Total quality management

Assignment on
benchmarking

- Suresh Kumar Sen.

Benchmarking
 Benchmarking is defined as “measuring our performance against
that of best in class companies, determining how the best in class achieve those
performance levels and using the information as a basis for our own company’s targets,
strategies and implementation.” (Or) more, “the search of industry best practices that
leads to superior performance”.
The essence of benchmarking
Essence of benchmarking is the continuous
process of comparing a company’s strategy, product 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. In other words, it is “moving from where
we are to where we want to be”.
The evolution of benchmarking
The concept of benchmarking is not new. In the
early 1800s, Francis Lowell, a New England industrialist, traveled to England to study
manufacturing techniques at the best British factories. Toyotas just in time production
system was influenced by the replenishment practice of U.S supermarkets. Modern
benchmarking was initiated by Xerox (in the 1980s) an eventual winner of the Malcolm
Baldrige national quality award. IBM, Motorola and Xerox became the pioneers and
instituting the bench marking process.
Advantages of benchmarking
A primary advantage of benchmarking practice is
that it promotes a thorough understanding of the companies own processes i.e. the
companys current profile (strength and weakness) is well understood.
(I) It involves limitation and adaptation of the practices of superior competitors, rather
than invention, thereby saving time and money for the company practicing
benchmarking.
(II) Intensive studies of existing practice often lead to identification of none value added
activities and plans for process improvement.
(III) It enables comparison of performance measures in different dimensions, each with
best practices for that particular measure.
(IV) It focuses on performance measure and processes and not on products.
(V) It is not restricted to the industry to which the company belongs. It extends beyond
these boundaries and identifies organization in other industries that are superior with
respect to chosen measures.
(VI) I t allows organizations to set realistic, rigorous new performance targets and this
process helps convince people of the credibility of these targets.
(VII) It allows organization to define specific gaps in performance and to select the gap
between what they are doing and what best in class are doing. Closing the gap
emphasizes the need for personal to be involved in technique can of problem solving and
process improvement.
Limitations
(I) Benchmarking is the fact that best in class performance is not a static but a moving
target.
(II) New technology can create quantum leap performance improvements.
(III) Benchmarking is not an “instant pudding”. It will not improve performance if the
proper infrastructure of a total quality program is not in place.
Benchmarking is not a panacea that can replace all other quality efforts or
management processes that can improve the competitive advantage of a company.
Pitfalls of benchmarking
The potential pitfalls of benchmarking include the failure
to do the following.
(I) involve the employees who will ultimately use the information and improve the
process.
(II) Relate process improvement to strategy and competitive positioning.

(III) Define the firms own process before gathering data for the purpose of comparison.
(IV) Perceive benchmarking as an ongoing process and not as a one time project with a
finite start and completion dates.
(V) Perceive benchmarking as a means to process improvement, rather than an end itself.
(VI) Empower employees to achieve improvement that they identify and for which they
solve problems and develop action plans.
Levels of benchmarking
To compare ones business practice with those of other
organization, four common approaches to benchmarking are adopted. They are:
(I) internal benchmarking
(II) Competitive benchmarking
(III) Non competitive benchmarking
(IV) World class benchmarking

Internal benchmarking is done within ones organization or perhaps in conjunction with

another division or branch office. It is the easiest to conduct since data and information
should be readily available and confidentiality concerns are minimized.

Competitive benchmarking involves analyzing the

performance and practice of best in class companies. Their performance becomes a
benchmark to which a firm can compare its own performance and their practice is used to
improve that firms practices.
Non competitive benchmarking is learning something about a process a company wants
to improve by benchmarking including-
A related process in the industry with a firm, the company does not directly compete
with.
A related process in a different industry.
An unrelated process in a different industry.
An advantage of the type of benchmarking is that new processes which could easily be
adapted to ones organization might be discovered.
World class benchmarking is an approach to benchmarking is the ambitious. It involves
looking towards the recognized leader for the process being benchmarked – an
organization that does it benchmarking it better than any other.
Type of benchmarking
Performance benchmarking or Operational benchmarking
It involves pricing,
technical quality, features and other quality of performance characteristic of products and
services. Performance benchmarking is usually performed by direct comparisons or
“reverse engineering” in which competitors products are taken apart and analyses. This
process is also known as “operational benchmarking” or “competitive benchmarking”
and involves studying of products and processes of competitors in the same industry.
Process benchmarking or functional benchmarking
It centers on work
processes such as billing, order entry or employee training. This type of benchmarking
identifies the most effective practices in companies that perform similar functions, no
matter in what industry.
Strategic benchmarking examines how companies compute and seeks the winning
strategies that have led to competitive advantage and market success. One way to
determine how well a company is prepared to complete in a segment and to help define a
best in class competitor is to construct a key success factor matrix.
Areas to benchmark: specific areas to benchmark at the operating level might
include the following:

