9/17/2010

Benchmarking Helps Companies to Achieve Continuous Performance Improvements

By: Piyush Dewangan and Rajabahadur V. Arcot.

Benchmarking is a collaborative learning process among a group of companies and it involves relative
comparison of identified operating practices, metrics and such others. Comparison can help
companies to improve processes and practices that will ultimately lead to productivity enhancements,
reduction of wastages, and such others. Benchmarking can be across enterprises or among different
entities within an enterprise. Benchmarking performance against peers provides opportunities for
business improvement initiatives in different areas. Benchmarking helps companies to think laterally
about new methods and tools to continually improve their operational efficiencies and effectiveness of
resource deployment. It is an effective way to empower people to discover new ways of solving
problems and to address the natural resistance to change.

Benchmarking analysis helps to understand how a company compares with others. It also helps to
determine whether a plant is achieving the needed ROI and identifies where and how to improve
strategies and investments.

Benchmarking can be of several types, such as process performance benchmarking, strategic

benchmarking (for e.g. changes in maintenance strategy), plant & equipment benchmarking, and work
force benchmarking. For the effective deployment of benchmarking, developing a meaningful set of
metrics is as essential as linking them to intended improvement programs. It is also necessary to link
metrics to best practices. The success of the benchmarking approach will be determined by the
cooperation and collaboration throughout a manufacturing company's hierarchy. Yet another criterion
is the enterprise’s deep commitment to achieve business transformation.

ARC launched its benchmarking service in January 2005, comprising of a consortium of manufacturing
companies from process industries, including pharmaceutical industry. The program’s intent is to give
interested companies a platform to benchmark performance. The consortium members mutually
agree upon the common metrics for benchmarking the performance and practices for automation,
control, and related maintenance assets and resources. To cater to diversity of interests, Special
Interest Groups (SIGs) were formed to develop metrics for specific areas of interest within the
consortium.

Several companies are actively involved in benchmarking their performance by becoming members of
ARC’s benchmarking consortium. Through the diligent efforts of several working groups, they have
selected and approved metrics for benchmarking. Equipment performance, energy utilization,
operator performance, process management, use of automation tools, effectiveness of electronic batch
record systems, security patch management, and others are some of the performance metrics.
Members of the consortium believe that these metrics give a clear understanding of the plant’s status
and help them to identify various performance gaps. If the Indian manufacturing industry has to be
globally competitive it must identify and bridge performance gaps.

The ARC benchmarking analytical tool (BAT), while maintaining the participating company’s
confidentiality, allows filtering of the data by metric type, industry region, and plant type. It allows
companies to select the specific report type for the analysis and creates the most comparable
benchmark for company’s plant metric data. It also provides a wide variety of report types, enabling
critical analysis of the data, which could highlight important performance gaps that require immediate
attention. Hence the benchmarking analysis of performance can help companies to formulate the best
strategies in achieving global competitiveness and to carry out their continuous improvement
programs effectively.

The expanding Indian economy provides impetus for the growth of the manufacturing industry in the
country. The country’s manufacturing industry has acquired the threshold size and it is at the point of
inflexion. While the growing affluence would spur the demand for manufactured goods, the industry
will have to become globally competitive to emerge a winner in the market. Linear growth model of
investing to expand production capacities will not suffice. Companies must make investments in areas
which would result in productivity improvements. They must focus on improving supply chain
efficiencies and deploy energy conservation measures. Benchmarking is one of the ways by which
manufacturing companies can develop key performance indicators for pursuing the goal of continuous
improvements.

Some industries in India, such as cement, pharmaceutical, and steel can immensely benefit from
benchmarking. These industries are already mature and boast of global sized operations. While in the
case of cement, India is already the second largest producer of cement in the world, India occupies
the fifth position in the steel industry and soon it is likely to emerge as the third largest. In the case
of pharmaceutical industry, India now accounts for almost 10 percent of world’s total pharmaceutical
output in terms of volume and ranks third globally. Another industry which can gain from
performance benchmarking is the electric power generating industry. The demand for electric power
outstrips the installed generating capacity in the country and significant opportunity exists for
improving the operations and maintenance management in generating companies.

ARC will be happy to initiate the necessary dialogue with manufacturing companies in the country to
benchmark their performance. ARC invites cement, electric power plant including captive power
plants, pharmaceutical, and steel companies to write to raja@arcweb.com or venkat@arcweb.com to
join our benchmarking consortium.