BENCHMARKING

What is benchmarking?

• Benchmarking is the process of comparing one's business processes and performance metrics to industry bests or best practices from other industries.

• Benchmarking is a systematic method by which an organization can continuously measure themselves against the best industry practices or world class and improve accordingly.

The Evolution of Benchmarking

• The method may have evolved in the early 1950s, when W. Edward Deming taught the Japanese the idea of quality control.

• The best example is Toyota Motor Corporation’s following the footsteps of Ford Motor Corporation albeit with the adaptation of the Ford’s Just-in-case system into Toyota’s Just-in-time system.However the word “BENCHMARKING” was not coined at that time.

TYPES OF BENCHMARKING

•  Internal benchmarking : Benchmarking against its own unit or branches.

• External Benchmarking : Comparison of the same product or service produced by direct market competitors.

• International Benchmarking : Involves benchmarking against companies outside the country.

Benefits of Benchmarking

• Promotes a thorough understanding of company’s own process

• Saves time and money

• Identify non value added activities

• Focuses on performance measures and processes and not on products

• It provides a basis for training human resource

The Xerox Case

• The company invented the photocopier in 1959 and maintained a virtual monopoly for many years thereafter. 

• By 1981, however ,the companies market shrunk to 35% as  IBM and Kodak developed high-end machines and Canon, Richo and Savin dominated the low-end segment of market.

• Xerox’s products had over 30,000 defective parts per million—about 30 times more than its competitors.

Benchmarking Model at Xerox

• Planning: Determining the subject to be benchmarked, identify the relevant best practice and develop most appropriate data collection technique.

• Analysis: Assess the strengths of competitors and compare Xerox’s performance with competitors.

• Integration: Establish necessary goals and integrate these goals into the companys formal planning processes.

• Action: Implement action plans established and assess them periodically to determine whether the company is achieving its objective.

• Maturity: Determine whether the company has attained a superior performance level.

Supplier management system

Japanese Companies

• It has 1000 suppliers

• They trained Vendor’s Employee in Quality Control , manufacturing automation.

• Just-in-time i.e. Delivery in small quantities, as per customer’s production

Xerox• Reduced the vendors from 5000 to 400.

• Created a Vendor Certification Process in which suppliers were offered training & told their areas of improvement.

• Vendors were consulted for better Designs & Improved Customer service.

Inventory Management

Inventory holding Time reduction

• Xerox asked Branch managers to match the Stocking Policy with Customer’s installation Orders .

• Minimize Inventory Carrying Cost was to delay the assembly of product into the final Configuration.

Marketing

• Company sent 55,000 questionnaires to monthly to customers to measure customer Satisfaction & record Competitor’s performance.

• Those Competitors who have scored higher, Xerox benchmark itself against it.

Quality• As a part of “Leadership Through Quality” program, Xerox started providing

its customers( External & Internal) innovative products & services.

Total Quality Management

• Team consists of Senior managers & Consultants from McKinsey help to make TQM

• Under which New three SBUs were introduced:

Enterprise Service Business

Office Copiers

Home Copiers

• All these have autonomy in Engineering, marketing & pricing.

Reaping The Benefits

• Number of defects reduced by 78 per 100 machines.

• Service response time reduced by 27%.

• Defects in incoming parts reduced to 150ppm.

• Inventory costs reduced by two-thirds.

• Distribution productivity increased by 8-10%.

• Increased product reliability on account of 40% reduction in unscheduled maintenance.

•Increased product reliability on account of 40% reduction in unscheduled maintenance.

• Became the leader in the high-volume copier-duplicator market segment.

•Xerox went to be only company to win three prestigious quality awards- Malcolm Baldridge National award, Deming award ,and European quality award.

•During 1990s, Xerox, along with companies like Ford, AT&T, IBM, Motorola created the International Benchmarking Clearinghouse (IBC) to promote Benchmarking and guide companies across the world in benchmarking efforts.

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