Benchmarking Ahmed Mohammed Seth Shafer ShouJen Steve Wang

Benchmarking Ahmed Mohammed Seth Shafer Shou-Jen Steve Wang

Benchmarking ► Chalk and bench activity

Who ► Robert C. Camp 1989 ► Bachelors degree in civil engineering from Cornell University ► MBA from Cornell University's Johnson School of Management ► Ph. D. in logistics and operations research from The Pennsylvania State University

Benchmarking ► Is a process ► Is secrets of success

Four Forms ► Generic ► Functional ► Competitive ► Internal

Types ► Process benchmarking ► Financial benchmarking ► Benchmarking from an investor perspective ► Performance benchmarking ► Product benchmarking ► Strategic benchmarking ► Functional benchmarking ► Best-in-class benchmarking ► Operational benchmarking

Activity Connect the dots ► Rules 1. Draw in a straight line. 2. Pen does not leave the blackboard. 3. All dots have to be connected Goal: As few lines as possible. ►

Prerequisites ► Will and commitment ► Vision and strategic objective link ► Goals to becoming the best ► Openness to new ideas

Prerequisites (cont. ) ► Understanding of existing processes, products, services, practices, and customer needs ► Documented Processes ► Process analysis ► Research, communication, and teambuilding skills

Obstacles ► Internal Focus ► Objective too broad ► Unrealistic timetables ► Poor team composition ► OK-in-class ► Improper emphasis ► Insensitivity to partners ► Limited top-management support

Rationale ► Global competition ► Current standing of company ► A best-in-class model ► Customers are better informed ► Support of total quality

Examples ► Xerox ► Computer Hardware

Computer Hardware ► Comparison of performance

Xerox ► Started in 1908 ► Big company by the 1960 s ► Rapid expansion of the middle management ► Competition from Japanese companies by 1980 s

Benchmarked Processes ► Supplier management system ► Inventory management ► Manufacturing system ► Marketing ► Quality

Benefits of benchmarking ► Fewer customer complaints ► Reduction of defects ► Reduction in service response time ► Reduction in defective incoming parts ► Reduction in inventory costs ► Reduction in labor costs ► Reduction in billing errors

Benefits of benchmarking ► Increase in customer satisfaction ► Increase in marketing productivity ► Increase in distribution productivity ► Increase in product reliability

Seven steps to benchmarking 1. 2. 3. 4. 5. 6. 7. Identify what to benchmark Determine what to measure Identify who to benchmark Collect the data Analyze the data and determine the gap Set goals and develop an action plan Monitor the process

Seven steps to benchmarking ► Step-1 ► Identify what to benchmark ► Activities involved in step-1 are ► Clarifying the benchmarking objective ► Decide whom to involve ► Define the process ► Consider the scope ► Set the boundaries ► Agree on what happens in the process ► Flow chart the process

Step-1 continue ► Identify what to benchmark ► Two approaches of benchmarking 1) Strategic benchmarking Financial function could benchmark it activities (billing process) 2) Organizational benchmarking Considerable research is done. Like soldering process, driver motor assembly benchmarking

Step-1 continue ► As a starting point benchmark your customer interfaces by not limiting benchmarking to products. Like contract truckers, answering phone calls, accuracy of bills. ► Benchmarking Product, manufacturing process, equipment, and business processes.

Benchmarking: A Practical Example ► ATO, INC. , is a manufacturer of small to medium air conditioners. ► Approximately 60%- home and office use only ► The remaining 40%-trucking industry, where ATO’s unique respected position in supplying units for refrigerated trucks and trailer rigs.

ATO, Inc. , ► ATO Inc’s production supervisor for Model 724 series (home models) manufacturing area. Seth ► Seth’s group is a customer for an outside supplier of external control panel. ► Responsibility of Seth’s production area ► Building the chassis and housing for the units ► Installing internal components and wiring ► Assembling the final products

ATO, Inc. , ► The model 724 series manufacturing group is organized into three work areas: Chassis Production Component Install Final Assembly ►Build ►Install Chassis Components ►Build Housing ► Lastly. internallysupplied control wire unit vendor panels ►Affix product lables Seth’s team processes the units through the warehouse for packing and shipping to final destination.

