Introduction to Benchmarking

Begin Module 1

Cultural Implications

Module 4

Steps in Benchmarking

Module 3

Types of Benchmarking

Module 2

Introduction Benchmarking

Module 1

Agenda

Rajiv Gupta
BITS Pilani

Benchmarking

Thomas Edison

Keep on the lookout for novel and interesting

ideas that others have used successfully. Your
idea has to be original only in its adaptation to
the problem youre currently working on

Prince Otto Von Bismarck

Fool you are . to say you learn by your

experience .. I prefer to profit by others
mistakes , and avoid the price of my own

Sun Tzu- Chinese General, 500 B.C.

If you know your enemy and know yourself,

you need not fear the result of a hundred
battles

 A way to reduce resource usage

A quick fix to a recurring problem
Something that can be done purely with the help
of consultants
A program or special project
A specific cookbook approach or recipe

Isnt

What Benchmarking Is and Isnt

It is not possible to solve all the problems by oneself

It is becoming acceptable to borrow good ideas

Todays problems are very complex

It is becoming difficult to retain a particular edge for

long. Change is occurring very fast.
Growing awareness among people and industries

More access to information globally

Larger number of global players

Current competitive marketplace

Why Benchmark?

The continuous process of measuring our

products, services and practices against our
toughest competitors or those companies
renowned as leaders
David Kearns
Chairman, Xerox Corporation
(1982-1990)

Benchmarking

Improves organizational quality

Helps in achieving competitive costs
Creates buy-in for change
Exposes people to new ideas
Creates avenue for learning
Creates an external business view
Overcomes employees belief that better
performance is possible

End of Module 1

Benefits of Benchmarking

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A way to understand the competitive position of a

company
An ongoing process
Part of top management responsibility
Strategically important to a company

Is

What Benchmarking Is and Isnt

 Usually compares products or services with

competitors
Reverse engineering
Focus on attributes such as technical quality,
reliability, speed, etc.
Used to understand a companys competitive
position

Competitive Benchmarking

Internal
External
Global/Best-in-class

Based on Levels:

Competitive Benchmarking
Process Benchmarking
Strategic Benchmarking

Based on Outcomes/Targets:

Types of Benchmarking

Types of Benchmarking

Begin Module 2

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Look for best practices within the company

Diverse company divisions and locations may be
unaware of practices elsewhere
Several times, one can also get a wealth of
information from looking at past successes
Is relatively cheap and has fewer hurdles to cross

Internal Benchmarking

High level business strategies are targeted for

benchmarking
Focus on things such as core competencies,
markets, etc.
Implementation can take a long time
Japanese have excelled in strategic benchmarking

Strategic Benchmarking

A specific process or work activity is selected for

comparison
The process should be critical to the companys
success
Either an internal or an external benchmark is
researched
Examples could be the order fulfillment process,
billing process, recruitment process, complaint
handling process, etc.

Process Benchmarking

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 End of Module 2

External companies, not necessarily in the same

industry are selected, based on who does an
activity the best
Typically used for process benchmarking
Examples are Xerox benchmarking L.L. Beans
logistics and distribution function, Japanese
borrowing the Kan Ban system from grocery
stores, etc.

Best-in-class Benchmarking

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Looking for best practices outside the company,

often in the same industry
Could be either competitive or process
benchmarking
Requires more effort, cost, and preparation
Gives a better view of the competitive stand of the
company

External Benchmarking

Input

Process

What is a Process?

