tqm module iii

8/13/2019 TQM Module III

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Module III



Benchmarking - Definition Reasons for benchmarking Types of benchmarking Process of benchmarking what to benchmark, understanding current

performance, planning, studying others

Using findings Xerox model of benchmarking Advantages and pitfalls of benchmarking Concept of Kaizen and its applications



Systematic search for best practices, innovativeideas, and highly effective operating procedures

Powerful tool and extremely effective when usedfor the right reasons and aligned withorganization strategy

Considers the experience of others and uses it

Benchmarking measures performance againstthat of best-in-class organizations, determineshow the best in class achieve those performance

levels



What is ourperformance level?How do we do it?

What are othersperformance levels?

How did they get there?

Creative

Adaptation

Breakthrough Performance



To achieve business and competitive objectives Help organizations develop strengths and

reduce weaknesses An external outlook through benchmarking

greatly reduces the chance of being caughtunaware by competition

Benchmarking can notify the organization if ithas fallen behind the competition or failed totake advantage of important operating

improvements developed elsewhere



Can inspire managers to compete Allows goals to be set objectively, based on

external information Is time and cost efficient because the process

involves imitation and adoption rather thanpure invention

Reduces planning, testing and prototypingeffort

Why reinvent the wheel?



Three major types1. Performance benchmarking or operational

benchmarking2. Process benchmarking or functional

benchmarking and3. Strategic Benchmarking



Involves pricing, technical quality, featuresand other quality or performancecharacteristics of products and services

Usually performed by direct comparisons or“reverse engineering” in which competitor’sproducts are taken apart and analyzed

Also called as “competitive benchmarking”which involves studying of products andprocesses of competitors in the sameindustry



Centers on work processes such as billing,order entry or employee training

Identifies the most effective practices incompanies that perform similar functions, nomatter in what industry

For example, The warehousing anddistribution practices of L.L. Bean wereadapted by Xerox for its spare partsdistribution system



Examines how companies compute and seeksthe winning strategies that have lead to

competitive advantage and market success One way to determines how well a company

is prepared to compete in a segment and tohelp define a best-in-class competitor is toconstruct a key success factor (KSF) matrix



Key Successfactor

Weight Ourcompany

Competitor A Competitor B Competitor C

Sales force

Distribution

Suppliers

R&D

Service

Cost structure

Competitive Analysis – Computer Industry … Segment Performance Rating



Customer Service levels Inventory management

Inventory control (extent of automation) Purchasing Billing and collection Purchasing practices Quality process Warehousing and distribution and Transportation



Six steps contain the core techniques1. Decide what to benchmark

2. Understand current performance3. Plan4. Study others5.

Learn from the data6. Use the findings



1. Which processes are causing the mosttrouble?

2. Which processes contribute most tocustomer satisfaction and which are notperforming up to expectations?

3. What are the competitive pressures

impacting the organizations the most?4. What processes or functions have the mostpotential for differentiating our organizationfrom the competition?



Techniques like flow diagrams and cause-and-effect diagrams and understanding

Attention must be paid to inputs and outputs Careful questioning is necessary to identify

circumstances Benchmarking tam should be comprised of

those who won or work in the process toensure suggested change are actuallyimplemented



Documenting the process and quantify thesame

Units of measure must be determined Key metrics like unit costs, hourly rates, asset

measures and quality measures Special care should be taken when using

accounting information



Once internal processes are understood aredocumented, it possible to make decisionsabout how to conduct the study

A benchmarking team, candidates should bechosen

Timetables should be agreed upon for each

benchmarking tasks and desired output fromthe study

Planning process should result in a “Short

list” of possible benchmark partners



The scope of study and the type ofbenchmarking may require examination ofseveral outside organizations

When a process is broken into sub-processes,it is common to discover that a singleorganization is not best-in-class for all sub-

processes In such case, Study multiple organizations

ensures that the best practices are discovered



Three techniques for conducting originalresearch are questionnaires, site visits and

focus groups (people brought together todiscuss areas of mutual interest)

Questionnaires useful to ensure respondent

confidentiality

Mail survey, telephone survey, checklist can besued

Face-to-face interviews with best-in-class people



Is there a gap between the organization’sperformance and the performance of the

best-in-class organizations? What is the gap? How much is it? Why is there a gap? What does the best-in-

class do differently that is better? If best-in-class practices were adopted, what

would be the resulting improvement?



Benchmarking studies can reveal threedifferent categories External processes may be significantly better

than internal processes (a negative gap)

Process performance may be approximately equal(parity)

Or the internal processes may be better than thatfound in the external organizations (positive gap)

Negative gap all for the major improvement effort



There are two ways to prove that onepractice is superior to other

1. Analyzing quantitatively – return on assets,defect rates, customer satisfaction levels

2. Market analysis – Consumers of products and

services give their feedback, how may

customers will we have if we deliver our productin 24 hrs instead of five days, Price outside

services



The generic steps involved in developmentand execution of the plan are:

1. Specify tasks2. Sequence tasks

3. Determine resource needs

4. Establish task schedule5. Assign responsibility for each task

6. Describe expected results

7. Specify methods for monitoring results



1. Determine who the clients are – who willused the information to improve theirprocesses

2. Advance the clients from the literacy stageto the champion stage

3. Test the environment. Make sure the clients

can and will follow through withbenchmarking findings4. Determine urgency. Panic or disinterest

indicate little change for success



5. Determine scope and type of benchmarkingneeded

6. Select and prepare the team7. Overlay the benchmarking process onto the

business planning process8. Develop the benchmarking plan

9. Analyze the data10. Integrate the recommended action11. Take action12. Continue improvement



1. Identify what is to be benchmarked2. Identify comparative organizations

3. Determine data-collection method andcollect data4. Determine current performance gap5. Project future performance levels6. Communicate benchmarking findings and

gain acceptance



7. Establish functional goals8. Develop action plans

9. Implement specific actions and monitorprogress

10. Recalibrate benchmarks



It promotes a through understanding of thecompany’s own processes, strengths and

weaknesses

Involves limitation and adaptation of the practices

of superior competitors rather than inventions,

thereby saving time and money

Intensive studies of existing practices often lead to

identification of non-value-added activities an d

plans for process improvement



Enables comparison of performance measures indifferent dimensions like assets, percentage of on-timedelivery, proportion of defects etc.

Focuses on performance measures and processes andnot on products, thus not restricting to which thecompany belongs

Allows organizations to set realistic, rigorous newperformance targets and helps convince people of thecredibility of these targets. Tends to overcome “notinvented here”, “we are different”



Helps organizations to define specific gaps inperformance and to select the processes to

improve. Helps company to redesign its products

and services

Provides a basis for training human resources

Synergy between organizational activities isimproved through cross-functional cooperation



Best-in-class performance is not a static but amoving target

Benchmarking may not be successful ifproper infrastructure of a total qualityprogram is not in place

Copying of others instead of innovating It do not work if the owners or managers feel

threatened or do not accept and act onfindings



The potential pitfalls of benchmarking includethe failure to do the following:

Involve the employees who will ultimately use the

information and improve the process Relate process improvement to strategy and

competitive positioning Define the firm’s process before gathering data for

the purpose of comparison Perceive benchmarking as an ongoing process and

not as an one-time project with start andcompletion dates



Set goals for closing the gap between theexisting performance (what is) and the

benchmark (what can be) Empower employees to achieve

improvements that they identify and forwhich they solve problems and developaction plans

tqm module iii

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