Benchmarking Ahmed Mohammed Seth Shafer Shou-Jen Steve Wang

BenchmarkingBenchmarking

Ahmed MohammedAhmed MohammedSeth ShaferSeth Shafer

Shou-Jen Steve WangShou-Jen Steve Wang


►Chalk and bench activityChalk and bench activity

WhoWho

► Robert C. Camp 1989Robert C. Camp 1989► Bachelors degree in civil Bachelors degree in civil

engineering from Cornell engineering from Cornell University University

►MBA from Cornell University's MBA from Cornell University's Johnson School of Johnson School of Management Management

► Ph.D. in logistics and Ph.D. in logistics and operations research from The operations research from The Pennsylvania State University Pennsylvania State University


► Is a processIs a process► Is secrets of successIs secrets of success

Four FormsFour Forms

►GenericGeneric►Functional Functional ►CompetitiveCompetitive► InternalInternal

TypesTypes

► Process benchmarking Process benchmarking ► Financial benchmarking Financial benchmarking ► Benchmarking from an investor perspective Benchmarking from an investor perspective ► Performance benchmarking Performance benchmarking ► Product benchmarking Product benchmarking ► Strategic benchmarking Strategic benchmarking ► Functional benchmarking Functional benchmarking ► Best-in-class benchmarking Best-in-class benchmarking ►Operational benchmarking Operational benchmarking

ActivityActivity

► Connect the dotsConnect the dots► RulesRules

1.1. Draw in a straight line.Draw in a straight line.

2.2. Pen does not leave the blackboard.Pen does not leave the blackboard.

3.3. All dots have to be connectedAll dots have to be connected

Goal:Goal:

As few lines as possible.As few lines as possible.

PrerequisitesPrerequisites

►Will and commitmentWill and commitment►Vision and strategic objective linkVision and strategic objective link►Goals to becoming the bestGoals to becoming the best►Openness to new ideasOpenness to new ideas

Prerequisites (cont.)Prerequisites (cont.)

►Understanding of existing processes, Understanding of existing processes, products, services, practices, and products, services, practices, and customer needscustomer needs

►Documented ProcessesDocumented Processes►Process analysisProcess analysis►Research, communication, and team-Research, communication, and team-

building skillsbuilding skills

ObstaclesObstacles

► Internal FocusInternal Focus►Objective too broadObjective too broad►Unrealistic timetablesUnrealistic timetables►Poor team compositionPoor team composition►OK-in-classOK-in-class► Improper emphasisImproper emphasis► Insensitivity to partnersInsensitivity to partners►Limited top-management supportLimited top-management support

RationaleRationale

►Global competitionGlobal competition►Current standing of companyCurrent standing of company►A best-in-class modelA best-in-class model►Customers are better informedCustomers are better informed►Support of total qualitySupport of total quality

ExamplesExamples

►XeroxXerox►Computer HardwareComputer Hardware

Computer HardwareComputer Hardware

►Comparison of performanceComparison of performance

XeroxXerox

►Started in 1908Started in 1908►Big company by the 1960sBig company by the 1960s►Rapid expansion of the middle Rapid expansion of the middle

managementmanagement►Competition from Japanese companies Competition from Japanese companies

by 1980sby 1980s

Benchmarked ProcessesBenchmarked Processes

►Supplier management systemSupplier management system► Inventory managementInventory management►Manufacturing systemManufacturing system►MarketingMarketing►QualityQuality

Benefits of benchmarkingBenefits of benchmarking

►Fewer customer complaintsFewer customer complaints►Reduction of defectsReduction of defects►Reduction in service response timeReduction in service response time►Reduction in defective incoming partsReduction in defective incoming parts►Reduction in inventory costsReduction in inventory costs►Reduction in labor costsReduction in labor costs►Reduction in billing errorsReduction in billing errors

Benefits of benchmarkingBenefits of benchmarking

► Increase in customer satisfactionIncrease in customer satisfaction► Increase in marketing productivityIncrease in marketing productivity► Increase in distribution productivityIncrease in distribution productivity► Increase in product reliabilityIncrease in product reliability