Customer services levels

Inventory management
Inventory control (extent of automation)
Purchasing
Billing and collection
Purchasing practices
Quality process
Warehousing and distribution and
Transportation

Guidelines to benchmarking: companies approach benchmarking in different ways.

IBM has a four step approach. AT & T has a nine step approach and Xerox a ten step
approach. All these approach have the general guidelines given below:

Do not go on a fishing expendition: When preparing a benchmarking study, pick-up

specific area in the organization that needs improvement. This may be quality, customer
satisfaction, accounts payable or delivery time. Then do your homework, including
thoroughly reviewing your own process and procedures before picking a company that
excels in the particular area chosen.

Use company people: The people who are to implement changes need to see and
understand for themselves, so it is they who should make the visits to other firms which
are benchmarked and have the discussions with the concerned people. Further the visits
should be short and the working teams small.
Exchange information: You should be ready to exchange information and provide
answers in turn to any questions you might ask another company.

Legal concerns: avoid legal problems which might arise as a result of discussions that
might imply price fixing, market allocations or other illegal activities. This could lead to
problems. Do not expect to learn much about new products of competitors by the
benchmarking process. Most benchmarking missions focus on existing products, business
practices, human resources and customer satisfaction.

Confidentiality: Respect the confidentiality of data obtained. Companies that agree to

share information with you may strongly object if that information leaks out to a
competitor.

Four phases of benchmarking

The four phases of benchmarking are:

I) Planning: identify the product, service or process to be benchmarked and the firm(s)
to be used for comparison determine the measures of performance for analysis and collect
the relevant data.
ii) Analysis: determine the gaps between the firm’s current performance and that of the
firm(s) benchmarked and identify the causes of significant gaps.
iii) Integration: establish goals and support of managers who must provide the
resources for accomplishing the goals.
iv) Action: develop cross-functional teams of those most affected by the changes,
develop action plans and team assignments, implement the plans, monitor progress and
recalibrate benchmarks as improvements are made.

Benchmarking process: Specific steps in benchmarking vary from company to

company but the fundamental or basic step is the same. One company’s benchmarking
may not work at another organization because of differences in their operating concerns.
Successful benchmarking reflects the culture of the organization, works within the
existing infrastructure and is harmonious with the leadership philosophy.

Motorola Inc., winner of the Malcolm Baldrige Award for 1988, uses a five step
benchmarking process:
(i) Decide what to benchmark
(ii) Select companies to benchmark
(iii) Obtain data and collect information
(iv) Analyze data and form action plans and
(v) Recalibrate and start the process again.
AT & T, which has two Baldrige winners among its operating units, uses a nine step
process:
 (i) Project conception: identify the need and decide what to benchmark.
(ii) Planning: determine the scope and objectives and develop a benchmarking
plan.
(iii) Preliminary data collection: collect data on industries companies and similar
processes as well as detailed data on your own processes.
(iv) Best-in-class selection: select companies with best-in-class processes.
(v) Best-in-class collection: collect detailed data from companies with best in
class processes.
(vi) Assessment: compare your own and best-in-class processes and develop
recommendations.
(vii) Implementation planning: develop operational improvement plans to attain
superior performance.
(viii) Implementation: enact operational plans and monitor process improvements.
(ix) Recommendations: update benchmark findings and access improvement in
processes.

Xerox divided its initial benchmarking procedure into ten steps but other
experts have noted successful programs based on as few as four defined
stages. What matters is not the number of steps but all necessary actions are
completed in the benchmarking process.

The seven step benchmarking model

Benchmarking is an ongoing process that requires data gathering, goal setting and
analysis. These are accomplished by seven step model. The seven steps are:
Step 1: identify what to benchmark
Step 2: determine what to measure
Step 3: identify who to benchmark
Step 4: collect he data
Step 5: analyze data and determine the gap
Step 6: set goals and develop action plans and
Step 7: monitor the process

Step 1: identify what to benchmark?