ATO, Inc. , ► What is cooking in ATO’s ► Each of the work area is organized into work teams responsible for setting and attaining their goals and managing their work processes. ► Seth handles most of the interaction between the work team to ensure coordination and planning.

ATO, Inc. , ► Seth’s production group members are working towards continuously improving the process. ► Revamping of the production line and installation of new equipment. The feel they have reached the plateau. ► Steve, most experienced assembler, put it this way “Look, we’ve done all we can on this process. We’ve tried everything and our numbers are as good as they are going to get. Got it? ”

ATO, Inc. , ► Ahmed: “Steve’s feelings are understandable, you got to do something Seth…wake up. ” ► They have been working hard and their recent most improvement produced smaller gains. ► Seth wakes up… ► Let us do benchmarking study for the entire assembly process.

Step-1 ► The first step identify what to benchmark has following sub steps ► Clarify the benchmarking objectives ► Decide whom to involve ► Define the process ► Consider the scope ► Set the boundaries ► Agree on the process ► Flow chart the process

Clarify The Benchmarking Objective ► We have already discussed why we have decided to benchmark-setting priorities for improvement, addressing a specific problem which needs attention and not meeting goals. ► Why Seth has decided to do benchmark ► They have upgraded equipment, everyone had needed skills, and taken steps to improve quality but they are still searching for way to improve. Their objective was to have best in class final assembly process.

Seth is deciding whom to involve in benchmarking team ► Management support to the team ► Include employees who are close to the process. Include employees who have interest and knowledge about what goes on outside the boundaries of process. ► “Let us also consider internal suppliers and customers of the process. Who supply products, information, or other key inputs. Customers receive our service, products or output. ”

Benchmarking team ► Seth-Production supervisor for the Model 724 series. Given decision making authority. ► Steve- A senior assembler, member of the quality improvement team. ► Bill- An assembler a new employee at ATO ► Maria-An inspector got promoted from the shipping department and just completed training for final assembly area. She installs the labels and information plates at the end of the process (is some sense she is a final customer for the process) ► Simon-A former assembler who now works in component installation area, but occasionally done assembly when team requires backup (brings internal supplier perspective)

Sub steps of step-1 ► Define the process ► One need to clearly define process. A process is a series of interrelated task that are organized to produce an output. ► Consider the scope ► Not to be too broad or too narrow.

ATO, Inc. ’s final assembly benchmarking team ► The decide to benchmark control panel installation because they had recently experienced troubled with connections coming loose. ► Steve-”That’s a good place to focus, and it is broad enough to achieve something and narrow enough that we can wrap our arms around it”

ATO, Inc. ’s final assembly benchmarking team ► Simon-” Sure. Let us define the starting and ending point of the process so that we all know exactly what we are working on? ”…. ► Set the boundaries ► After a few minutes of discussion the team reached an agreement. ► Starting point-receive the panel from the inventory clerk ► Ending boundary-place the unit back to the conveyor belt.

ATO, Inc. ’s final assembly benchmarking team ► Agree 1. 2. 3. 4. 5. 6. on the process Receive the panel from the inventory clerk Unpack the panel as needed and visually check for completeness (no broken wires etc) Place the control panel on unit and attach fasteners Solder the connections Test the circuitry and secure the cover Place the unit back on the conveyor belt

Step-2 of seven step model ► Determine what to measure has three major sub steps to consider 1. Examine the flow chart 2. Establish the process measures 3. Verify that measures match objectives

Flow chart ► Review the flow chart. Some of the measurable items we are looking for might be 1. Overall time to complete the process 2. Completion time for each individual task 3. Time spent at each decision point 4. Number of loops or repeats 5. Variation of task time 6. Number of defects showing up 7. Costs 8. Scrap

Start No Verify panels OK Unpack panels 1 min. Receive panels 1 min. Yes 1. 5 min. 2 min. Test circuitry Solder connections 10 min. Attach fasteners 15 -18 min. 9 -13 min. Place panels in position Yes No Position of mounting holes OK . 5 min. No Circuits OK Yes Secure Cover 4 min. Place unit on belt 5 min. Total time = 45 - 52 min. . 5 min. End

Step-2 ► Bill-” Since we know where our inputs and outputs are coming from, shouldn’t we consider measuring that are important to our internal suppliers and customers too? ”. . 2)Establish process measures ► Consider measures outside the process ► Measures of your external customers should influence the choice of process measures to benchmark (even though it is distant from customers contact)

Step-2 ► Measures of your internal suppliers and customers requirement. Since their performance is linked to yours, your measures should be linked as well ► ATO, Inc internal customers are the shipping and warehouse department and their internal suppliers are component installation area and inventory department.

