benchmarking for improvement presented by: enrico c. mina kaizen management systems, inc

Benchmarking for Improvement

Presented by:

Enrico C. Mina

Kaizen Management Systems, Inc.

Benchmarking for Improvement 2

Introduction

Benchmarking is the search for best practices in other organizations that can be adapted to one’s own organization.

It is the search for models that one’s organization can emulate, thus eliminating the “not-invented-here” paradigm.


Objectives (1)

At the end of this seminar, the participants would have been able to:

Understand and appreciate the principles and practices behind benchmarking

Identify opportunities for conducting a benchmarking exercise involving an actual high-priority business process

Create a detailed benchmarking action plan


What Is the Primary Purpose of a Business Enterprise? Old paradigm: To make profit New paradigm: To meet or exceed

customers’ requirements in the most cost-efficient way. Satisfied customers reward the firm with repeat business and long-term loyalty, which generates sales, growth, market share, and profits.

Profits are a reward for doing this well.


What Is a Paradigm?

A paradigm is a mental model, a deeply-held mindset that influences the perception of reality and the identification of solutions to problems encountered in that reality.


Customer Goals

QUALITY - the ability of the product or service to satisfy customer needs

COST - the price, plus the costs of operating, maintaining, and disposing

DELIVERY - the timeliness, quantity, and manner of making the product or service available

Customers, including internal ones, want all three.


Process and Results (1)

The three customer goals are all end-results of a process.

A process is a series of interrelated activities that transform inputs into desirable and predictable outputs.

Characteristics:On-going, continuousNot based on existing organizational structures;

usually cuts across boundaries



Often unnamed and unrecognizedTypically not many; around 10-12 major ones

in an enterpriseIdeally, should start and end with the customer

or recipient of the output.

Understanding business processes is essential to implementing effective and efficient improvement programs.



Process creates results. If results are not satisfactory, the only permanent way to improve them is to improve the process first.

Results are needed to verify if process improvements are working.

Therefore, there must be a balanced emphasis on both process and results.


Process Elements (1)

Most processes have six elements: Man (people) - the personnel that

perform the work in the process Machines - the process equipment,

physical facilities, vehicles, tools, etc.



Materials - the raw materials, supplies, components, packaging, fuel, forms, source documents, raw data, etc.

Methods - standards, procedures, guidelines, instructions, techniques



Measurements - the capturing, recording, summarizing, and reporting of quantitative data generated by the process during operation

Environment - working conditions under which the process operates


The Process System

The six process elements are distinctive but interdependent. Outputs (products and services) are the result of their systemic interaction.

W. Edwards Deming: the “common causes” inherent in the process system account for 94% of process failures. A bad system will always beat a good performer.


Cause-and-effect Relationship

The process elements and their interaction produce the output or results.If the results are not satisfactory to customers,

the only logical way to improve them is to improve first the process.

No change in process, no permanent change in results, same problems occur.


Total Systems Focus

A system is an integrated whole made up of distinct but interdependent and interacting parts.

The only real improvement is that which enables the entire organization to serve customer requirements better.

Systemic problems can only be solved through cross-functional teamwork.


Non-blaming/Non-judgmental Behavior

A blaming culture causes people to hide problems.

Problems are really opportunities for improvement in disguise.

Focus on the problem and make people problem-solvers.

“The first time you get angry is the last time you get the truth.” (Ishikawa)


SDCA to PDCA

Standardization and Improvement

SS

DDCC

AA PP

DDCC

AA


Process Muda (1)

Muda is the Japanese word for waste. The presence of muda in a process,

through one or more of its elements, deteriorates quality, increases costs, and delays delivery by lengthening the cycle time.

Muda is non-value-adding and therefore unproductive.


Process Muda (2)

Overproduction - Each work station or process stage tries to operate at full capacity, leading to a build-up of WIP or FGI. These hide problems by making them tolerable, although at high cost, and prevent them from being addressed. This is the “mother of all muda.”


