Benchmarking

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What is Benchmarking?Benchmarking is the process of

comparing the cost, cycle time, productivity, or quality of a specific process or method to another that is widely considered to be an industry standard or best practice.

Why best practice?Best practice refers to techniques,

methods or processes that are more effective at delivering a desired outcome.

Incorporating best practice into your organization can lead to greater efficiency and effectiveness and a happier customer.

Types of BenchmarkingComparison: (Partner Selection)

◦ Internal – Best in Firm Comparing a similar process, product, or service in internal company or organization

◦ Competitive – Best in Industry Comparing with the toughest external competitor or against world-class companies in similar industry

◦ Functional/Generic Comparing against a world-class company that is not even in similar industry, but that uses a process similar with internal company or organization

Types of BenchmarkingForm:

◦ Performance Benchmarking usually focuses on elements of price, technical quality, product or service features, speed, reliability, and other performance characteristics.

◦ Process Benchmarkingfocuses on discrete work processes and operating systems, such as the customer complaint process, the order-and-fulfillment process, or the strategic planning process.

◦ Strategic Benchmarking influences the longer-term competitive patterns of a company. Consequently, the benefits may accrue slowly

Benefits of BenchmarkingBenchmarking helps identify the gaps

between the organization that is undertaking the benchmarking assessment and best practice.

Undertaking benchmarking can lead to improvements being incorporated into processes and systems delivering gains in efficiency and effectiveness.

Benchmarking can help align improvement activity with strategic goals and objectives.

The Benchmarking process

The Benchmarking process

The Benchmarking process

Implement AnalyseDecideWhat to

BM

IdentifyBMPartners

Gatherinfo

Adopt

Improve

Adapt

Benchmarking Process

Benchmark Practices

How to close the Gap:* Improved Knowledge* Improved Practices* Improved Process

Employee Participation

Organization Communication

Management Commitment

Benchmark Gap:* How much

* Where * When

Benchmarking Standards

Problems with Benchmarking

Problems with benchmarking occur where◦ Data is not obtained for the process being

measured – and analysis becomes subjective◦ No peer group/best practice identified

(including data available)◦ The gap between current state and best

practice is captured but nothing is done about it

◦ Assumed best practice isn't best practice◦ Benchmarking happens as a one off event and

not reviewed periodically

Problems with Benchmarking

Problems with benchmarking occur where◦ Data is not obtained for the process being

measured – and analysis becomes subjective◦ No peer group/best practice identified

(including data available)◦ The gap between current state and best

practice is captured but nothing is done about it

◦ Assumed best practice isn't best practice◦ Benchmarking happens as a one off event and

not reviewed periodically

The importance of dataIn order to measure the gap between the

measuring organization and best practice quantifiable measures need to be taken, this requires data.

Unless this method is followed results can be subjective and inaccurate.

Benchmarking doesn’t stopBenchmarking should be viewed as a

continuous improvement method.Regular reviews of performance

should be taken especially if improvement activity is underway to transition to “best practice”.

Regular reviews of the peer group should be taken to cater for any changes/improvement made.

What is ReengineeringThere is an alternative way to

go about this and that is abandon the current process and replace it with a brand new process that provide the same functionality but better, faster, or cheaper.

Benchmarking vs Reengineering

Involves Partnering

Advanteges Learn from others experience &

practices Allows examination of present

processes Aids change & improvement Implementation / changes more

likely Overall industry improvement

Disadvantges What is best for someone else may

not suit you Poorly defined benchmarks may

lead to wasted effort and meaningless results.

Incorrect comparisons Reluctance to share information

Internal activity, not involves partnering

Advanteges Used when its impossible to use

benchmarking Typically Internal improvement Allows changing or eliminating

activity in a process Implementation / changes more

likely Overall industry improvement

Disadvantges No Guarantee to have a competitive

process Many times it is seen as a

management tool for laying off workers

Benchmarking Re engineering

Case studyBackground: 'Xerox' trademark in 1948. Xerox was listed on the New York Stock

Exchange in 1961 and on the Chicago Stock Exchange in 1990.

Revenues soared from $37 million in 1960 to $268 million in 1965.

Xerox acquired a majority stake in various company’s

Profits increased five-fold from $ 83 million in 1966 to $ 407 million in 1977

Competition In the early 1980s,

Xerox found itself increasingly vulnerable to intense competition from both the US and Japanese competitors.

According to analysts, Xerox's management failed to give the company strategic direction. It ignored new entrants

New Product & CopierIntroductions

Competition The company's

operating cost (and therefore, the prices of its products) was high and its products were of relatively inferior quality in comparison to its competitors.

Return on assets fell to less than 8% and market share in copiers came down sharply from 86% in 1974 to just 17% in 1984.

Market Share

Manufacturing CostAverage manufacturing cost of copiers in

Japanese companies was 40-50% of that of Xerox.

Benchmarking against Japanese competitors, Xerox found out that it took twice as long as its Japanese competitors to bring a product to market, five times the number of engineers, four times the number of design changes, and three times the design costs.

Japanese could produce, ship, and sell units for about the same amount that it cost Xerox just to manufacture them.

Xerox's products had over 30,000 defective parts per million - about 30 times more than its competitors.

Benchmarking also revealed that Xerox would need an 18% annual productivity growth rate for five consecutive years to catch up with the Japanese.

