Benchmarking 201: How to learn fast and leapfrog the competition
One key best practice is benchmarking the function or process across different industries—especially companies in fast-moving markets and high competition.
Benchmarking is a term that's used often today, but is not well-understood by many. If we go back to the first documented book on benchmarking by Robert C. Camp in 1989, when he was at Xerox, he defined it this way: "Benchmarking is the search for best practices that lead to superior performance." Best practice is another term we can define: a practice that works for you.
I had become friends with Bob Camp as he strove to establish the concept and process of benchmarking in North America and, later, in the world. Much like J. Edwards Deming, who was asked to help Japan re-build their industry after World War II, companies worldwide knocked on Camp's door and asked him to help them establish the concept in many of their locations. In the U.S., the Malcolm Baldrige Nation Quality Award, which initially focused on manufacturing companies, expected to see benchmarking as a focus of their applications using comparative data to measure the applicant's pursuit of excellence. If you didn't know the benchmarks and best practices, your evaluation was not scored high.
With this short history, we can proceed to address the best practices of benchmarking developed since 1989. These are the questions a leader must ask:
- Who is the best at what we do? This is a tough question, because it can be your industry competition or in your specific process but way outside your industry. For Xerox warehousing, Camp found that L.L. Bean, the outdoors company in Maine, used a best practice of segmenting their warehouse to reduce the waste of walking to kit orders. When he suggested a benchmarking visit there, his managers asked, "Why should we go there? They sell canoes and rubber boots, and we are a high-tech company." The answer was that warehouses all have a process even if the products are not the same! They went, they learned, they set goals and they changed. As Benjamin Franklin, U. S. statesman and inventor said, "Who is wise? He that learns from everyone."
- How well are we doing? What performance measures do you have? What are the benchmark goals?
- What are our strengths and gaps? Which areas are reaching the goals? These are strengths. Which areas are not reaching goals? These are gaps.
- How will we close the gaps and share the strengths? Involve management to proceed with changes based on the best practices found in benchmarking.
To compete, we need to learn fast and change fast continually. Here is a quote that is more applicable today than when I recorded it in 1998.
"What makes a company great? Great companies are quick; they're nimble. They are wide open to new ideas and new ways to do things. We need to be externally biased in our benchmarking and search for best practices." -Dan Burnham, chairman and CE0, Raytheon Co.
One key best practice we found was benchmarking the function or process across different industries. It's particularly valuable to benchmark companies that have had to change in fast-moving markets and high competition. You really don't want to benchmark solely in your industry because it really will not be a step function, but could only make you "the best of the dogs!"
For example, to benchmark the "new-product development process," it's best to survey industries that have to move faster than you and people that have had to drastically change to stay on the leading edge. We were able to benchmark with a leading integrated circuit (chip) company, since we knew they had to come out with a smarter, faster chip about every six months. We visited and discussed our process and theirs, since there was no competitive sensitivity, and came back to make some significant changes to our process, which greatly reduced our cycle time.
For me, a unique project was to benchmark "office supplies procurement and distribution within the company." The burning platform was the high cost of supplies and what could we do to better manage them with our multiple sites and facilities. We surveyed some high-tech companies like us and some lower-tech companies that had lots of office personnel. I remember one high-tech company did not provide office supplies: The engineers had to supply their own pencils, pens, tablets and such. We determined that this was not what we wanted to do in our culture, so this practice was recorded but discounted.
A lower-tech company with many employees had seen numerous local stashes of supplies in their organization, because administrators were stockpiling supplies to never run out. The solution was to attack the root case and contract with a local supplier to deliver requested items to the requisitioner's desk the next day, thus eliminating the need to have many stashes of items, even some that were not necessarily needed. We took this best practice back and changed our process. We just had to make sure the next-day delivery worked for all our facilities and became trusted. This was implemented, and we were able to reduce our office supplies ordering and cost greatly.
- Bill Baker is the Target Editorial Board Chairman. This article originally appeared on Association for Manufacturing Excellence. AME is a CFE Media content partner. Edited by Erin Dunne, production coordinator, CFE Media, email@example.com.
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Annual Salary Survey
Before the calendar turned, 2016 already had the makings of a pivotal year for manufacturing, and for the world.
There were the big events for the year, including the United States as Partner Country at Hannover Messe in April and the 2016 International Manufacturing Technology Show in Chicago in September. There's also the matter of the U.S. presidential elections in November, which promise to shape policy in manufacturing for years to come.
But the year started with global economic turmoil, as a slowdown in Chinese manufacturing triggered a worldwide stock hiccup that sent values plummeting. The continued plunge in world oil prices has resulted in a slowdown in exploration and, by extension, the manufacture of exploration equipment.
Read more: 2015 Salary Survey