Process Muda (3)

Inventory - Excessive supplies and parts are costly to carry: cost of tied-up capital, storage, security and pilferage, supervision, insurance, obsolescence and deterioration.

Waiting - Waste of time when people and work stations are capable of work but are idle.


Process Muda (4)

Transportation - Additional cost and time created by transferring the location of people, materials, or products without any value being added.

Motion - Created by people being made to exert physical efforts that merely add to fatigue and time but do not create value.


Process Muda (5)

Overprocessing - Created when the process is performing work that is unnecessary from the customer’s point of view.

Producing failures - Process failures like defects and errors result in customer dissatisfaction, higher costs, and delays.


Process Muda (6) In most companies, mudas are

considered normal and have been tolerated over a long period of time. Many even have provisions in budgets.

Every muda removed and prevented from recurring improves process quality and reduces cost and cycle time, thus automatically increasing productivity.


Process Flowcharting (1)

The first step in identifying muda is to draw a flowchart, a graphical representation of a process. It is essential to process analysis and improvement.

The flowchart must be based on the actual sequence of activities, not on the theoretical one in the manual.


Process Flowcharting (2)

The best sources of information are the people who are actually working on the process.


Basic Symbols (1)

Beginning and end

Operation

Sub-process

Wait/delay


Basic Symbols (2)

Transportation

Storage

Connector A


Basic Symbols (3)

Direction of

process flow

Document

DecisionY

N

?

36

START

Customer Dept. X Dept. Y Dept. Z

A

A

BN

Y

B

C

C

D

N

Y

D

N

Y

E

E

FN

Y

END

FTotal Cycle Time:

Min.: ___hrs

Max.: ___hrs

Ave.: ___hrs

Total Distance Traveled:

Min.: ___m

Max.: ___m

Ave.: ___m

OK?OK?

OK?


Identifying Muda (1)

After making a flowchart, ask the following questions:What are we doing? Can we avoid doing it at

all?Who is doing it? Can it be done better by

someone else (e.g., a subcontractor)?Where are we doing it? Can it be done better

somewhere else?



When and how often are we doing it? Can it be done better at other times or with another frequency?

How are we doing it? Can it be done better through another way?If it is done manually, can we automate it?Can it be done simultaneously or in parallel?Can we apply Information Technology and tele-

communications effectively?



If there is no clear value-added, then that particular activity is muda and should be eliminated.

If it is value-adding, apply simplification and mistake-proofing.

Create, document, and continuously improve standards for each process element. Use the standards for training staff.


Muda Elimination

The process should be revised to eliminate all identified muda. Every muda eliminated and prevented from recurring reduces costs and cycle time and improves process quality.

The opportunities for improvement through the continuous elimination of muda are infinite.

Benchmarking is a very good way to see how others have avoided or eliminated muda in a similar process.


Benchmarking (1)

Benchmarking is the search for and adoption of ideas for improvement and best practices from other organizations.

It provides an identification of opportunities for improvement even if current processes are “good enough.”

It avoids “reinventing the wheel.”


Benchmarking (2)

Three levels of benchmarking:Internal – the best practices of a particular

branch, plant, or facility of the same organization become models for the others to follow (e.g., best practices of a particular plant or branch are communicated to the others to have them adopt these also)


Benchmarking (3)

Competitive – the best practices of another organization engaged in the same business are identified, analyzed, and copied (e.g., GM adopted the essential features of the Toyota Production System or JIT in order to improve quality and reduce costs).


Benchmarking (4)

Functional – another organization’s practices that have been identified as “best in class” are analyzed and copied or adapted into one’s own organizational processes. The target benchmark organization is not necessarily from the same business (e.g., a hospital adopting the billing process of a hotel in order to discharge patients quickly).


Process Identification (1)

Identify a high-priority business process (to be targeted for improvement) exhibiting one or more of these characteristics:Vital to maintaining competitiveness in a tough,

turbulent business environmentIs a frequent source of customer complaints

about quality failures or delays/long cycle timeHas too high a cost; consumes too much

resourcesIs prone to accidents or environmental hazards


Process Identification (2)

Solicit regular feedback from customers (both external and internal) regarding their level of satisfaction with the outputs of the process.

