Benchmarking

Outline
1. Introduction
2. Process of Benchmarking
3. Case Study
4. References
5. Seminar Topics for IA
 1. Introduction
• Benchmarking is the process of identifying, understanding
and adopting outstanding practices and process from
organization anywhere in the world to help your
organization improve its performance.
• Benchmarking is not a panacea or program- it is long term
commitment .
• Benchmarking is a tool to achieve business and
competitive objective by imitation and adaptation rather
than pure invention .
• Benchmarking is not a panacea. It is not a strategy ,nor is
it indented to be business philosophy. It is an
improvement tool.
 1. Introduction…
• Benchmarking is a systematic method by which
organization can measure themselves against
the best industry practices.
• It is tool for continuous improvement .
• Benchmarking is time and cost efficient.
Because the process involves imitation and
adaptation rather than pure invention , time
and money is saved.
• Benchmarking forces on organization to set
goals and objectives based on external reality.
 2. Process of Benchmarking
Step-1 Decide what to benchmark
• Mission and Vision statement should take into
consideration.
• Set the critical success factors.
• Decide the matrix of measurement.
Step-2 Understanding Current Performance
 2. Process of Benchmarking…
Step-3 Planning
• Identification to whom one can benchmark
• Numbers and kind of partner involved in it.
• Types of bench marking should de defined initially, i.e
internal, process, competitive.
• Generate the sources of information .
• Set the project time tables.
Step-4 Studying others
• This can be done by three ways 1 focus group
interview, circulating questionnaires, site visit
 2. Process of Benchmarking…
Step-5 Learning from Data
• What is gap? How much it is ?
• Why there is gap?
• Why other do better and differently?
• If best in class practice were adopted ,
what would be resulting improvement?
 2. Process of Benchmarking…
Step-6 using the findings
• Approval of newly defined objectives and goal
• Specify the task
• Sequence of tasks
• Determine the resources needed
• Establish the task schedule
• Assign the responsibility of each task
• Describe the expected results
• Specify the methods of monitoring.
 3. Case Study: Spinning Industry

• Continuous improvement is the integral part of

TQM philosophy. In order to achieve the success
in implementing TQM philosophy it is desirable
for each company to make its comparative
assessment.
• A case study of spinning industry is taken here
 Case Study
• The spinning unit under investigation was set up four
decades back.
• The unit is engaged in producing of different counts of
yarn.
• Large proportion of its infrastructure has deteriorated.
• Unable to deliver quality and services for its costumers.
• The financial turn over of company is drastically reduces in
the last five years.
• The scale and scope of operations have become very low
and employees are loosing skill and motivation.
 Objectives of Study
• It is indispensable to improve the productivity and
quality by identifying the lacunas and lapse of
existing company working.
– To promote the unit under study to the comparable
level of excellence to that of best unit.
• To inject new skills and improve existing skill in
the unit to make it more competitive.
• To identify training needs of personnel at all
levels to enhance their technical competence at
par with best unit .
 Objectives of Study…
• To promote welfare facilities on par with
other unit to keep personnel motivated.
• Creation of infrastructure to improve scale
and scope of operation .
• To set goals and objective based on
external reality.
 Applied Methodology of Benchmarking
1. Determine what should be benchmarked
2. Identify the benchmarked parameter.
3. Data gathering
4. Analyze the data and determine the gap
5. Formulate the functional goals
6. Develop action plans
7. Implement specific actions and monitor the
progress
 Parameters Benchmarked
The unit under study was divided into seven subsystems –
• Production system
• Human system
• Competitive orientation
• Technical and management aspects
• Inventory management
• Infrastructure
• Other facilities
• The relevant data and necessary information is collected
from past records, observations and discussions.
• Every parameter has been assigned a standard score
according to relative importance .
• The analysis is carried out and compression made in
parameters of unit under study and best practice unit ,for
each subsystem.
• The gaps are analyzed and causes there of are discovered
for the purpose of formulation of action plan
 Production Subsystem
Parameter Weighte Score of Unit
d Score
Utilization of area 15 15
Manufacturing
25 25
flexibility
Production layout 10 10
On line inspection 10 10
Production
10 10
planning
Degree of
08 08
automation
Machines
07 07
maintenance
Tools and
05 05
accessories
Material handling 05 05
House keeping 05 05
 Production Subsystem
Parameter Weight Score Scores of benchmarked units
ed of unit
score under 1 2 3
study
Utilization of area 15 05 14 12 14
Manufacturing
25 05 15 20 15
flexibility
Production layout 10 01 03 04 03
On line inspection 10 03 03 05 03
Production planning 10 01 03 04 04
Degree of
08 02 03 04 04
automation
Machines
07 01 02 05 03
maintenance
Tools and
05 01 03 04 03
accessories
Material handling 05 04 03 04 04
House keeping 05 02 03 04 04
 Production Subsystem
Parameter Weighted Score of Scores of benchmarked units Gap
score unit under between
study 1 2 3 unit under
study &
best
performan
ce
Utilization of area 15 05 14 12 14 09
Manufacturing flexibility
25 05 15 20 15 15

