Breakthrough Improvement

Discontinuous change resulting from innovative and creative thinking, motivated by stretch goals, and facilitated by benchmarking and reengineering

Benchmarking


Benchmarking the search of industry best practices that lead to superior performance. Best practices approaches that produce exceptional results, are usually innovative in terms of the use of technology or human resources, and are recognized by customers or industry experts.

The essence of benchmarking is the continuous process of comparing a company s strategy, products and processes with those of world leaders and best in class organizations in order to learn how they achieved excellence and then setting out to match and even surpass it.

Benchmarking

Benchmarking is the systematic search for best practices, innovative ideas, and highly effective operating procedures. Benchmarking considers the experience of others and uses it.

Benchmarking at Xerox


Benchmarked with companies both in and outside the industry. Results: Suppliers reduced from 5000 to 300. Commonality of parts increased from 20% to 60% Cross functional Team Xerox formed.

Select Best Practices Company

Company
       

Function
   


American Airlines American Express AMP Benetton Disney World Domino s Pizza Dow Chemicals Xerox

Information Systems Billing Supplier Management Advertising

Optimum Customer Experience

  

Cycle Time Safety Benchmarking

WHY REINVENT THE WHEEL IF YOU CAN LEARN FROM SOMEONE.

Benchmarking Process
1. 2.

3. 4.

5.

Determine what to benchmark Identify key performance indicators to measure Identify the best-in-class companies best-inMeasure the performance of best-in-class best-inand compare to your own performance Define and take actions to meet or exceed the best performance

Benchmarking is a tool to achieve business and competitive objectives. It is powerful and extremely effective when used for the right reasons and aligned with organization strategy

Reasons to Benchmark
Some of the reasons are:
  

Benchmarking can inspire managers (and organizations) to compete. Benchmarking allows goals to be set objectively, based on external information. Benchmarking partners provide a working model of an improved process, which reduces some of the planning, testing, and prototyping effort. As the old saying goes, Why reinvent the wheel? Benchmarking enhances innovation by requiring organizations to constantly scan the external environment and to use the information obtained to improve the process.

Process
Organizations that benchmark, adapt the process to best fit their own needs and culture. Although the number of steps in the process may vary from organization to organization, the following six steps contain the core techniques.
1. 2. 3. 4. 5. 6.

Decide what to benchmark. Understand current performance. Plan. Study others. Learn from the data. Use the findings

Deciding What to Benchmark

Benchmarking can be applied to virtually any business or production process. Improvement to best-in-class levels in best-insome areas will contribute greatly to market and financial success, whereas improvement in other areas will have no significant impact. Most organizations have a strategy that defines how the firm wants to position itself and compete in the marketplace.

Some other questions that can be raised to decide high impact areas to benchmark are: 1. Which processes are causing the most trouble? 2. Which processes contribute most to customer satisfaction and which are not performing up to expectations? 3. What are the competitive pressures impacting the organization the most? 4. What processes or functions have the most potential for differentiating our organization from the competition? In deciding what to benchmark, it is best not to choose too large a scope Pareto analysis can be a helpful technique for deciding what processes to investigate.

Understanding Current Performance

To compare practices to outside benchmarks, it is first necessary to thoroughly understand and document the current process. It is essential that the organization s performance is well understood


Several techniques, such as flow diagrams and cause-andcause-andeffect diagrams can be used. When documenting the process, it is important to quantify it. Special care should be taken when using accounting information. Most accounting systems were developed to satisfy external reporting requirements to the tax and regulatory authorities.

Types of Benchmarking


Competitive benchmarking - studying products, processes, or business performance of competitors in the same industry to compare pricing, technical quality, features, and other quality or performance characteristics of products and services. Process benchmarking focus on key work processes

Strategic benchmarking focus on how companies compete and strategies that lead to competitive advantage

Planning


The Benchmarking Team should do planning considering following:

what type of benchmarking to perform: internal, competitive, and process. what type of data are to be collected the method of data collection. candidates to serve as the benchmark to be identified. Identifying the best firms to find a benchmark is a research project. timetables for each of the benchmarking tasks : Techniques like Gant Chart, PERT, etc. can be effectively used The desired output from the study.

Studying Others

Benchmarking studies look for either description of how best-inbest-inclass processes are practiced or the measurable results of these practices. For this purpose, internal sources, data in the public domain, original research, or most likely a combination of sources are used.

