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BENCHMARKING
&BEST PRACTICES
ACHIEVING SUSTAINABLE EXCELLENCE
BAHRAIN QUALITY SOCIETY
19-09-2007
BYAHMED A.HUSSAIN
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Benchmarking
Content: Definition of benchmarking
Why Companies use benchmarking
Types of benchmarking
What do we need to conduct benchmarking exercise
Steps of benchmarking
Critical success factors of benchmarking
Examples of benchmarking
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Definition of Benchmarking
Benchmarking is the process of improving performance by:
Continuously identifying, understanding, and adaptingoutstanding practices found inside and outside the
organisation.
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Benchmarking is:
Knowing your position and operation.
Adopting best practices which are the cause of best
performance. Studying best practices provides thegreatest opportunity for gaining a strategic, operational,and financial advantage.
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Benchmarking is NOT:
Tour visits to other competitors or organisations.
Performance measurement, its part of benchmarkingprocess. i.e. competitive analysis.
A cost-cutting exercise.
Imitating others practices or processes, its How to not
What is.
A public relations exercise.
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Why Companies Use Benchmarking?
Improve performance: Benchmarking identifies methods of
improving operational efficiency and product design.
Understand relative cost position: Benchmarking reveals
an organisations relative cost position and identifies.
Quality
ManagementSystem
Business
ExcellenceAssessment
Opportunity
forImprovement Benchmarking Best Practices
The Way to Achieve Business Excellence
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Why Companies Use Benchmarking?
Increase the rate of organisational learning:Benchmarking brings new ideas into the organisation
and facilitates experience sharing.
Gain strategic advantage: Benchmarking helpsorgan sa ons ocus on capa es cr ca o u ngstrategic advantage.
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Types of Benchmarking
There are several classifications for benchmarking, basedon partner type, adoption level and target process,following are the most used types:
Internal
External
Functional
Competitive
Generic
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Types of Benchmarking: Internal
benchmarking with another department or business unitwithin the same organisation, i.e. searching for the bestpractices internally.
The main advantages of internal benchmarking are:
access to sensitive data and information is easier.
standardised data is often readily available.
usually less time and resources are needed.
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Types of Benchmarking: Internal
There may be fewer barriers to implementation as practicesmay be relatively easy to transfer across the sameorganisation. However, real innovation may be lackingand best in class performance is more likely to be found
through external benchmarking.
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Types of Benchmarking: Internal
Internal benchmarking is most appropriate when there areseveral business units within the same organisation andmanagement want to spread internal expertise quickly,throughout the organisation.
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Types of Benchmarking: External
Benchmarking with an external partner, i.e. searching forbest practices with another organisation such as partnercompanies, suppliers and customers.
External benchmarking provides opportunities ofearning rom t ose w o are at t e " ea ing e ge".
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Types of Benchmarking: External
Can take up significant time and resource to ensure thecomparability of data and information, the credibility ofthe findings and the development of soundrecommendations.
other organisations and there is a lack of good practiceswithin internal business units.
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Types of Benchmarking: Functional
Functional benchmarking focuses on comparisons insimilar functions within the same broad industry or ofindustry leaders. It can lead to breakthroughs that willresult in major improvements. Example: L.L. Bean &
Xerox
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Types of Benchmarking: Competitive
Competitive benchmarking applies to companies thatproduced similar products or services. It is a specificcompetitor to competitor comparison for theproduct or function in question.
owever, as s usua y cu o n ou e u ureplans of business rivals, competitive benchmarking maynot yield information that can be used to gain acompetitive advantage over ones competitors.
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Types of Benchmarking: Generic
Generic benchmarking involves comparisons of businessfunctions or process that are the same regardless of theindustry.
It can be the most informative and can result in changed
paradigms in the current operations of an organisation.- - .
Example: an insurance company may Benchmark a bank loan applicationprocess against its insurance claims process. While the processes may
appear dissimilar, they both require timely and consistent adjudication.Therefore, generic benchmarking involves analysis across industries.
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What do we need to conduct benchmarking
exercise:
To ensure success of benchmarking activities in anyorganisation, certain requirements need to be fulfilled.Among the factors which will determine successfulimplementation of benchmarking are:
op managemen suppor an comm men .
Benchmarking as part of organisational strategy.
It is a team activity.
It is planned, organised and managed. Understanding of own process.
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Steps of Benchmarking:
There are several approaches to implement benchmarking,such as 12 steps of Xerox, and 9 steps of AT&T and 7steps Alcoa, in general, they are all based on Plan-Do-Check-Act cycle.
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Steps of Benchmarking:
1) Plan:
It is necessary to select and define the process that is to bestudied and benchmarked and then to identify themeasures of process performance, followed by an
evaluation of own capability at this process and
against.