Seven steps to benchmarkingSeven steps to benchmarking

1.1. Identify what to benchmarkIdentify what to benchmark

2.2. Determine what to measureDetermine what to measure

3.3. Identify who to benchmarkIdentify who to benchmark

4.4. Collect the dataCollect the data

5.5. Analyze the data and determine the Analyze the data and determine the gapgap

6.6. Set goals and develop an action planSet goals and develop an action plan

7.7. Monitor the processMonitor the process

Seven steps to benchmarkingSeven steps to benchmarking

► Step-1Step-1► Identify what to benchmarkIdentify what to benchmark► Activities involved in step-1 are Activities involved in step-1 are ► Clarifying the benchmarking objectiveClarifying the benchmarking objective► Decide whom to involveDecide whom to involve► Define the processDefine the process► Consider the scopeConsider the scope► Set the boundariesSet the boundaries► Agree on what happens in the processAgree on what happens in the process► Flow chart the processFlow chart the process

Step-1 continueStep-1 continue

► Identify what to benchmarkIdentify what to benchmark►Two approaches of benchmarkingTwo approaches of benchmarking

1)1)Strategic benchmarking Strategic benchmarking

Financial function could benchmark it Financial function could benchmark it activities (billing process)activities (billing process)

2) Organizational benchmarking2) Organizational benchmarking

Considerable research is done. Like Considerable research is done. Like soldering process, driver motor assembly soldering process, driver motor assembly benchmarkingbenchmarking

Step-1 continueStep-1 continue

►As a starting point benchmark your As a starting point benchmark your customer interfaces by not limiting customer interfaces by not limiting benchmarking to products. Like benchmarking to products. Like contract truckers, answering phone contract truckers, answering phone calls, accuracy of bills.calls, accuracy of bills.

►Benchmarking Product, manufacturing Benchmarking Product, manufacturing process, equipment, and business process, equipment, and business processes.processes.

Benchmarking: A Practical Benchmarking: A Practical ExampleExample

►ATO, INC., is a manufacturer of small to mATO, INC., is a manufacturer of small to medium air conditioners.edium air conditioners.

►Approximately 60%- home and office use Approximately 60%- home and office use onlyonly

►The remaining 40%-trucking industry, whThe remaining 40%-trucking industry, where ATO’s unique respected position in sere ATO’s unique respected position in supplying units for refrigerated trucks and upplying units for refrigerated trucks and trailer rigs.trailer rigs.

ATO, Inc., ATO, Inc.,

►ATO Inc’s production supervisor for Model 724 ATO Inc’s production supervisor for Model 724 series (home models) manufacturing area- series (home models) manufacturing area- SethSeth

►Seth’s group is a customer for an outside Seth’s group is a customer for an outside supplier of external control panel. supplier of external control panel.

►Responsibility of Seth’s production areaResponsibility of Seth’s production area►Building the chassis and housing for the unitsBuilding the chassis and housing for the units► Installing internal components and wiring Installing internal components and wiring ►Assembling the final productsAssembling the final products


►The model 724 series manufacturing The model 724 series manufacturing group is organized into three work areas:group is organized into three work areas:

►Lastly. Seth’s team processes the units Lastly. Seth’s team processes the units through the warehouse for packing and through the warehouse for packing and shipping to final destination.shipping to final destination.

Chassis Chassis ProductionProduction

Component Component InstallInstall

Final Final AssemblyAssembly

►Build Chassis Build Chassis ComponentsComponents►Build HousingBuild Housing

►Install internally-Install internally-supplied control supplied control wire unitwire unit

►Install vendor panelsInstall vendor panels►Affix product lablesAffix product lables


►What is cooking in ATO’sWhat is cooking in ATO’s►Each of the work area is organized into woEach of the work area is organized into wo

rk teams responsible for setting and attairk teams responsible for setting and attaining their goals and managing their work ning their goals and managing their work processes.processes.

►Seth handles most of the interaction betwSeth handles most of the interaction between the work team to ensure coordination een the work team to ensure coordination and planning. and planning.


►Seth’s production group members are working Seth’s production group members are working towards continuously improving the process.towards continuously improving the process.

►Revamping of the production line and Revamping of the production line and installation of new equipment. The feel they installation of new equipment. The feel they have reached the plateau.have reached the plateau.

