Benchmarking: - Sun Tzu

BENCHMARKING
• “If you know neither yourself nor your enemy, you will
succumb in every battle.
• If you know yourself but not the enemy, for every
victory gained you will suffer a defeat.
• If you know yourself and your enemy, you need not
fear of a hundred battles.”
- Sun Tzu
Copyright © Houghton Mifflin Company. All rights reserved. Lecture Outlines, 8–1
What is it??
What to BM?
Whom to BM?
Data Collection
'How do WE do it? '

and
'How do THEY do it?'
Analyze the data
• Data analysis,
•Data presentation,
• Root cause analysis,
• Enabler identification
• Results projection
What is future performance level?
Partner’s
Performance
Future Gap
PERFORMANCE Current Gap
Former Gap Own Performance
- T1 Today T1
TIME
What do you do after this??
Adopt or adapt??
What do you do after this?
How Do You Set Goals &
Plans??
Implementation
What Do You Do Next?
Recalibrate
Recalibrate
BM Process
Pitfalls of BM
• Lack of sponsorship
• Selecting the wrong people for the team
• Teams not fully understanding their own work
• Teams taking on too much
• Managers failing to understand the necessary commitment
• Focusing on metrics rather than processes
• Not positioning benchmarking within a larger strategy
• Misunderstanding the organization’s mission, goals, and
objectives
• Assuming every project requires a site visit
• Failure to inspect benchmarking
Benchmarking- A case study
Haloid
A totally new product, a new market
PERFORMANCE
• 1960 : Sky had no limit to Xerox , It was the
sweetheart of Wall Street
• 1962 : entered fortune 500 list ranking 423
• 1962 : Fuji Xerox Co. Ltd. was launched
• 1970 : Ranked No. 40 in the Fortune 500
• early 1970s, Xerox diversified into IT
Reputation & Rapid growth

– revenues of $53 million by 1959
– revenues $268 million in 1965
– revenues $ 698 million in 1966
– Profit$ $ 83 million in 1966
– revenues of $8 billion in 1970
– profits of some $600 million in 1970
1970:When success “went to the head”
Performance between 1971-1981
Xerox, which had pioneered the paper copier,

saw its U.S. market share drop from 93% in
1971 to 40% in 1981.
What happened to Xerox
between 1975 -1981
• Challenged by the Japanese companies

• By the 1980s, 80 per cent of all copiers in use
throughout Europe were Japanese supplied
• The sharp decrease in revenue and profit
growth together with a fall in return on capital
from 19 per cent in 1980 to just 8.4 per cent in
1983
• In August 1980, David Kearns, promoted as
CEO, started the total quality process.
Launch of total quality initiatives
1981-The first Visit to Japan
Do you know what Xerox found?
The first Japan Visit (1981)
• Product cost: Xerox 2 X Manufacturing cost of Japanese

competition
• Product design:
– Sequential Vs Concurrent approach
– 5000 suppliers 250 suppliers
– 900 parts Vs 175 parts per machine
– Uniqueness Vs interchangeability
• Workforce:
– Ratio of 1:2 of mgt to Non-mgt at Xerox
– Ration of 1:7 mgt to Non-mgt at Canon & Ricoh
1982 Xerox benchmarks with L.L. Bean
• Xerox compared to L.L. Bean

– 500 orders to 1500 orders per day
– Compare to parts handled
– Shape, size, color, availability
– Warehousing operations
Here's where you are!
HOW GOOD ARE WE, REALLY?
Leadership Through Quality (1982)
• David Kearns, CEO, launched leadership through
Quality in 1982.
• All have received at least 28 hours of training
• Company invested more than four million man-hours and
$125 million in educating employees about quality
principles.
• "Team Xerox"
• 75 % of its workers are members of at least one of more
than 7,000 QITs.
• Customer Service Measurement System tracks the
behavior and preferences of about 200,000 owners of
Xerox equipment.
This forced Xerox the invert the pyramid
• The old Xerox- senior

staff at the top
• The new Xerox-

Customers at the top,
A series of benchmarking in Xerox
• 1982-Cost benchmarking done in manufacturing
• 1983-Discipline of benchmarking developed &
conducted BM against Canon
• 1984-Many functions adopt practice of BM
1985-Benchmarking is institutionalized
• 1986-Performance improvement from BM studies
widely communicated
• 1987-Companies health and industry leadership
reestablished.
• Mid-1990s, BM spread over 240 key areas of
product, service and business performance at
Xerox.
Some Benchmarking examples
• From L.L. Bean, Order-fullfilling process;
• From a drug wholesaler, Xerox learnt how to better electronically order
between stores and its distribution centres;
• From an appliance manufacturer, how a forklift could move six appliances at
once;
• From an electrical components manufacturer, automatic, in-line weighing,
barcode labelling and scanning of packages;
• from a photographic film manufacturer, self-directed warehouse work teams.
• Improving billing process and collection procedures with American Express,
Citibank and a credit card company.
• From Ford Motor Corporation to study plan layout;
• A competitive benchmark with Canon produced a new cylinder for a copier
photoreceptor.
THE XEROX BENCHMARKING
EXPERIENCE
• Product and operational quality – defects per

100 machines improved 10 X, benchmark met.
• Production suppliers – Reduced 10 X, from
5000 to 500.
• Production line defective parts (ppm) – reduced
13 X (from 4000 to 300).
• Received inspection – reduced to 5 % of
incoming materials.
THE XEROX BENCHMARKING
EXPERIENCE
• Goods inwards acceptance better than 99.5%.
• Inventory reduced by two–thirds.
• Service labour cost down by 30%.
• Customer satisfaction increased 38% in five years.
• Country units improved sales from 152% to 328%
XEROX IN 1989
• Market Share : 46%

• Profitability : respectable, above industry Average
• Growth rate : Faster than market

• Production line : Focused , state of art
• Employees : TQM focused, regarding self respect
• Team Xerox :In 1988 teams in manufacturing &
development saving $116 million
• Winner :MBNQA Prestigious Award for Quality
• Over the years, won the awards in 20 countries
Here's an example of how you can get
there.
Quality at Xerox
1. It took Xerox nine years to really buy into

quality as a corporate way of life.
2. It took five years to complete the TQM training
for all of its employees.
3. The salary of every employee is tied to quality
improvements and profits.
4. It was concluded that all of this was worth
doing.
Message from Xerox: “Take the risk; challenge
the system. You’re not going to lose your job.”
The process of being humble enough to admit
that someone else is better at something and
being wise enough to learn how to match and
even surpass them at it .

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BENCHMARKING

'How do WE do it? '

PERFORMANCE Current Gap

Former Gap Own Performance

Reputation & Rapid growth

Xerox, which had pioneered the paper copier,

• Challenged by the Japanese companies

1981-The first Visit to Japan

• Product cost: Xerox 2 X Manufacturing cost of Japanese

• Xerox compared to L.L. Bean

• The old Xerox- senior

• The new Xerox-

• Product and operational quality – defects per

• Inventory reduced by two–thirds.

• Service labour cost down by 30%.

• Customer satisfaction increased 38% in five years.

• Country units improved sales from 152% to 328%

• Market Share : 46%

• Growth rate : Faster than market

1. It took Xerox nine years to really buy into

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