gap:
* How much
* Where
* When
How to close the Gap:
* Improved Knowledge
* Improved Practices
* Improved Process
Management Commitment
Decide
What to
BM
Identify
BM
Partners
Gather
info
Analyse
Implement
Organization
Communication
Employee Participation
Problems with Benchmarking

Problems with benchmarking occur where
◦ Data is not obtained for the process being measured –
and analysis becomes subjective
◦ No peer group/best practice identified (including data
available)
◦ The gap between current state and best practice is
captured but nothing is done about it
◦ Assumed best practice isn't best practice
◦ Benchmarking happens as a one off event and not
reviewed periodically
Problems with Benchmarking

Problems with benchmarking occur where
◦ Data is not obtained for the process being measured –
and analysis becomes subjective
◦ No peer group/best practice identified (including data
available)
◦ The gap between current state and best practice is
captured but nothing is done about it
◦ Assumed best practice isn't best practice
◦ Benchmarking happens as a one off event and not
reviewed periodically
The importance of data


In order to measure the gap between the
measuring organization and best practice
quantifiable measures need to be taken, this
requires data.
Unless this method is followed results can be
subjective and inaccurate.
Benchmarking doesn’t stop



Benchmarking should be viewed as a
continuous improvement method.
Regular reviews of performance should be
taken especially if improvement activity is
underway to transition to “best practice”.
Regular reviews of the peer group should
be taken to cater for any
changes/improvement made.
What is Reengineering

There is an alternative way to go
about this and that is abandon
the current process and replace it
with a brand new process that
provide the same functionality
but better, faster, or cheaper.
Benchmarking vs Reengineering
Benchmarking

Involves Partnering
Advanteges

Learn from others experience &
practices

Re engineering

Internal activity, not involves partnering
Advanteges

Allows examination of present
processes
Used when its impossible to use
benchmarking

Typically Internal improvement

Aids change & improvement


Implementation / changes more likely
Allows changing or eliminating activity in
a process

Overall industry improvement

Implementation / changes more likely

Overall industry improvement
Disadvantges

What is best for someone else may not
suit you

Poorly defined benchmarks may lead to
wasted effort and meaningless results.

Incorrect comparisons

Reluctance to share information
Disadvantges

No Guarantee to have a competitive
process

Many times it is seen as a management
tool for laying off workers
Case study
Background:





'Xerox' trademark in 1948.
Xerox was listed on the New York Stock Exchange in
1961 and on the Chicago Stock Exchange in 1990.
Revenues soared from $37 million in 1960 to $268
million in 1965.
Xerox acquired a majority stake in various company’s
Profits increased five-fold from $ 83 million in 1966 to $
407 million in 1977
Competition
In the early 1980s,
Xerox found itself
increasingly
vulnerable to intense
competition from
both the US and
Japanese
competitors.
 According to
analysts, Xerox's
management failed
to give the company
strategic direction. It
ignored new entrants

New Product & Copier
Introductions
Competition


The company's
operating cost (and
therefore, the prices of
its products) was high
and its products were
of relatively inferior
quality in comparison
to its competitors.
Return on assets fell to
less than 8% and
market share in
copiers came down
sharply from 86% in
1974 to just 17% in
1984.
Market Share
Manufacturing Cost


Average manufacturing cost of copiers in
Japanese companies was 40-50% of that of
Xerox.
Benchmarking against Japanese competitors,
Xerox found out that it took twice as long as its
Japanese competitors to bring a product to
market, five times the number of engineers,
four times the number of design changes, and
three times the design costs.
Quality



Japanese could produce, ship, and sell units for
about the same amount that it cost Xerox just
to manufacture them.
Xerox's products had over 30,000 defective
parts per million - about 30 times more than its
competitors.
Benchmarking also revealed that Xerox would
need an 18% annual productivity growth rate
for five consecutive years to catch up with the
Japanese.
Objective
Process

Benchmarking was
implemented at Xerox
– ‘Leadership Through
Quality’
Process

Benchmarking, nearly 200 processes from non-competitive companies
◦
◦
◦
◦
Cummins Engine – Production scheduling
LL Bean – Distribution system
American Express – Billing system
Measuring customer satisfaction
 40,000 mails surveyed
 Seeking feedback on
 Equipment performance, Sales, Service &
Administrative support
Process

Equal training at all levels world wide, in quality principles,
starting from top management
◦ In 5 years, 4 million hours with more than $125
million all employees had received quality related
training
◦ In 1988 – 79% were involved in Quality
improvement teams
Results




Highly satisfied customers for its
copier/duplicator and printing systems
increased by 38% and 39% respectively.
Customer complaints to the president's office
declined by more than 60%.
Customer satisfaction with Xerox's sales
processes improved by 40%, service processes
by 18% and administrative processes by 21%.
Overall customer satisfaction was rated at more
than 90% in 1991.
Results






Number of defects reduced by 78 per 100
machines.
Service response time reduced by 27%.
Inspection of incoming components reduced to
below 5%.
Inventory costs reduced by two-thirds.
Marketing productivity increased by one-third.
Distribution productivity increased by 8-10 %.
Results