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Steps of Benchmarking:
2) Do:
Conducting primary and secondary research. Learning asmuch as possible about the target company's particularprocess through public disclosures in press and trade
publications. Direct communication may include, .
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Steps of Benchmarking:
3) Check:
In this step all the gathered information is analysed todetermine study findings and recommendations andidentifying process gaps and enablers that contribute to
improve performance and develop the own best practice.
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Steps of Benchmarking:
4) Act:
Communicate, adapt and monitor the new process. Theobjective of benchmarking is to change an organisationin a way that improves its performance. Finally,
recalibrate benchmarking and look for new.
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Critical Success Factors of Benchmarking:
Organisations to achieve its vision with the help ofbenchmarking, they need to have critical success factors(CSFs), that are core competencies or capabilities, thatmust be accomplished. The major CSFs are:
o ng e r g s u y.
Being committed to implementing the results.
Using an appropriate benchmarking process.
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Critical Success Factors of Benchmarking:
Choosing and empowering the right team members.
Knowing its own process first.
Adherin to the code of conduct.
Testing adaptability of practices and enablers
Verifying the results of implementation.
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Examples of Benchmarking: Xerox & L.L. Bean
Xerox: is photocopiers manufacturer.
L.L. Bean: is mail order clothing company relays heavily onlogistics.
In 1980s, Xerox performance of warehouse and logisticswas behind technology, Xerox faced financial difficultydue to the Japanese competitors.
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Examples of Benchmarking: Xerox & L.L. Bean
There was potential for the elimination of the bottleneckin the warehouse.
Technology was thought to be a key, but there was
insufficient data to confirm any of the theories. L. L.ean was oug o ave e es per ormance, u s
function was totally manual.
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Examples of Benchmarking: Xerox & L.L. Bean
Xeroxs order filling procedures were Benchmarkedagainst L. L. Beans and found to pose the greatest
opportunity.
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Examples of Benchmarking: Xerox & L.L. Bean
Through a series of follow-up interviews and site visits,Xerox determined that L. L. Bean organised itswarehouse so that the fast moving inventory (shirts,promotional items, etc.) were located near the loadingdock. This minimised the amount of time it took to pick
an order and et it loaded on a truck
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Examples of Benchmarking: Xerox & L.L. Bean
Additionally, incoming inventory was stored using anautomated system for maximizing space moreefficiently.
Xerox took these findings and implemented them ate r ware ouses. s overa or er ng e c ency
improved and costs were reduced.
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Examples of Benchmarking: Ford & Mazda
A Ford Motor Company team visited Mazda, in Japan (acompany in which Ford has a 25% interest).
Their mission was to make an in-depth analysis of
processes. It was found that its accounts payableepar men a near y 500 peop e n e n e a es
while Mazda had only nine. A gap like this was just toohard to ignore.
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Examples of Benchmarking: Ford & Mazda
As a first step, Ford identified further Benchmarksimpacting accounts payable performance which assistedthem in identifying three important business differences
Ford had more suppliers than Mazda.
Ford captured and matched more data elements on eachpayment transaction.
Fords payments were triggered by invoices from its suppliers -Mazdas processes did not.
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Examples of Benchmarking: Ford & Mazda
Action: Instituting a supplier review.
Re-engineering the requisitioning, receiving, and paymentprocesses.
Automating the information flow between Ford and its suppliers.
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Examples of Benchmarking: Ford & Mazda
They mapped out the basic business processes and foundthat Mazda was missing some steps. Japanesecompanies did not invoice each other -- instead they paidwhen they received the goods
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Examples of Benchmarking: Ford & Mazda
Ford decided on a program of:
Redefining the terms of the relationship with suppliers
Standardise payment terms on a total payment.
Instituting disciplined receiving practices for inventory
and payment control purposes.
Ensuring that all the terms and conditions were on thepurchase order and understandable by all parties.
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Examples of Benchmarking: Ford & Mazda
Ford Motor Company found that the results ofBenchmarking were not achieved overnight. It has takenthem over 10 years of effort to educate the suppliers tochange their practices.
s pro ec was an exerc se o c ang ng eenvironment, not changing internal practices, and hasresulted in an 80% reduction in accounts payable staffingrequirements.
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Bibliography:
Bogan, C. E., & English, M. J. (1994). Benchmarking for best practices :winning through innovative adaptation. New York: McGraw-Hill.
Camp, R. C. (2006). Benchmarking : the search for industry best practices thatlead to superior performance. Milwaukee, Wis.: Quality Press.
, ., , . . .handbook (1st ed.). New York, N.Y.: HarperBusiness.
Clifford Jamison, The Channel Practice.
Benchmarkingbooks.com
National Productivity Corporation.