Quality

Objective

ProcessBenchmarking was

implemented at Xerox – ‘Leadership Through Quality’

Process Benchmarking, nearly 200 processes from non-competitive

companies ◦ Cummins Engine – Production scheduling◦ LL Bean – Distribution system◦ American Express – Billing system◦ Measuring customer satisfaction

40,000 mails surveyed Seeking feedback on

Equipment performance, Sales, Service & Administrative support

Process Equal training at all levels world wide, in quality

principles, starting from top management◦ In 5 years, 4 million hours with more than

$125 million all employees had received quality related training

◦ In 1988 – 79% were involved in Quality improvement teams

ResultsHighly satisfied customers for its

copier/duplicator and printing systems increased by 38% and 39% respectively.

Customer complaints to the president's office declined by more than 60%.

Customer satisfaction with Xerox's sales processes improved by 40%, service processes by 18% and administrative processes by 21%.

Overall customer satisfaction was rated at more than 90% in 1991.

Results

Number of defects reduced by 78 per 100 machines.

Service response time reduced by 27%. Inspection of incoming components reduced

to below 5%. Inventory costs reduced by two-thirds. Marketing productivity increased by one-

third. Distribution productivity increased by 8-10

%.

Results

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

Notable decrease in labour costs. Errors in billing reduced from 8.3 % to

3.5% percent. Became the leader in the high-volume

copier-duplicator market segment. Country units improved sales from 152% to

328%.

Summary

Xerox use competitive benchmarking, where compare production process with competitor – best in practice, and with non competitive competitor

Xerox found that production cost per unit is more expensive than competitor from Japan

conducted benchmarking Xerox produces changes in production costs, competition and quality

Question

1. Apakah Proses Benchmarking itu dilakukan sendiri oleh perusahaan atau menggunakan konsultan ?( Oleh :Jawaban :Proses Benchmarking adalah proses untuk membandingkan biaya, cycle life, produksi atau kualitas dari suatu perusahaan atau industri. Benchmarking adalah proses yang dipersiapkan perusahaan, karena benchmarking merupakan proses yang bersifat continue. Dan yang menjalankan proses Benchmarking adalah perusahaan sendiri, tanpa menggunakan konsultan.

2. Bagaimana cara membandingkan atau cara menentukan metode Benchmarking ?( Oleh : Jawaban :Cara menentukan metode Benchmarking yang digunakan adalah pertama – tama perusahaan harus menentukan dulu proses atau sistem apa yang mau dibenchmark. Hal – hal yang bisa dibenchmark adalah Kualitas, Waktu dan Produktifitas. Sebagai Contoh, jika perusahaan jasa delivery ingin membandingkan kecepatan waktu untuk mengantarkan kiriman, berarti hal atau sistem yang mau dibandingkan dengan best practice adalah waktu pengiriman. Dengan begitu, perusahaan dapat menentukan metode atau type Benchmark yang dilakukan. Bisa Tipe Competitive Benchmark, Performance Benchmark,atau tipe lainnya sesuai denga teorinya.

3. Apakah Proses Benchmarking itu legal atau tidak ?( Oleh :

Jawaban :Benchmarking adalah proses yang disepakati oleh manajemen perusahaan dengan maksud demi perbaikan dan peningkatan kualitas. Dengan komitmen dan tim yang dipersiapkan, proses Benchmarking adalah proses legal, karena Benchmarking bukanlah proses mengcopy atau meniru begitu saja dari best practice lain.

4. Apakah perbedaan antara Benchamarking dengan Reengineering ? Kapan waktu yang tepat untuk melakukan Benchmarking dan kapan untuk melakukan Reenginering ?( Oleh : Jawaban :

5.Apakah proses Benchmarking bisa dibandingkan dengan perusahaan kecil ?( Oleh : Jawaban :

6. Bagaimanakah cara Xerox menekan biaya produksinya?( Oleh :Jawaban :Xerox melakukan proses Benchmarking dengan perusahaan Jepang Canon. Dari Proses Benchmark ini, Xerox mendapati bahwa ada sistem dari Canon yang bisa diterapkan dalam proses produksinya yaitu Proses Just In Time. Dengan proses JIT ini, Xerox mampu mengurangi biaya produksinya. JIT adalah suatu filosofi sederhana dalam manajemn biaya, yaitu memproduksi barang apabila ada pemesanan. Atau dengan kata lain, hanya memproduski sesuai unit dan kualitas yang diminta. Sasaran utama JIT adalah meningkatkan produktivitas sistem produksi atau operasi dengan cara menghilangkan semua macam kegiatan yang tidak menambah nilai bagi suatu produk.

7. Apa saja yang di Benchmarking?

( Oleh :

Jawaban :Bidang – Bidang yang dapat di Benchmarking adalah :1. Kepuasan Pelanggan : kesesuaian Produk, waktu pengiriman, penyerahan tepat waktu2. Kinerja Keuangan : biaya produksi, penjualan, umur piutang, penanaman modal3. Distribusi : biaya kegiatan distribusi, jumlah tingkat distribusi4. Pembelian : jumlah pemasok, harga bahan baku5. Manajemen Bahan Baku : ruang gudang, persediaan6. Praktek Manajemen : manajemen SDM, Manaj. Kualitas,

8. Apakah dengan Proses Benchmakring, perusahaan harus mengcopy semua program atau sistem dari Best Practice?

( Oleh :

Jawaban :Proses Benchmarking bertujuan untuk memahami kegiatan – kegiatan dan proses – proses yang merupakan kunci ke arah keberhasilan bisnis, dan bisa menentukan standar kinerja menjadi lebih baik.Ketika Perusahaan sudah menetukan subjek yang akan menjadi benchmark seperti pemasaran, CRM, keuangan, SDM, operasional atau lainnya perusahaan akan menentukan perusahaan yang menjadi Best Practice. Dan perlu diketahui bahwa Proses Benchmark untuk mengcopy paste atau meniru secara keseluruhan proses dari best practice.