Benchmarking: striving to be the best of the best.
Never let it rest,
Until the good is better
And the better is best. "
Often taught to young children, in its pure simplicity, this elementary rhyming scheme describes the precept under which American manufacturing operates today. What it speaks of is continuous improvement, the ultimate challenge laid before all of business and industry. And a frustrating one it can be because for business and industry the real issue is competitiveness and its myriad of components-from quality and productivity to profitability.
But how does an organization begin to improve when it is not sure how good or how bad it is to begin with? Traditionally, managers have relied on a variety of techniques to determine their company's performance level and position in the marketplace. Intuition and gut feelings are two of the more notable methods, and if all else failed, there was always the bottom line. But it is these less-than objective views that allowed American manufacturing to be blindsided by international competition in the 1980s. We believed we were good, if not the best in the world. While there is little the world.
ere is little doubt that we can compete internationally, the questions linger: how well and for how long? How do we really know where we stand in the international marketplace if we aren't really sure where we stand in our own markets, in our industry or even when compared with the foundry down the road? So, if we seek continuous improvement, where do we start?
The answers to many these questions may lie in a technique called benchmarking. In a speech to be given later this year at the Midwest Regional Conference of the American Foundrymen's Society, George Booth, general manager of the Casting Div./Ford Motor Co., describes this measurement technique in this way: "The term 'benchmark' is taken from the land surveying term for a mark used as a reference point for elevation or direction comparisons. Today, the term 'benchmarking' commonly refers to the practice of comparing performance between organizations."
In the United States, the Xerox Corp. pioneered benchmarking in the late 1970s and early '80s. Misled by its own belief that it was the best manufacturer of photocopiers in the world, the company watched its domestic marketshare of copiers cut in half-from 82 to 41%. It also discovered that foreign manufacturers were selling copiers for less than what it cost Xerox to produce them. According to Booth: "Soon Xerox sent a study team to Japan and began the first effort to formally benchmark its processes and products against the best machines in the world."
What the study team found was that Xerox did many things well, but others very poorly. By formally benchmarking nearly every aspect of its business, Xerox was able to compare its business and manufacturing practices against its competition. The process provided a starting point for the company to regain its competitiveness and superior position in the copier industry. The effort paid off. In the past five years, Xerox has managed to improve product quality by 93%; reduce product development time by 50%; and assembly line rejects from 10,000 to 350 parts per million. In addition, the company has increased the quantity of units shipped by 45%, while cutting manufacturing cost and labor overhead in half.
Booth believes that benchmarking could provide a variety of benefits to the foundry industry, as well. Among these he lists: * meeting customer requirements; * establishing goals; * measuring true productivity; * becoming competitive; * adopting best practices. Good, Better or Best?
Even the best performers in a given industry would probably admit that somewhere in their organization, and perhaps in several areas, there are gaps in their performance. The major problem is identifying the gaps and then determining how to reduce and/or eliminate them. "Benchmarking is an indicator of what a business function's performance should or could be," according to Robert C. Camp, author of the 1989 book Benchmarking*.
In the preface to his book jointly published by Quality Press of the American Society for Quality Control, and Quality Resources, a division of The Kraus Organization, Ltd.) Camp, explains: "Benchmarking is the search for those best practices that will lead to the superior performance of a company. Establishing operating targets based on the best possible industry practices is a critical component in the success of every business. Traditional target-setting methods have failed U.S. managers and blindsided them to foreign competition. The Japanese term dantotsu, which means striving to be the "best of the best," incorporates the essence of the process they use to establish competitive advantage. We Americans have no such word, perhaps because we always assumed we were the best. We cannot assume that anymore."
Camp also describes benchmarking as a "positive, proactive activity that is the missing ingredient in the kit bag of U.S. marketing and manufacturing firms to correctly establish its goals, objectives and targets. "Its focus is on the search for practices that lead to superiority."
