Benchmarking

Module 03

Benchmarking

Benchmarking is the process of continually searching for the best methods, practices and processes, and either adopting or adapting their good features and implementing them to become the “best of the best.”

Benchmarking is the practice of being humble enough to admit that someone else is better at something, and

being wise enough to learn how to match and even surpass them at it.

Importance of Benchmarking

Objective Without Benchmarking

With Benchmarking

To become more adaptive

Evolutionary Change Understanding of competition ideas from proven practices

Implement Industry best practices

Few solutions, Frantic catch up activity

Many options, Superior performance

Defining customer requirements

Based on history, Gut feeling or Perception

Market reality, objective evaluation

Establishing effective goals & objectives

Lacking external focus, Reactive

Credible unarguable, Proactive

Developing true measures of productivity

Pursuing projects, strength/weaknesses not understood, Route of least resistance

Solving real problems, Understanding output based on industry best practices

Reasons to Benchmark• Assists businesses cultivate strong points and diminish

problem areas

• Lets ambitions be set impartially, taken from outside information

• Includes emulation and revision instead of new innovation

• Probable, valuable knowledge can be established and implemented early on

How is benchmarking used?

• Compare performance of an existing process against other companies’ best-in-class practices• Determine how those companies achieve their performance levels• Improve internal performance levels

• Rate of customer complaint 5%• Employee satisfaction rate 95%• Customer retention rate 90%• Information retrieval time 5 secs• Customer response time 15 min.• Medical Cost per Employee RM16.89• MC Rate

0.5%

Xerox 12-Step Benchmarking Process

Phase 1: Planning 1. Identify what to benchmark; 2. Identify comparative companies; 3. Determine data collection method & collect data.

Phase 2: Analysis 4. Determine current performance gap; 5. Project future performance levels.

Phase 3: Integration 6. Communicate finding and gain acceptance; 7. Establish functional goals.

Phase 4: Action 8. Develop action plans; 9. Implement specific actions & monitor progress; 10. Recalibrate benchmarks.

Phase 5: Maturity 11. Attain leadership position ; 12. Fully integrate practices into processes

Types of Benchmarking

Benchmarking

Market related(Competition analysis)

Internal Benchmarking External Benchmarking

Generic Processes(Best Practice)

Branch related(Trend research)

Plant related

Internal Benchmarking

• Evaluates progressions or procedures inside the business or company over time with recognized objectives in mind

• Benefits - the simplicity of data gathering and the designation of parts for upcoming outside inspections

• Disadvantage - a decreased likelihood that it will generate important process advancement innovations

Competitive Benchmarking

• Evaluates the organization's procedures to those of close rivals.

• An expert or another outside party, rather than the company itself, gathers and evaluates the data because of its proprietary quality.

Generic/Process/Functional Benchmarking

• Investigates actions that are or can be used in the majority of businesses

• One inconvenience is in realizing how processes transform

across industries

• Can frequently bring about an organization's radically changing its thoughts about its working competence and in the reengineering of industry processes

• Innovations from other kinds of organizations can be applied across industries

Designing Successful Benchmarks

• MEASUREMENT FOCUS – Determine where in a work area or process that value for the customer is

created;– Determine where value is detracted through high costs, errors, rework, or

accidents; and– Target benchmarks in areas where performance diverges from designated

standards, or where variation above and below standards is greatest.

• MEASUREMENT PERSPECTIVE– Leading indicators foreshadow or anticipate future system outcomes.

Leading indicators are thus “proactive” or “preventative”.– Lagging indicators such as traditional financial measures are

“reactive” or “descriptive” of the actual results of a system or process in a given time period.

Benefits of Benchmarking

Improves organizational quality

Leads to lower cost

Creates buy-in for change

Exposes employees to new ideas

Broadens organization’s perspective

A catalyst for learning

Increase employee satisfaction

Test the internal operating target

Raise the level of potential performance

Sharing of best practices

Understanding world-class performance in-depth

Encourage and stimulate innovation

“If you know neither yourself nor your enemy, you will

succumb in every battle.

If you know yourself but not the enemy, for every victory gained

you will suffer a defeat.

If you know yourself and your enemy, you

need not fear of a hundred battles.”

- Sun Tzu

Potential Problems with Benchmarking

• Benchmarking is restricted to your individual trade

• It may confine the focal point to what is currently being done

• Useless if used for procedures that do not present a great deal of opportunity for progress

• Process owners and managers may feel intimidated or may not admit/act on results

KAIZEN

Japanese word for small continuous improvement Encourage suggestions by operators who continually try to

incrementally improve their job or process Ex :-Change in colour of a tool from black to white for improved

visibility Maintain & improve the working standard through small gradual

improve Produce a systems approach and problem soloing tools that can be

applied Not a day should go by with out some kind of improvement being

made some where in the Company Use it as a management tool within the TQM move ment Financial Investment is minimal

Japanese words ‘Kai’ and ‘Zen’, which translate roughly into ‘to break apart and investigate’

CONSTITUENTS OF KAIZEN

IMPR

OVE

MEN

TS

TIME

“we have done enough”“let’s stop hear “

“hold Performance at this level

Improvements mode by the Competition

Ever Increasing Pressure from Customers and the market place

Our improvement

KAIZEN FOUNDATIONSEmployee empowermentListeningSelf DisciplineEfforts RecognitionZero investments