►Steve, most experienced assembler, put it Steve, most experienced assembler, put it this way “Look, we’ve done all we can on this this way “Look, we’ve done all we can on this process. We’ve tried everything and our process. We’ve tried everything and our numbers are as good as they are going to get. numbers are as good as they are going to get. Got it?”Got it?”


►Ahmed: “Steve’s feelings are Ahmed: “Steve’s feelings are understandable, you got to do understandable, you got to do something Seth…wake up.”something Seth…wake up.”

►They have been working hard and their They have been working hard and their recent most improvement produced recent most improvement produced smaller gains.smaller gains.

►Seth wakes up…Seth wakes up…►Let us do benchmarking study for the Let us do benchmarking study for the

entire assembly process.entire assembly process.

Step-1Step-1

►The first step identify what to benchmark The first step identify what to benchmark has following sub stepshas following sub steps

►Clarify the benchmarking objectivesClarify the benchmarking objectives►Decide whom to involveDecide whom to involve►Define the processDefine the process►Consider the scopeConsider the scope►Set the boundariesSet the boundaries►Agree on the processAgree on the process►Flow chart the processFlow chart the process

Clarify The Benchmarking Clarify The Benchmarking ObjectiveObjective

►We have already discussed why we have We have already discussed why we have decided to benchmark-setting priorities for decided to benchmark-setting priorities for improvement, addressing a specific problem improvement, addressing a specific problem which needs attention and not meeting goals.which needs attention and not meeting goals.

►Why Seth has decided to do benchmark Why Seth has decided to do benchmark ► They have upgraded equipment, everyone They have upgraded equipment, everyone

had needed skills, and taken steps to improve had needed skills, and taken steps to improve quality but they are still searching for way to quality but they are still searching for way to improve. Their objective was to have best in improve. Their objective was to have best in class final assembly process. class final assembly process.

Seth is deciding whom to Seth is deciding whom to involve in benchmarking team involve in benchmarking team

►Management support to the teamManagement support to the team► Include employees who are close to the Include employees who are close to the

process. Include employees who have process. Include employees who have interest and knowledge about what goes interest and knowledge about what goes on outside the boundaries of process.on outside the boundaries of process.

► ““Let us also consider internal suppliers and Let us also consider internal suppliers and customers of the process. Who supply customers of the process. Who supply products, information, or other key inputs. products, information, or other key inputs. Customers receive our service, products or Customers receive our service, products or output.”output.”

Benchmarking teamBenchmarking team

► Seth-Production supervisor for the Model 724 Seth-Production supervisor for the Model 724 series. Given decision making authority.series. Given decision making authority.

► Steve- A senior assembler, member of the quality Steve- A senior assembler, member of the quality improvement team.improvement team.

► Bill- An assembler a new employee at ATOBill- An assembler a new employee at ATO► Maria-An inspector got promoted from the shipping Maria-An inspector got promoted from the shipping

department and just completed training for final department and just completed training for final assembly area. She installs the labels and assembly area. She installs the labels and information plates at the end of the process (is information plates at the end of the process (is some sense she is a final customer for the process)some sense she is a final customer for the process)

► Simon-A former assembler who now works in Simon-A former assembler who now works in component installation area, but occasionally done component installation area, but occasionally done assembly when team requires backup (brings assembly when team requires backup (brings internal supplier perspective)internal supplier perspective)

Sub steps of step-1Sub steps of step-1

►Define the processDefine the process►One need to clearly define process. A One need to clearly define process. A

process is a series of interrelated task process is a series of interrelated task that are organized to produce an that are organized to produce an output.output.

►Consider the scopeConsider the scope►Not to be too broad or too narrow.Not to be too broad or too narrow.

ATO, Inc.’s final assembly ATO, Inc.’s final assembly benchmarking teambenchmarking team

►The decide to benchmark control panel The decide to benchmark control panel installation because they had recently installation because they had recently experienced troubled with connections experienced troubled with connections coming loose.coming loose.

►Steve-”That’s a good place to focus, Steve-”That’s a good place to focus, and it is broad enough to achieve and it is broad enough to achieve something and narrow enough that we something and narrow enough that we can wrap our arms around it”can wrap our arms around it”


►Simon-” Sure. Let us define the starting Simon-” Sure. Let us define the starting and ending point of the process so that and ending point of the process so that we all know exactly what we are working we all know exactly what we are working on?”….on?”….