Benchmarking can be very powerful vehicle for driving peal process performance
but if the approach to benchmarking is not targeted, well planned or organized, it can be a
very costly investment of resources with minimal return on investment.

The first step which keeps the efforts of the company focused involves the following
sub-steps:
(i) clarify the benchmarking objective
(ii) decide whom to involve
(iii) define the process
(iv) consider the scope
(v) set the boundaries
(vi) agree on the process and
(vii) flow chart the process

(i) clarify the benchmarking objective : benchmarking decision may be driven by

any one or more of the following factors:

• An organization wide strategy, setting priorities for improvement.

• The need to address a specific problem that requires immediate attention.
• A new business requirement (a new product line or a modification to the
existing one).
• Not meeting goals in previous attempts to improve a process.

(ii) Decide whom to involve: after deciding what to benchmark, decide who will
be on the team. Even though benchmarking can be done individually, best
results typically come from team effort. the team members are selected on the
following considerations:

• It is critical for management to be actively involved with the team.

• Include employees involved with the day-to-day flow of the process and
• Include employees who have an interest in and knowledge about what
goes on just outside the boundaries of the process.

(iii) Define the process: the process should be clearly defined. A process is a series
of interrelated tasks that are organized to produce an output. An output might
include a product or a service. It is important to know as much about your
process before you benchmark it against another organizations process.

(iv) Consider the scope: the scope should not be too broad or too narrow. if the
scope of your focus is too large, you might not be able to tackle it effectively .
For example, benchmarking the “human resources function” at another
organization might be too broad in scope. A narrower focus, such as the
“recruiting and interviewing process” is more realistic.

If the scope is too narrow, your benchmarking efforts might miss important
opportunities. For example, benchmarking the “prospective employee interview
scheduling process” might miss critical information and opportunities not related to
this narrow focus.

(v) Set the boundaries: every system is made up of separate and distinct
processes. Boundaries of each process can be defined by identifying its inputs
and outputs. Boundaries exits at the point where inputs are received from
 internal suppliers and outputs go to internal customers. Defining the
boundaries more specially will make you more successful in improving the
process. You will be better able to stay focused make plans and stay on track
as you benchmark.
(vi) Agree on the process: once your team has defined the process, you agree on
the tasks involved. It is a good idea to brainstorm the tasks first and put them
in the right order later. The objective is to include all the major tasks in the
process from start to finish.
(vii) Flow chart the process: a flow chart is a step by step picture of the task in your
process. Use it as a “working document” to help define the process. Later, it
can be used as the tool to continuously improve the process.
Step 2: Determine what to measure
Once the process to be benchmarked has been defined, you are almost ready to look
at similar processes in other organizations. Comparison of your processes with those
in other organizations should be meaningful. This requires clear and accurate
measures before looking at processes in other organizations.
Three sub steps
(i) Examine the flow chart.
• Overall time to complete the process
• Complete time at each individual task
• Time spent at each decision point
• Number of repeat
• Variation of task time
• Costs and
• Scrap.
(ii) Establish the process measures and
(a) Consider measures outside the process-
(b) Comparing and selecting your benchmarking measures.
(a) Determine customer “result” measures
(b) Determine supplier “input” measures
(c)Brainstorm in process measures
(d) Link supplier and customer measures with in process measures

(iii) Verify that measures match objectives.

Step3: Identify who to benchmark
(a) Conduct general research through sources:
(i) trade magazines
(ii) industry publications
(iii) professional journals
(iv) market research
(v) government studies
(vi) telephone or mail surveys and
(vii) Benchmarking consultants.
(b) Choose the level to benchmark.
Step 4: Collect the data
 (a) internal
(b) public information
(c) other companies
Step 5: Analyze data and determine gap
(a) quantitative data
(b) qualitative analysis
Step 6: Set goals and develop an action plan
(a) Set performance goals
(b) Develop an action plan
Step 7: Monitor the process
 Track the changes
(i) evaluate measures in increments
(ii) publish periodic benchmarking progress reports
(iii) hold regular progress meetings
(iv) monitor customers (internal and external)
(v) monitor suppliers (internal and external)
(vi) implement benchmarking as on ongoing process

 Make benchmarking a habit

Benchmarking is process of discovering and adapting new and innovative
practices to improve overall organizational effectiveness. It is also a
“learning process” – learning and adapting new practices by establishing
new goals and introducing new ideas.