Three techniques for conducting original research are:

Questionnaires: Questionnaires are particularly useful to ensure respondent anonymity and confidentiality, when data are desired from many external organizations and when using a third party to collect information. Site visits: Site visits provide the opportunity to see processes in action and for face-to-face contact with best-in-class face-tobest-inoperators. Site visits usually involve a tour of the operation or plant followed by a discussion period. Focus groups: Focus groups are simply panels of benchmarking partners brought together to discuss areas of mutual interest. Most often the panels are comprised of people who have some previous joint benchmarking activity.

Learning from the Data

Benchmarking studies can reveal three different outcomes.



External processes may be significantly better than internal processes (a negative gap). Negative gaps call for a major improvement effort. Process performance may be approximately equal (parity). The internal process may be better than that found in external organizations (positive gap). The finding of a positive gap should result in recognition for the internal process.

Following steps should be taken in in case of negative gaps  Identifiable benchmark gaps must be described and quantified.  Once best-in-class practices are described and best-inunderstood, key process measures should be quantified.  When best-in-class processes have been described best-inand quantified, additional analysis is necessary to determine the root causes of the gaps

Using the Findings

When a benchmarking study reveals a negative gap in performance, the objective is to change the process to close the gap.  The findings must translate to goals and objectives, and action plans must be developed to implement new processes.  Process changes are likely to affect upstream and downstream operations as well as suppliers and customers. Therefore, senior management has to know the basis for and payoff of new goals and objectives in order to support the change.  These changes have to be considered and incorporated into the strategic planning process.  When acceptance is gained, new goals and objectives are set based on the benchmark findings

The generic steps for the development and execution of action plans are:
1. 2. 3. 4. 5. 6. 7.

Specify tasks. Sequence tasks. Determine resource needs. Establish task schedule. Assign responsibility for each task. Describe expected results. Specify methods for monitoring results.

Pitfalls and Criticisms of Benchmarking



The most persistent criticism of benchmarking comes from the idea of copying others. Benchmarking isn t very helpful if it is used for processes that don t offer much opportunity for improvement. Benchmarking is also not a substitute for innovation

Summary


The organizations which have intentions to grow and perform well should measure themselves against the best industry practices. Benchmarking provides a systematic approach to achieve this purpose. It primarily contains two elements, first, doing comparative performance measure on the basis of well-established metrics and wellsecond, understanding why their own performance differs from the targeted values. .

Benchmarking can be adapted to any business or production process. The organization must indentify critical processes or business measures, which it wants to benchmark and at the end achieve it. Several techniques are available to carry out the benchmark studies. Organizations must ensure that business ethics are maintained in obtaining such data and should avoid copying the processes blindly

Reengineering


Reengineering the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed.

Why do we do this business process? Why is this done this way? This gives at times uncovers obsolete, erroneous or inappropriate assumptions.

Successful reengineering requires fundamental understanding of the processes, creative thinking to breakaway from traditions and assumptions, and effective use of technology.

 

Pepsico : Customer reps typically experienced stockouts of as much as 25% of products by the end of the day, resulting in late- day stops not getting latefull deliveries and the need toreturn to those accounts. Many other routes return with overstock of other products, increasing handling costs

By redesigning the system to include hand held computers, customer reps computers, can confirm and deliver that day s order and also take a future order for the next delivery to that customer.

Radical redesign involves tossing out existing procedures and reinventing the process, not just incrementally improving it.

The Key Role of Process

Principles of Process Redesign

  

Reduce handoffs Eliminate steps Perform steps in parallel rather than in sequence Involve key people early

DMAIC Methodology
1. 2. 3. 4. 5.

Define Measure Analyze Improve Control

Define


Describe the problem in operational terms Drill down to a specific problem statement (project scoping) (project scoping) Identify customers and CTQs, performance metrics, and cost/revenue implications

Measure


Key data collection questions

What questions are we trying to answer? What type of data will we need to answer the question? Where can we find the data? Who can provide the data? How can we collect the data with minimum effort and with minimum chance of error?

Analyze


  

Focus on why defects, errors, or excessive variation occur Seek the root cause 5-Why technique Experimentation and verification

Improve
   

Idea generation Brainstorming Evaluation and selection Implementation planning

Control
    

Maintain improvements Standard operating procedures Training Checklist or reviews Statistical process control charts

Organizational Issues
    

Resistance to change Top management support Diversity of human resources Methodological rigor Payoffs and benefits