KAIZEN TOOLS

Waste EliminationStandardizationP-D-C-APoka-yoke-Failure proofing

KAIZEN REQUIREMENTS1,Operating Practices –expose new improvement opportunities Ex:- JIT

reveals water , inefficiency and poor quality 2,Total Involvement• Top management –provides support & resources for all improvement

activities• Operating management –suggestion systems self development programs3,Training

At Nissan motor Co.Ltd,any suggestion that saver0.6 seconds in a production process is considered serious by the management Kaizen at Mercedes –Benz truck factory:- Reduction of manufacturing space by 30%-Reduction of inventory 45%-Reduction in lead time 70%16 Employees have full-time responsibility for kaizen activities

Benefits of Kaizen

• These continual small improvements add up to major benefits. They result in improved productivity, improved quality, better safety, faster delivery, lower costs, and greater customer satisfaction.

• On top of these benefits to the company, employees working in Kaizen-based companies generally find work to be easier and more enjoyable - resulting in higher employee moral and job satisfaction, and lower turn-over.

• Kaizen Reduces Waste in areas such as employee skills, waiting times, transportation, worker motion, over production, excess inventory, quality and in processes.

• Kaizen Improves -

product quality, use of capital, production capacity, communications, Space utilization and employee retention.

Benefits of Kaizen….

• Kaizen Provides immediate results. Instead of focusing on large scale improvements, which involve capital intensive, Kaizen focuses on creative investments that continually solve large numbers of small problems.

• For example, Toyota is well-known as one of the leaders in using Kaizen. In 1999 at one U.S. plant, 7,000 Toyota employees submitted over 75,000 suggestions, of which 99% were implemented.

Kaizen -The three pillars*

1. Housekeeping – Gemba Kaizen – 5S for housekeeping – Creates cleanliness, sanitary, pleasant, and safe working

environments; it revitalizes Gemba– Greatly improves employee morale and motivation; it

eliminates various kinds of waste by– minimizing the need to search for tools, making the

operators' jobs easier, reducing physically– strenuous work, and freeing up space; it creates a sense

of belonging and love for the place of work for the employees

*M. Imai, a guru

Kaizen -The three pillars*

2. Waste (Muda ) elimination.

Muda is any non-value-added task

Kaizen -The three pillars* 3. Standardisation

P – PlanPick a project (Pareto Principle)Gather data (Histogram and Control Charts)Find cause (Process Flow Diagram and Cause/Effect DiagramPick likely causes (Pareto Principle and Scatter Diagrams)Try Solution (Cause/Effect , ‘’5W AND 1H ‘’ methodology :who, what, why, when, where, how)D – DoImplement solutionC – CheckMonitor results (Pareto, Histograms, and Control Charts)A – ActStandardize on new process (Write standards, Train, Foolproof, Quality-At-The-Source

A successful PDCA cycle then is followed by the SDCA cycle where ‘S’ stands forstandardization and maintenance of the new situation

Advantages of Standardisation

• Offer the best way to preserve know-how and expertise• Provide a way to measure performance• Show the relationship between cause and effect• Provide a basis for both maintenance and improvement• Provide objectives and indicate training goals• Provide a basis for training• Create a basis for auditing or diagnosis, and• Provide a means for preventing recurrence of errors

and minimizing variability.

Case example: Std. Work at Automotive Supplier

This client produces stampings for Ford, Chrysler, GM and others and has recently expanded into Non-Auto Segments

BEFORE Kaizen AFTER Kaizen• Batch Operation

• 14 People on the line

• Inspection/Rework at end of line

• High levels of Work In Process

• Disruptions from forklift ops.

• Excessive stopping to clean scrap

• Line Runs in Flow

• Batching and WIP eliminated

• Tooling Issues Resolved to eliminate rework

• Scrap removal Automated

• 10 People on the Line

• Cycle Time Improved

ONE IMPROVEMENT EVENT IN January 2011Eliminated Waste, Standardized Processes; Eliminated

WIP, Balanced Line

Before After

25.3

50

ProductivityPieces/Labor Hour

$340K Annualized Benefit97.6 % Productivity

Improvement

Case Example: HospitalOperating Room Changeover Event

This 281 bed medical center (acute and sub-acute care) handles more than 26,700 inpatient cases and approximately 60,000 emergency room visits annually.

BEFORE Kaizen AFTER Kaizen•Operating Room Reported Changeover Time = 25 minutes

•Not all Changeovers Measured

•Patient Delays

•“Dirty” & “Sterile” Operating Rooms not sitting idle

•No defined plan for execution (ie no Standard Work)

• Operating Room Reported Changeover Time = 12 min

• Reduced Patient Delays

• Fewer Operating Rooms sitting idle

• Defined “Operating Room Changeover Process”

• Potential for 107 additional Cases per month

ONE IMPROVEMENT EVENT IN JUNE 2010!Eliminated waste, Standardized processes, Established “operating room changeover

playbook”

9/2011

>$11M Potential Additional Annual Revenue due to possible additional cases