Make it easy for customers to communicate complaints. These are a direct indication of opportunities for improvement.

Welcome bad news from operators and other personnel directly working on the process. Institute “bad news reporting.”


The Benchmarking Team (1)

Benchmarking is an undertaking too complex for an individual. It must be undertaken by a team organized for the purpose (i.e., a task force).

The composition of the task force should be cross-functional, i.e., the members come from various departments or functional units that are involved in the process or affected by it.



Typical team size is 5 – 9. Too large a team is unwieldy; too small a size does not generate enough synergy.

The team leader should be a process owner, someone whose job function is most directly concerned with the effective and efficient operation of the process.



The team should have access to resource persons, specialists within the organization whose expert advice and services will be helpful to the team, but whose membership in the team is not required. Examples: IT professionals, financial analysts, logistics analysts, engineering experts, R & D experts, etc.



The team must have an executive sponsor (or “godfather”), a senior-level executive who will play the role of team champion and adviser, and whose influence and stature in the organization are vital in convincing the other senior executives to accept and support the benchmarking results.



Arrangements must be made with the respective superiors of the team members to transfer some of their regular workload to other personnel while the benchmarking project is on-going. Otherwise, conflicts in priorities will occur.

Corollarily, their key performance goals must be modified to include their participation in the benchmarking project.



The team members will have to undergo shared experiences and personal interaction to facilitate the development of team cohesiveness. One way is to train together or undergo teambuilding exercises.

Each team member must understand clearly the team’s mission and his/her particular role or contribution in achieving it.


Defining and Analyzing the Current Process (1) The team should draw an “as is” flowchart

of the current process and analyze it for the presence of muda.

The team should identify the key measurement indicators or metrics of the current process for both process and results.


Defining and Analyzing the Current Process (2) Result indicators

Quality level, number of rejects/errorsCycle time (overall and per station)Volume per unit timeCost per unitAccident rateInventory levels (RM, WIP, FGI)Number of customer complaints


Defining and Analyzing the Current Process (3) Process indicators:

Man: manning complement, training, skill certification, education, physical condition, morale, how organized, organizational culture

Machines: type, brand, capacity, number, speed, settings, tooling, maintenance program indicators (MTBF, MTTR, OEE, etc.)

Materials: type, specifications, vendor accreditation and QA, packaging, yield


Defining and Analyzing the Current Process (4)

Methods: procedures, work instructions, standards

Measurement: critical process parameters, how measured, where measured, how many readings or samples, what instruments used, degree of accuracy and precision, what analysis performed, instrument calibration program

Environment: lighting, noise, dust count, sanitation and housekeeping, ambient temperature, relative humidity, reliability of utilities,


Generation of Baseline Measurements on Own Process After identifying the process and result

indicators, the team should generate baseline or current data on process performance.

Customers of the process as well as operators should be involved in the generation of these data.

Efforts should be exerted to get competitive performance data on the same process.


Exercise in Identifying Result Indicators Brainstorm the most important measurable

or verifiable indicators of Quality, Cost, and Delivery as perceived by customers.

What are our current performance levels in these indicators?

What do customers expect? What will they expect in the future?

What are the comparative performance levels of our best competitors?


Baseline Result Indicators

Customer Goal

Own Process

Customer Expectation

Best Competitor

Quality

Cost

Delivery


Identification of Gaps

The baseline data should be compared against both customer expectations and competitor performance.

In what areas are we unable to completely satisfy current customer expectations? future customer expectations?

In what areas are we inferior in performance to that of our best competitors?


Exercise in Identifying Process Indicators (1) Brainstorm the most important measurable

or verifiable indicators of the state or condition of each of the six process elements: man, machine, materials, methods, measurements, and environment.

Are all these controllable? When in their optimal states, do they

guarantee a very high level of process quality?


Exercise in Identifying Process Indicators (2) For each indicator for each element,

establish the current levels of performance. Establish also the consistency of maintaining these levels.