Production layout 10 01 03 04 03 03
On line inspection 10 03 03 05 03 02
Production planning 10 01 03 04 04 03
Degree of automation 08 02 03 04 04 02
Machines maintenance
07 01 02 05 03 04

Tools and accessories 05 01 03 04 03 03

Material handling 05 04 03 04 04 00
House keeping 05 02 03 04 04 02
 Production Subsystem
Parameter Weight Score Scores of benchmarked units Gap between unit under study
ed of unit & best performance
score under 1 2 3
study
Utilization of area 15 05 14 12 14 09 64%
Manufacturing
25 05 15 20 15 15 75%
flexibility
Production layout 10 01 03 04 03 03 75%
On line inspection 10 03 03 05 03 02 40%
Production planning 10 01 03 04 04 03 75%
Degree of
08 02 03 04 04 02 50%
automation
Machines
07 01 02 05 03 04 80%
maintenance
Tools and
05 01 03 04 03 03 75%
accessories
Material handling 05 04 03 04 04 00 00%
House keeping 05 02 03 04 04 02 50%
100 25 52 66 57 43 65%
 Human Resource management
Parameter Weighted Score of Scores of benchmarked units Gap between unit under
score unit under study & best performance
study 1 2 3
Leadership style 18 05 15 17 13 12 71%
Employee involvement 10 02 03 05 04 03 60%
Interpersonal
10 04 07 11 08 07 64%
Relationship
Quality awareness 10 06 06 10 12 06 50%
Commitment 10 05 04 11 10 06 55%
Work satisfaction 08 04 04 08 06 04 50%
Motivation 08 03 09 12 09 09 75%
Team work 07 06 09 09 08 03 33%
Skill, and qualification
05 04 04 05 04 01 20%
of manager
Training of manager 05 02 04 05 03 03 60%
Communication 05 02 03 07 02 05 71%
Training of worker 04 01 04 04 02 03 75%

100 47 71 104 81 62 60%.

 Customer Orientation
Parameter Weighted Score of Scores of benchmarked Gap between unit
score unit units under study & best
under performance
study 1 2 3

After sale service 20 10 15 17 18 20 67%

Customer survey
20 06 15 16 17 11 65%
mechanism
Competitive
20 07 15 16 17 10 59%
analysis Criterion
Product
20 08 16 16 16 08 50%
development
Delivery schedule 10 08 08 08 08 00 00
Handling, Packing, 10 8 08 09 08 01 11%

100 48 77 82 84 49 58 %
 Technology –Management Aspect
Parameter Weighted Score of Scores of benchmarked units Gap between unit
score unit under under study & best
study performance
1 2 3

Supplier rating 15 8 12 13 14 06 43%

Information/ 15 06 10 13 13 07 54%
documentation
Auditing regularity 15 06 12 13 10 07 61%

Application SQC 20 07 16 18 16 11 61%

technique
Performance 15 06 12 10 12 06 50%
Evaluation criteria
Purchase practices of 20 9 16 17 16 08 47%
raw material
100 41 78 85 81 45 53%
 Inventory Management
Parameter Weighte Score of Scores of Gap between unit
d score unit benchmarked units under study &
under best performance
study
1 2 3

Storage space 40 10 25 28 30 20 67%

Inventory of 20 07 15 16 17 10 59%
spare part
Storage facilities 20 07 15 16 17 10 59%

Safety stock 10 04 08 09 08 05 56%

Varity of raw 10 04 06 08 05 04 50%

material
100 32 69 77 77 49 64%
 Estate protection and Fire Services
Parameter Weighte Score of Scores of benchmarked units Gap between unit under
d score unit under study & best
study performance
1 2 3

Wall 20 5 15 20 20 15 75%
Boundary road 10 0 0 4 7 7 100%
Lighting& ventilation 10 0 3 3 3 3 100%
Guard towers 10 3 5 5 5 2 40%
Fire vehicles 10 10 10 10 10 0 0%
Water reservoirs 10 7 7 6 7 0 0%
Water pipeline 10 0 10 4 0 10 100%
Fire crew 05 3 4 4 4 1 25%
Vehicles 05 4 4 4 4 0 0%
Internal fencing 05 0 5 4 5 5 100%
Guards 05 4 4 4 4 0 0%
100 36 67 68 69 43 62%
 Other Facilities
Parameter Weighted score Score of unit Scores of benchmarked units Gap between unit under study
under study & best performance

1 2 3

Hygienic working 30 04 24 24 24 20 83%

Recreational facilities 10 05 06 07 07 02 28%

Industrial Relations 10 05 06 07 08 03 37%

Employee Welfare 10 04 06 07 07 03 42%

Accommodation for 10 00 08 08 07 08 100%

Officers
Accommodation for 20 10 18 18 18 08 44%
staff
Landscaping 10 00 03 04 03 04 100%