One of the biggest stumbling blocks for many organizations is that often their measure of performance takes place internally. According to Camp, "Comparisons are most frequently within a company. These inward orientations tend to reinforce feelings of superiority and foster not-invented-here excuses. Comparisons with outsiders, however, may expose best industry practices and encourage adoption of those practices. Benchmarking is industrial research or intelligence gathering that allows a manager to compare his or her function's performance to the performance of the same function in other companies. Benchmarking identifies those management processes, practices and methods that the function or cost center would use if it existed in a competitive environment. Benchmarking is an indicator of what a business function's performance should or could be."
Benchmarking is not a process of comparing for comparison's sake, though. It is a process for discovering the best practice-whether or not it is used in your particular industry- and adopting the practice or modifying it to fit your organization. In the case of benchmarking, good, better or best do not bestow a value judgment of an organization. Rather, it is an objective determination of the best practice available. While some practices work, others are better. If we continue to search, we will find others that are even more effective. The goal of benchmarking is to find those practices and integrate them into our own businesses. As Camp asks: "What manager is not interested in the search for industry's best practices?"
In summary, Camp explains that "Benchmarking is not just a study of competition but a process of determining the effectiveness of industry leaders by measuring their results ... [1t] goes beyond the traditional competitive analysis to not only reveal what the industry best practices are, but to also obtain a clear understanding of how best practices are used ... Benchmarking should not be aimed solely at a direct competitor. In fact it could be a mistake to do so since they may have practices that are less than desirable ... A well-executed benchmarking investigation can provide a manager with detailed information about the best functional practices in the industry. These practices can then be used or modified to establish competitive advantage in the marketplace."
He adds that benchmarking can be applied to all possible business endeavors whether a product, service or support process" is involved.
Since its success with benchmarking, Xerox has redefined the technique as "the continuous process of measuring products, services and practices against the toughest competitors or those companies recognized as industry leaders." Why Benchmark?
The best time to initiate the benchmarking process is when business is good and when it can be integrated into our daily business. But, as Camp points out, this isn't usually the case. He cites three likely scenarios that cause an organization to consider bench marking: * loss of marketshare; * declining profit levels; * high customer dissatisfaction.
"This often happens because, when a business is not in danger, there can be disincentives to improve operating costs and profits. Internal performance as opposed to competitive gain may be stressed to satisfy personal goals. Rapid sales growth can mask inadequate performance," Camp explains.
"Cost centers by their very nature leave a motivational void. They buffer the function from competition. When performance to budget is stressed, time is often spent arguing about the size of the budget, not stressing improved performance. If profit generation was stressed, time would be spent generating revenue, controlling expenses and anticipating the competitive environment.
"Benchmarking is the only way to overcome these deficiencies and force individual business functions to constantly test their ability to be competitive and profitable as measured by the external environment," according to Camp. "In benchmarking the manager's goal is to identify those companies, regardless of industry, which demonstrate superior performance in functions to be benchmarked so that their practices, processes and methods can be documented." Getting Started
Nearly everyone in business benchmarks in some way.
Readers of modern casting and other business and trade publications, for example, want to know how others conduct their business. Or they are curious about new manufacturing methods or marketing techniques. If what they read or hear seems to make sense for their organization, the practice is adopted or modified to fit their business. Such casual approaches to keeping on top of things is more often than not a hit-or-miss proposition, and offers little certainty that the practice is the best.
On the other hand, the benchmarking process espoused by Camp is a formal one that allows managers to ascertain and document that a practice is indeed the best.
But before embarking on a benchmarking programtwothingsarerequired to get the program off the ground. The first is commitment As he points out in his book: "It is one thing to understand practices and question how others perform in similar circumstances; it is another to take action on the benchmark findings. The willingness to change and adapt is perhaps the final act of commitment and support by management. There is no more crucial indication of potential for success in benchmarking than strong, concerted and interested support by management."
The second is to understand that the focus of benchmarking is on practices. To go beyond the search for the best practices defeats the purpose of benchmarking.
In addition to these facets of the process, Camp adds basic philosophical steps that he believes are fundamental to the success of benchmarking.
Know your operationYou need to assess the strengths and weaknesses of the internal operation. That assessment must be based on the understanding that competitors will analyze your operation also to capitalize on the weaknesses they uncover.
Know the industry leaders or competitors-You will only be prepared to differentiate your capabilities if you know the strength and weaknesses of the competition.