►Set the boundariesSet the boundaries►After a few minutes of discussion the After a few minutes of discussion the

team reached an agreement. team reached an agreement. ►Starting point-receive the panel from the Starting point-receive the panel from the

inventory clerkinventory clerk►Ending boundary-place the unit back to Ending boundary-place the unit back to

the conveyor belt.the conveyor belt.


►Agree on the processAgree on the process1.1. Receive the panel from the inventory clerkReceive the panel from the inventory clerk2.2. Unpack the panel as needed and visually Unpack the panel as needed and visually

check for completeness (no broken wires check for completeness (no broken wires etc)etc)

3.3. Place the control panel on unit and attach Place the control panel on unit and attach fastenersfasteners

4.4. Solder the connectionsSolder the connections5.5. Test the circuitry and secure the coverTest the circuitry and secure the cover6.6. Place the unit back on the conveyor belt Place the unit back on the conveyor belt

Step-2 of seven step modelStep-2 of seven step model

►Determine what to measure has three Determine what to measure has three major sub steps to considermajor sub steps to consider

1.1.Examine the flow chartExamine the flow chart

2.2.Establish the process measuresEstablish the process measures

3.3.Verify that measures match objectivesVerify that measures match objectives

Flow chart Flow chart

►Review the flow chart. Some of the Review the flow chart. Some of the measurable items we are looking for might measurable items we are looking for might bebe

1.1. Overall time to complete the processOverall time to complete the process2.2. Completion time for each individual task Completion time for each individual task 3.3. Time spent at each decision point Time spent at each decision point 4.4. Number of loops or repeatsNumber of loops or repeats5.5. Variation of task timeVariation of task time6.6. Number of defects showing up Number of defects showing up 7.7. Costs Costs 8.8. ScrapScrap

Place unit on belt

Secure Cover

Test circuitry

Solder connections

Attach fasteners

Place panels in position

Unpack panels

Receive panels

Verify panels OK

Position of mounting holes OK

Circuits OK

Start

End

1 min.

1 min. 2

min.

1.5 min.

.5 min.

9-13 min.

15-18 min.

10 min.

5 min.

4 min.

.5 min.

Yes

No

Yes

Yes

No

No

Total time = 45 - 52 min.

Step-2Step-2

►Bill-” Since we know where our inputs and Bill-” Since we know where our inputs and outputs are coming from, shouldn’t we outputs are coming from, shouldn’t we consider measuring that are important to consider measuring that are important to our internal suppliers and customers too?”..our internal suppliers and customers too?”..

2)Establish process measures2)Establish process measures►Consider measures outside the processConsider measures outside the process►Measures of your external customers Measures of your external customers

should influence the choice of process should influence the choice of process measures to benchmark (even though it is measures to benchmark (even though it is distant from customers contact)distant from customers contact)

Step-2Step-2

►Measures of your internal suppliers and Measures of your internal suppliers and customers requirement. Since their customers requirement. Since their performance is linked to yours, your performance is linked to yours, your measures should be linked as well measures should be linked as well

►ATO, Inc internal customers are the ATO, Inc internal customers are the shipping and warehouse department shipping and warehouse department and their internal suppliers are and their internal suppliers are component installation area and component installation area and inventory department. inventory department.

Step-2Step-2

►Link supplier and customer measures with iLink supplier and customer measures with in-process measures.(fig)n-process measures.(fig)

►Seth’s benchmarking team took the intervSeth’s benchmarking team took the interview of both internal suppliers and customeriew of both internal suppliers and customers.s.

►As the team looked back they concluded baAs the team looked back they concluded based on the flow chart, internal suppliers ansed on the flow chart, internal suppliers and customer measures.d customer measures.

►They concluded that the total time for the pThey concluded that the total time for the process varied due to several reasons. rocess varied due to several reasons.