How do these levels compare with sister plants overseas?

Do we know how they compare with those of our best competitors? with those of subcontractors?


Baseline Process Indicators

Element Indicator Current Level

Personnel

Machines

Materials

Methods

Measurements

Environment


Identification of the Benchmarking Target (1) For internal benchmarking, search for the

best performing unit, plant, or branch and initiate contact.

For competitive benchmarking, read newspaper, magazine, or journal articles about what competitors are doing very well. Talk to common customers and common suppliers to identify which competitors are performing extraordinarily well.


Identification of the Benchmarking Target (2) For functional benchmarking, again search

published materials. Attend conventions or conferences where outstanding performers are presenting papers, and initiate contacts there. Get referrals from professional or trade organizations. Search the Internet!


Seeking Permission from the Benchmarking Target (1) For internal benchmarking, have someone

high enough in your own facility to make the initial contact. Or, have some from headquarters make a referral. Arrange for the benchmarking team to visit the target at a mutually convenient date and time.

Obviously, competitors (with rare exceptions) will not accommodate benchmarking visits from you. Alternatives:


Seeking Permission from the Benchmarking Target (2)

Buy a competitor’s product from the open market and do reverse engineering. Dissect it to determine its design, materials used, packaging, and manufacturing process.

For service businesses, patronize a competitor’s facility and observe closely its processes. Prepare beforehand a checklist of critical items to evaluate.


Seeking Permission from the Benchmarking Target (3) For functional benchmarking, have your

highest ranking executive formally write to his counterpart in the target organization, explaining what you want to do and why.

Give assurances that you will respect any confidential or proprietary information you may get to know. Emphasize that you are not a competitor.


Seeking Permission from the Benchmarking Target (4) Define clearly the scope of your

benchmarking study and the time period involved.

Offer a quid pro quo. Offer to share your own information about your process. Do not ask for information you yourself are not prepared to give.

If the target agrees, set a date and time for the benchmarking team to visit.


Preparing for the Benchmarking Visit (1) The team members should all be informed

about the name, location, nature of business, and name of contact person of the target, particularly in the case of functional benchmarking.

Schedules should be communicated and agreed.

The team should collate all documents created so far concerning the process.


Preparing for the Benchmarking Visit (2)

“as is” flowchartlist of identified mudaprocess and result indicators and their baseline

measurementscustomer feedback and evaluation

The team should prepare a checklist of key items to focus on during the visit. Specific topics are assigned to individual members.


Exercise in Preparing a Pre-visit Checklist Brainstorm the key process and result items

that the team will have to focus on during the benchmarking visit.

Arrange them logically in a checklist. Assign specific item responsibilities to

various members of the team.


Conducting the Benchmarking Visit (1) After the usual introductions, greetings, and

courtesies, the team leader explains to the counterpart host personnel what the team is tasked to dowhat process they are focusing on why that particular organization was selectedwhat the team hopes to accomplish by the end

of the visit.


Conducting the Benchmarking Visit (2) The team leader also reiterates that they are

not competitors of the benchmarking partner, and that all confidential or proprietary information will be respected (i.e., not divulged to 3rd parties).

The team leader emphasizes that the results of the study will be shared with the benchmarking partner.


Conducting the Benchmarking Visit (3) If possible, have a guided tour of the

benchmark partner’s facilities, paying particular attention to the gemba of the benchmark process. Observe carefully how it runs.

Interview the process owner, process engineers, supervisors, and operators to get an appreciation of the benchmark process and its outstanding characteristics.


Conducting the Benchmarking Visit (4) Request for a copy of the flowchart of the

benchmark process, if possible; if not, the team draws its own “as is” flowchart.

Get measurable data about the results and process parameters of the benchmark process. Be sure you get data on each of the six process elements, using the same metrics as those of the own-process.


Conducting the Benchmarking Visit (5) Compare the benchmark process and the

own-process in terms of the data on results and the data on each process element. Focus on the areas where the benchmark process is markedly better than the own-process.What are the outstanding differences?What factors explain these differences?Can these factors be replicated in-house?How did the process evolve into its present

state? Is it still possible to improve the benchmark process? How?