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Output

Understand what you want to study

Gather data
Define gaps with your current system/process
Take innovative action to cover the gaps and
gain superiority
Continuously innovate

Basic Steps in Benchmarking

Steps in Benchmarking

Begin Module 3

Manuf
Function

Manufacturing

Core Processes

Order Fulfillment process

Engineering
Function

Engineering

Dist
Function

Distribution

Market to collection
Integrated supply chain
Time to market
Customer service

Advanced technology
Offerings development
Service delivery
Order-to-remittance

General Electric

Xerox

Examples of Core Business Processes

Core processes are those processes that are

critical to the success of the organization
Examples of core processes could be order
entry, order fulfillment, training, recruitment,
billing, customer service, etc.
Each organization would need to define its
own set of core processes.
These core processes are what should be the
focus of benchmarking

Sales
Function

Sales

President

Process View of an Organization

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Sources of Data

Direct Competitors

Generic

Internal Sources

Data Collection
Ease

Functional Leaders

Relevance

Past Experience

Source

Own past experiences

Internal sources
Direct competitors
Functional leaders
Generic

Internal sources
External sources
Original research

Whom to Benchmark

Innovative
Ideas

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Library Search/Internet Search

Professional and Trade Associations
Consultants
External Experts and Studies

External sources

Functional experts are usually aware of current trends

in their respective areas
There may be other people who are not functional
experts, but whose job keeps them on a lookout for
developments in the markets, e.g. marketing people
There may be people who may not have information
themselves, may have indirect information that may
help
There are people who are active socially or
professionally and this brings them into contact with
what is happening on the outside

Internal experts:

Internal Sources

Reverse engineering reveals information about the

product
Ordering and shipping documents show methods and
origin of shipment
Packing slips and other documents may reveal use of
bar codes for inventory control
Repair and returns policy might also be indicated on
service documents
Order catalogs have information on ordering methods

Product analysis:

Internal Sources

Data Analysis and Action

Questionnaires
Telephone Interviews
Mail in surveys
Direct site visits

500 employees worked in the accounts payable department.

Ford executives thought they could reduce the headcount by
about 20% by using computers.
They visited Mazda, which employed only 5 people in A/P.
How to use re-engineering? You cannot re-engineer a
department such as the A/P dept.
They decided to re-engineer the procurement process

Ford:

Examples

Analyze current performance gaps

Project future performance gaps
Establish action plan

Original Research

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 End of Module 3

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Purchasing releases P/O to vendor and enters order in on-line

data base. When material is received, the receiving clerk
checks physical material with any on-line purchase order. If it
does, the clerk okays the receipt and this automatically
authorizes a check to be sent to the vendor.
If the received material does not match any open P/O, the
clerk refuses the material and sends it back to the vendor.
As a result of these changes, the A/P dept was reduced to 5%
of its original size in some parts of Ford.

New Process:

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Purchasing sends a P/O to the vendor, with a copy to A/P.

When material is received at receiving dock, receiving clerk
completes a form regarding the material and sends it to A/P.
The vendor sends an invoice to A/P.
A/P has 3 documents. If they matched, payment was sent to
vendor. If not, clerks in A/P spent hours to reconcile them. Lot
of work and delay in payment to the vendor.

Old process:

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We need to get away from the idea that

learning from others is cheating
We need to make sure, however, that nothing
illegal is done, i.e., taking patented or
proprietary information or ideas
Borrowing from others needs to built into our
system to facilitate organizational learning

Cultural Implications

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We have been brought up on the concept that

it is wrong to steal, even ideas.
However, there is nothing wrong in taking
ideas from someone and improving upon
them
Innovative adaptation of ideas has always
been done in history and has resulted in
human progress

Cultural Implications

Cultural Implications

Begin Module 4

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End of Module 4

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Make best practice information sharing and

innovative adaptation skill evaluated in performance
review and promotion process
Make benchmarking competitors and other excellent
companies a responsibility clearly described in job
descriptions
Engage high level executives directly in
benchmarking and innovative adaptation
Regularly identify, study and celebrate internal
successes with the goal of repeating and improving
on them

What Can Companies Do

Invest in employee education that brings

outside ideas into your organization
Create lending libraries that focus on
competitors and other high performance
winning strategies and systems
Encourage visits to outside facilities and
seminars to learn from other companies

What Can Companies Do