100 28 71 75 74 48 64%
 Direct Performance Measure
Parameter W.S Score of unit Scores of benchmarked units Gap between unit under study
under study & best performance

1 2 3

% Scrap 20 15 08 12 11 07 2.14(H)

Numbers of breakdown 10 6 3 4 6 03 2.00(H)

Defect rate 10 9/hrs 5 6 5 4 1.8 (H)

% Rejected lots 10 6/100 4 3 4 3 2.00(H)

Machine utilization 05 16hrs 18 19 22 6 0.27(L)

Labour productivity 05 45 60 65 70 25 0.64( L)

%Labour turn over 05 25 13 16 15 12 2.08(H)

% Absenteeism 05 7 6 6 5 2 1.4(H)

Revenue per employee 10 45/day 49 52 55 10 0.82(L)

Number of complaints 10 4 4 3 4 1 1.33(H)

Defect in raw material 10 5/100tag 4 4 4 1 1.25(H)

 Benchmarking Summary
Parameter W.S Score of Scores of benchmarked units Gap between unit under
unit under study & best performance
study
1 2 3

Production system 100 25 52 66 57 43 65%

Human resource 100 47 71 104 81 62 60%.

management
Customer orientation 100 48 77 82 84 49 58 %

Tech- man aspects 100 41 78 85 81 45 53%

Inventory management 100 32 69 77 77 49 64%

Estate Protections and 100 36 67 68 69 43 62%

Fire Service
Other facilities 100 28 71 75 74 48 64%

700 257 485 557 523 339 61%

 Action Plan
• The following action plan is suggested in order to
improve the existing situation
• A long-term plan spanning 5 years has been formulated
on the basis of benchmarking findings by framing
mission, vision and policies of enterprises.
• The mission statement and policy must be production
and quality oriented.
• Communicated the plan policies, vision and mission to
each and every person associated with business to
increase the awareness about quality and productivity.
• The priorities for implementation of plan have been set
out according to the urgency and availability of funds.
The parameter where the gap existing is more than 70%
receives the priority. But concurrently the preparation
for minimizing the gap of other parameter was started
 Action Plan
• The annual plans have been prepared for implementation
and financial control. Equipment, spare and tools have
been procured annually according to budgets provided.
The action plan of first year involves construction of
workshops, storehouses, roads, fencing, etc. in terms of
infrastructure.
• For Cultural change “ kaizen theory” is significant than
reengineering hence measurement of cultural parameter
done separately and also started simultaneously.
• Priority must lay down to participate employees in
decision making.
• Training need were identified.
 Summary of benchmarking after
implementation of action plan..
Parameter W.S Score of Scores of benchmarked units Gap between unit
unit under under study & best
study performance
1 2 3

Production system 100 25 52 66 57 43 65%

Human resource 100 76 71 104 81 28 27%

management
Customer orientation 100 59 77 82 84 25 30%

Tech- mana aspect 100 53 78 85 81 32 38%

Inventory management 100 60 69 77 77 17 22%

Estate protection and 100 60 67 68 69 09 13%

fire safety
Other facility 100 54 71 75 74 21 28%

Overall gap 700 423 485 557 523 155 28%

 Bench Marking According To Direct
Performance Measure
Parameter W.S Score of Scores of benchmarked units Gap between unit under
unit under study & best performance
study
1 2 3

% Scrap 20 12 08 12 11 04 2.00(H)

Numbers of breakdown 10 05 3 4 6 02 1.66(H)

Defect rate 10 8/Hrs 5 6 5 3 1.6( H)

% Rejected lots 10 5/100 4 3 4 2 1.66(H)

Machine utilization 05 17hrs 18 19 22 5 0.77(L)

Labour productivity 05 47 60 65 70 25 067( L)

%Labour turn over 05 20 13 16 15 7 1.53(H)

% Absenteeism 05 6 6 6 5 1 1.2(H)

Revenue per employee 10 48per day 49 52 55 7 0.87(L)

Number of complaints 10 4 4 3 4 1 1.33(H)

Defect in raw material 10 5/100tag 4 4 4 1 1.25(H)

 Comparison between gap before action
and gap remaining after action
Parameter Initial Final gap Remark

• The table indicates gap

that the gap between Production system 65% 35% Gap reduced by 30%

Assessed unit and Human resource

60%. 27% Gap reduced by 33%
Benchmark unit is management

Customer
reduced by 33% that is orientation
58 % 30% Gap reduced by 22%

the overall Tech- man aspect 53% 38% Gap reduced by 15%

improvement by Inventory
management
64% 22% Gap reduced by 42%

45%The result are Estate protection

62% 13% Gap reduced by 49%
satisfactory for the and fire safety

duration of only Other facility 64% 28% Gap reduced by 36%

6months time. 61% 28% Gap reduced by 33%

 Reference Books
• Making Common Sense Common Practice – Models for
Manufacturing Excellence, Ron Moore, Butter worth
Heinmann, Elsevier India, 3rd Edition, Publishing Year
2006.