Conducting the Benchmarking Visit (6) Share with the host any suggestions for

improvement of the benchmark process. It will be appreciated.

Clarify all pending issues. Look at the total system under which the benchmark process operates.

Before leaving, thank the host. Leave a small souvenir or token of appreciation with your company name and logo.


Conducting the Benchmarking Visit (7) Maintain the lines of communication with

the benchmark partner through e-mail, telephone, or mail.

Give feedback on what has happened to the study.


Revision of Own Process (1)

Conduct a team debriefing session where each member gives his/ her own views, observations, and ideas about the benchmarking visit just concluded. Write these down on flipchart paper.

Conduct a team brainstorming session to generate ideas for improvement on own-process based on the benchmarking experience.



Classify the brainstorming results into:Class 1: immediately doableClass 2: doable but may need further studyClass 3: not doable at this time.

Focus on Class 1. Assign a specific task force (preferably cross-functional) to study Class 2, with the study to be completed within a definite time frame.



Consolidate the Class 1 ideas into an improvement strategy.

Set specific and measurable, challenging but realistic, time-bound improvement goals.

Draw a How-how Diagram to generate critical details on how to translate the strategy into reality.


The Goal Statement

The implementation plan starts with a Goal Statement, a statement of the specific, measurable, attainable but challenging, key-results focused, and time-bound outcomes targeted to be accomplished.


Examples of Goal Statements (1)

To reduce NG level of the ____ product from 10% to 1% by January 31, 200__.

To reduce the cost per unit of the ___ product from P100 to P70 by March 31, 200__.

To achieve for the ___ product on-time delivery performance of 99% from the current 91% by May 31, 200__.


Examples of Goal Statements (2)

To reduce cycle time in the processing of Product X at work stations Y and Z from the current 10 min. per batch to 5 min. or less per batch by June 30, 200_.

To reduce the error rate in the ___ process at ___ from the current 10% to 0.1% by September 30, 200_.


The How-how Diagram

A tree diagram where at each branch, the question is asked: “How do we do that?”


Implementation Planning (1)

Rearrange the detailed requirements from the How-how Diagram into a chronological sequence of steps designed to achieve the target. If the change is major, consider a pilot test first.

Assign each step to a specific person. Set target dates for completion. Use a Gantt

chart if useful. Identify measurable success indicators for

each step.


Action Plan Format

3.0

2.0

1.0

Measurable Indicator

Target Completion Date

Person

Responsible

ActivityNo.



Identify resources required: what kind, how much/many, when needed, and estimated cost.

When Estimated

Type Quantity Needed Cost


Potential Problem Analysis (1)

Identify what can go wrong at each step and the causes.

Estimate the probability of occurrence of each potential problem:High = almost certain to happenMedium = about 50% chance of happeningLow = unlikely to happen

Take preventive actions to reduce the probability of occurrence.


Potential Problem Analysis (2)

Estimate the seriousness of the effect if what can go wrong does happenHigh = disaster; very threatening situationMedium = damaging and painful but survivableLow = a minor inconvenience

Design contingent actions that will reduce the seriousness in case the problem still happens in spite of the preventive actions. Identify the trigger (an event or piece of information that will activate the contingent action).


Potential Problem Analysis Spreadsheet

No.

Activity

What Can Go Wrong

Causes

Probability

Seriousness

Preventive Actions

Contingent Actions

Trigger



Create a monitoring mechanism that will regularly report progress of implementation. Reports Contents Sent to Frequency Responsibility

Have a plan for training personnel in the revised process.



Present for approval the benchmarking results, particularly the proposed changes in the own-process arising from the benchmarking, to the appropriate decision-makers. Support all proposals with data.

Upon approval, implement the plan. Change the affected standards and documents.

Send information to the benchmark partner.


End

benchmarking for improvement presented by: enrico c. mina kaizen management systems, inc

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