Increased product reliability on account of 40%
reduction in unscheduled maintenance.
Notable decrease in labour costs.
Errors in billing reduced from 8.3 % to 3.5%
percent.
Became the leader in the high-volume copierduplicator market segment.
Country units improved sales from 152% to 328%.
Summary
Xerox use competitive benchmarking, where
compare production process with competitor – best
in practice, and with non competitive competitor
Xerox found that production cost per unit is more
expensive than competitor from Japan
conducted benchmarking Xerox produces changes in
production costs, competition and quality
Question
1.
Apakah Proses Benchmarking itu dilakukan sendiri oleh
perusahaan atau menggunakan konsultan ?
( Oleh :
Jawaban :
Proses
Benchmarking
adalah
proses
untuk
membandingkan biaya, cycle life, produksi atau kualitas
dari suatu perusahaan atau industri. Benchmarking
adalah proses yang dipersiapkan perusahaan, karena
benchmarking merupakan proses yang bersifat continue.
Dan yang menjalankan proses Benchmarking adalah
perusahaan sendiri, tanpa menggunakan konsultan.
2.
Bagaimana cara membandingkan atau cara menentukan
metode Benchmarking ?
( Oleh :
Jawaban :
Cara menentukan metode Benchmarking yang digunakan
adalah pertama – tama perusahaan harus menentukan
dulu proses atau sistem apa yang mau dibenchmark. Hal
– hal yang bisa dibenchmark adalah Kualitas, Waktu dan
Produktifitas. Sebagai Contoh, jika perusahaan jasa
delivery ingin membandingkan kecepatan waktu untuk
mengantarkan kiriman, berarti hal atau sistem yang mau
dibandingkan dengan best practice adalah waktu
pengiriman.
Dengan
begitu,
perusahaan
dapat
menentukan metode atau type Benchmark yang
dilakukan.
Bisa
Tipe
Competitive
Benchmark,
Performance Benchmark,atau tipe lainnya sesuai denga
teorinya.
3.
Apakah Proses Benchmarking itu legal atau tidak ?
( Oleh :
Jawaban :
Benchmarking adalah proses yang disepakati oleh manajemen
perusahaan dengan maksud demi perbaikan dan peningkatan
kualitas. Dengan komitmen dan tim yang dipersiapkan, proses
Benchmarking adalah proses legal, karena Benchmarking
bukanlah proses mengcopy atau meniru begitu saja dari best
practice lain.
4. Apakah perbedaan antara Benchamarking dengan
Reengineering ? Kapan waktu yang tepat untuk melakukan
Benchmarking dan kapan untuk melakukan Reenginering ?
( Oleh :
Jawaban :
5. Apakah proses Benchmarking bisa dibandingkan dengan
perusahaan kecil ?
( Oleh :
Jawaban :
6. Bagaimanakah cara Xerox menekan biaya produksinya?
( Oleh :
Jawaban :
Xerox melakukan proses Benchmarking dengan perusahaan
Jepang Canon. Dari Proses Benchmark ini, Xerox mendapati
bahwa ada sistem dari Canon yang bisa diterapkan dalam
proses produksinya yaitu Proses Just In Time. Dengan proses
JIT ini, Xerox mampu mengurangi biaya produksinya. JIT
adalah suatu filosofi sederhana dalam manajemn biaya, yaitu
memproduksi barang apabila ada pemesanan. Atau dengan
kata lain, hanya memproduski sesuai unit dan kualitas yang
diminta. Sasaran utama JIT adalah meningkatkan
produktivitas sistem produksi atau operasi dengan cara
menghilangkan semua macam kegiatan yang tidak
menambah nilai bagi suatu produk.
7. Apa saja yang di Benchmarking?
( Oleh :
Jawaban :
Bidang – Bidang yang dapat di Benchmarking adalah :
1. Kepuasan Pelanggan : kesesuaian Produk, waktu
pengiriman, penyerahan tepat waktu
2. Kinerja Keuangan : biaya produksi, penjualan, umur
piutang, penanaman
modal
3. Distribusi : biaya kegiatan distribusi, jumlah tingkat
distribusi
4. Pembelian : jumlah pemasok, harga bahan baku
5. Manajemen Bahan Baku : ruang gudang, persediaan
6. Praktek Manajemen : manajemen SDM, Manaj. Kualitas,
8. Apakah dengan Proses Benchmakring, perusahaan harus
mengcopy semua program atau sistem dari Best Practice?
( Oleh :
Jawaban :
Proses Benchmarking bertujuan untuk memahami kegiatan –
kegiatan dan proses – proses yang merupakan kunci ke arah
keberhasilan bisnis, dan bisa menentukan standar kinerja
menjadi lebih baik.
Ketika Perusahaan sudah menetukan subjek yang akan
menjadi benchmark seperti pemasaran, CRM, keuangan,
SDM, operasional atau lainnya perusahaan akan menentukan
perusahaan yang menjadi Best Practice. Dan perlu diketahui
bahwa Proses Benchmark untuk mengcopy paste atau
meniru secara keseluruhan proses dari best practice.