Incorporate the bestLearn from industry leaders and competition. If they are strong in given areas, uncover why they are and how they got that way.
Gain Superiority-if careful investigation of best practices has been performed, and if the best of those best practices have been installed, you will have capitalized on strengths, brought weaknesses to match the marketplace, and gone beyond to incorporate the best of the best. A New Approach
For many businesses benchmarking represents a new approach to goal setting. Traditional goal setting procedures, like projecting future performance based on past history, generally fail because, as Camp points out, "the external environment [is] changing at a pace significantly faster than projected. Benchmarking is an alternative to the traditional way of establishing goals and objectives.
Benchmarking by its nature challenges the current way of doing business by bringing in new ideas and practices from the outside. These new practices are used to build functional strategies and business plants from knowledge gained from benchmarking. They are later converted into commitments to resources and action plans in the budgeting cycle," Camp writes.
Camp reiterates the ultimate benefits of the benchmark process throughout his book. Among them are that "Benchmarking in its most thorough application goes beyond looking solely at competitors and uncovers the best practices wherever they may exist, in any industry. The canvassing for proven practices and technology across a wide spectrum of industries is what bring ultimate competitiveness."
Benchmarking should not be viewed as a traditional competitive analysis. Rather, it goes beyond to reveal what the industry best practices are and to provide an understanding but to also obtain a clear understanding of how best practices are used. "[it] is not just a study of competition but a process of determining the effectiveness of industry leaders by measuring their results," says Camp.
More importantly, Camp explains, "Benchmarking legitimizes goals and targets by basing them on an external orientation. There is no more credible basis for goals than their being based on the industry best. This simple basis for goal setting ends all internal debates. If goals are based on industry best, not only do they meet customer needs, they are also unarguable." The book "Benchmarking: The Search for industry Best Practices that Lead to Superior Performance, " by Robert C. Camp, is co-published by Quality Press, American Society for Quality Control, Milwaukee, Wisconsin, and Ouality Resources, A Division of The Kraus Organization, Ltd., White Plains, New York.
POSSIBLE FOUNDRY BENCHMARK MEASURES GENERAL * General Product Type * Volume Category Sales Dollars/ * Pieces/Tons/People) * Basic Processes/Practices QUALITY * Internal Scrap (Dollar Weighted Percent of Sales) * Scrap at Customer (Dollar Weighted Percent of Sales) * Percent of Significant Characteristics (Dimensions/Properties/Process) in Statistical Control. * Percent of Significant Characteristics Capable (Cpk>1.33) * Number of Significant Characteristics Tracked * Percent of Product Delivered On-Time PRODUCTIVITY * Tons per Employee/Day * BTUs/Ton * Mold Rates (Molds per Hour) * Finishing Area Net Pieces/Hours Worked * Mold Line Uptime Percent * Average Total Plant Uptime Percent * First Run Capability (Percent) * Core Loss (Dollar Percent of Total Sales) INVENTORY * Raw Material Inventory (Dollar Percent of Total Sales) * Work-in-Process Inventory Dollar Percent of Total Sales) * Finished inventory (Dollar Percent of Total Sales) * Non-Production Stores inventory (Dollar Percent of total Sales) * Inventory Turns/Quarter LABOR * Hourly Overtime (Percent of Total Hours Worked) * Salary Overtime (Percent of Total Hours Worked) * Hourly/Salary Ratio * Work Pattern (Hours/Week) Camp lays out a five-phase, 10-step approach to effective benchmarking. it includes: Phase 1: Planning * Identify what is to benchmarked * Identify comparative companies * Determine data collection method and collect data Phase 2. Analysis * Determine current performance 'gap' * Project future performance levels Phase 3: Integration * Communicate benchmark findings and gain acceptance * Establish functional goals * Develop action plans Phase 4: Action * Implement specific actions and monitor progress * Recalibrate benchmarks Phase 5: Maturity This occurs only after the leadership position has been attained and practices are fully integrated into processes. in other words, the practice has become institutionalized in. the organization.
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|Author:||Kanicki, David P.|
|Article Type:||Cover Story|
|Date:||May 1, 1991|
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