Step-2Step-2

►Seth’s decided to benchmark three Seth’s decided to benchmark three measures measures

►Time for completion.Time for completion.►DowntimeDowntime►Number of reworksNumber of reworks►Verify that measures match objectivesVerify that measures match objectives►For example, if a group’s goal was to For example, if a group’s goal was to

increase productivity, they would need to increase productivity, they would need to look at measures such as time quantities look at measures such as time quantities of output, cost per unitof output, cost per unit

Step-3 Identify who to Step-3 Identify who to benchmarkbenchmark

►Conduct general research Conduct general research ►Choose the level to benchmark Choose the level to benchmark ► Internal Internal ►Competitive and noncompetitiveCompetitive and noncompetitive►World classWorld class►Seth’s team considered their ATO’s plaSeth’s team considered their ATO’s pla

nt in northwest region and best in class Bent in northwest region and best in class Bestco, Inc.stco, Inc.

Step-4 :collect the dataStep-4 :collect the data

► It’s time to gather information on the It’s time to gather information on the performance level of your benchmarking performance level of your benchmarking target and how they mange their target and how they mange their processes.processes.

►Three main sourcesThree main sources► InternalInternal►Public information Public information ►Other companies: this is the most exciting Other companies: this is the most exciting

part, we actually go out and discover new part, we actually go out and discover new ideas and make careful observation.ideas and make careful observation.

Step-4Step-4

►The techniques for gathering The techniques for gathering benchmarking information.benchmarking information.

►Using a questionnaire Using a questionnaire ►Conducting a benchmarking site visitConducting a benchmarking site visit►Using a questionnaire: things to rememberUsing a questionnaire: things to remember► Include a detail information of the processInclude a detail information of the process►List task includedList task included►List problem or concerns relating to itList problem or concerns relating to it

Step-4Step-4

► Including information and questions on Including information and questions on the how the process is measures and the how the process is measures and performance criteriaperformance criteria

1.1.Quality Quality

2.2.Time Time

3.3.Cost, etc.Cost, etc.

Step-4Step-4

►Focus on process improvement the Focus on process improvement the benchmark target has developedbenchmark target has developed

1.1. What kindWhat kind2.2. How How 3.3. Cost versus the best resultCost versus the best result4.4. Technical difficultiesTechnical difficulties5.5. Determine the area of support for the Determine the area of support for the

process like training, methods, technology, process like training, methods, technology, 6.6. Staff background and documentation Staff background and documentation

methodsmethods

Step-4Step-4

►Conducting a benchmarking visit:Conducting a benchmarking visit:►Prepare for the visitPrepare for the visit►Organizational climateOrganizational climate►How many and who will be goingHow many and who will be going►How will the visit be conductedHow will the visit be conducted►Who will take notes and howWho will take notes and how►Document the visitDocument the visit

ProcessProcess Your ProcessYour Process Organization Organization #1#1

Product or services Product or services that is produced that is produced (output)(output)

Key characteristics of Key characteristics of outputoutput

Measures that will be Measures that will be comparedcompared

Measurement data Measurement data (findings, (findings, comparisons)comparisons)

Gaps between our Gaps between our process and another process and another organizations’ organizations’

(positive or negative)(positive or negative)

Step-4Step-4

►Seth’s team have the resultsSeth’s team have the results

Measurement data – (findings, Measurement data – (findings, comparison)comparison)

Key Key measuresmeasures

ATO, Inc. ATO, Inc. Model 724Model 724

ATO, Inc. ATO, Inc. Northwest Northwest Region Region PlantPlant

Bestco, Inc.Bestco, Inc.

Total timeTotal time 45 – 52 45 – 52 min.min.

44- 46 44- 46 min.min.

22.5 min.22.5 min.

Downtime Downtime (per unit)(per unit)

3 – 5 min.3 – 5 min. 3 – 5 min.3 – 5 min. 1 – 2 min.1 – 2 min.

PercentagPercentage of e of reworksreworks

4%4% 3.5%3.5% 0.25%0.25%

Step-5: Analyze data and Step-5: Analyze data and determining gapdetermining gap

1 2 3 4

OurOrganizati

on

0204060

Our Organization

Orginazation A

Organization B

Average Process TimeAverage Process Time

05

101520253035404550

ATO, Inc.Model 724

control panelinstallation

ATO, Inc.Northwest

Region Plant

Bestco, Inc.

Average Downtime Per UnitAverage Downtime Per Unit

00.5

11.5

22.5

33.5

4

ATO, Inc.Model 724


ATO, Inc.Northwest

Region Plant

Bestco, Inc.

Average Percent of ReworksAverage Percent of Reworks

0

1

2

3

4

5

ATO, Inc.Model 724


ATO, Inc.Northwest

Region Plant

Bestco, Inc.

Step-5Step-5

►Seth’s team was surprised after looking aSeth’s team was surprised after looking at the gap between their processes and that t the gap between their processes and that of Bestco, Inc. of Bestco, Inc.

►Steve added “ You know, if someone have Steve added “ You know, if someone have told me a month ago that you could get thetold me a month ago that you could get these kind of numbers, I wouldn’t have beliese kind of numbers, I wouldn’t have believed it,”ved it,”

►Seth” we thought we have improved our pSeth” we thought we have improved our process as much as we could.”rocess as much as we could.”

Step-6: Set goals and develop Step-6: Set goals and develop and action planand action plan

►Set performance goal Set performance goal ►Goal should be achievable in Goal should be achievable in

increment( 3*5=15 hrs)increment( 3*5=15 hrs)►Goals should realistic (time, res, abilities, Goals should realistic (time, res, abilities,

skills and budget)skills and budget)►Goal should be measurable ( reducing Goal should be measurable ( reducing

three hours)three hours)►Goal should be finite (starting and ending Goal should be finite (starting and ending

pt)pt)►Goal should be supportedGoal should be supported

Step-6Step-6

►Seth’s team benchmarking goalsSeth’s team benchmarking goals►Reduce total task time to 30 minutes Reduce total task time to 30 minutes

(5m per Q)(5m per Q)►Reduce downtime from three to one Reduce downtime from three to one

minute per unit (end goals to be minute per unit (end goals to be reached in 9 m)reached in 9 m)

►Reduce reworks from 4 percent to 2.5 Reduce reworks from 4 percent to 2.5 percent (6m)percent (6m)

Step-6Step-6

►Developing action planDeveloping action plan►Step One-determine tasks, timelines, and Step One-determine tasks, timelines, and

responsibilitiesresponsibilities►Points to consider-who will be affected Points to consider-who will be affected

and responsible for implementation?and responsible for implementation?►What resources will the person What resources will the person

responsible for task need. How the responsible for task need. How the information will be sharedinformation will be shared

►Step Two-develop contingency planStep Two-develop contingency plan

Action PlanAction Plan

Action Step Action Step Responsible Responsible Person or Person or GroupGroup

Begin – End Begin – End DateDate

EstimateEstimated d DurationDuration

EstimateEstimated Costd Cost

1. Feasibility 1. Feasibility study to study to install new install new technology in technology in final final processing processing areaarea

Benchmark Benchmark TeamTeam

10/1 – 10/3010/1 – 10/30 One One MonthMonth

$5,000$5,000






2. Vendor 2. Vendor selection for selection for new new technologytechnology

Final Final assemblyassembly

10/1 – 10/710/1 – 10/7 35 hours35 hours $600$600

3. Design 3. Design project plan project plan for installationfor installation

Senior Senior managememanagementnt

10/7 – 10/1410/7 – 10/14 28 hours28 hours $1,200$1,200






4. Purchase 4. Purchase and install and install new new equipmentequipment

Vendors Vendors plus three plus three staff staff membersmembers

11/1 – 3/211/1 – 3/2 1,280 1,280 hourshours

$44,800$44,800

5. Test5. Test Vendor plus Vendor plus 2 staff 2 staff membersmembers

1/30 – 2/151/30 – 2/15 40 hours40 hours #1,200#1,200

Step-7: Monitor the processStep-7: Monitor the process

►Track the change Track the change ►Make benchmarking a habitMake benchmarking a habit►Benchmarking progress report Benchmarking progress report ►Regular progress meeting Regular progress meeting ►Monitor customers (internal and Monitor customers (internal and

external)external)►Monitor suppliers (internal and Monitor suppliers (internal and

customer)customer)

DiscussionDiscussion

ConclusionConclusion

►VS continuous improvementVS continuous improvement►VS reengineeringVS reengineering►7 Step benchmarking model7 Step benchmarking model

Thank you for your Thank you for your time.time.

Documents

Benchmarking Ahmed Mohammed Seth Shafer Shou-Jen Steve Wang