Step-2 ► Link supplier and customer measures with in -process measures. (fig) ► Seth’s benchmarking team took the interview of both internal suppliers and customers. ► As the team looked back they concluded based on the flow chart, internal suppliers and customer measures. ► They concluded that the total time for the process varied due to several reasons.

Step-2 ► Seth’s decided to benchmark three measures ► Time for completion. ► Downtime ► Number of reworks ► Verify that measures match objectives ► For example, if a group’s goal was to increase productivity, they would need to look at measures such as time quantities of output, cost per unit

Step-3 Identify who to benchmark ► Conduct general research ► Choose the level to benchmark ► Internal ► Competitive and noncompetitive ► World class ► Seth’s team considered their ATO’s plant in northwest region and best in class Bestco, Inc.

Step-4 : collect the data ► It’s time to gather information on the performance level of your benchmarking target and how they mange their processes. ► Three main sources ► Internal ► Public information ► Other companies: this is the most exciting part, we actually go out and discover new ideas and make careful observation.

Step-4 ► The techniques for gathering benchmarking information. ► Using a questionnaire ► Conducting a benchmarking site visit ► Using a questionnaire: things to remember ► Include a detail information of the process ► List task included ► List problem or concerns relating to it

Step-4 ► Including information and questions on the how the process is measures and performance criteria 1. Quality 2. Time 3. Cost, etc.

Step-4 ► Focus on process improvement the benchmark target has developed 1. What kind 2. How 3. Cost versus the best result 4. Technical difficulties 5. Determine the area of support for the process like training, methods, technology, 6. Staff background and documentation methods

Step-4 ► Conducting a benchmarking visit: ► Prepare for the visit ► Organizational climate ► How many and who will be going ► How will the visit be conducted ► Who will take notes and how ► Document the visit

Process Product or services that is produced (output) Key characteristics of output Measures that will be compared Measurement data (findings, comparisons) Gaps between our process and another organizations’ (positive or negative) Your Process Organization #1

Step-4 ► Seth’s team have the results

Measurement data – (findings, comparison) Key measures ATO, Inc. Northwest Region Plant 45 – 52 min. 44 - 46 min. Bestco, Inc. Downtime (per unit) 3 – 5 min. 1 – 2 min. Percentage of reworks 4% 3. 5% 0. 25% Total time ATO, Inc. Model 724 22. 5 min.

Step-5: Analyze data and determining gap

Average Process Time

Average Downtime Per Unit

Average Percent of Reworks

Step-5 ► Seth’s team was surprised after looking at the gap between their processes and that of Bestco, Inc. ► Steve added “ You know, if someone have told me a month ago that you could get these kind of numbers, I wouldn’t have believed it, ” ► Seth” we thought we have improved our process as much as we could. ”

Step-6: Set goals and develop and action plan ► Set performance goal ► Goal should be achievable in increment( 3*5=15 hrs) ► Goals should realistic (time, res, abilities, skills and budget) ► Goal should be measurable ( reducing three hours) ► Goal should be finite (starting and ending pt) ► Goal should be supported

Step-6 ► Seth’s team benchmarking goals ► Reduce total task time to 30 minutes (5 m per Q) ► Reduce downtime from three to one minute per unit (end goals to be reached in 9 m) ► Reduce reworks from 4 percent to 2. 5 percent (6 m)

Step-6 ► Developing action plan ► Step One-determine tasks, timelines, and responsibilities ► Points to consider-who will be affected and responsible for implementation? ► What resources will the person responsible for task need. How the information will be shared ► Step Two-develop contingency plan

Action Plan Action Step Responsible Person or Group Begin – End Date Estimated Duration Estimated Cost 1. Feasibility study to install new technology in final processing area Benchmark Team 10/1 – 10/30 One Month $5, 000

Action Plan Action Step Responsible Person or Group Begin – End Date Estimated Duration Estimated Cost 2. Vendor selection for new technology Final assembly 10/1 – 10/7 35 hours $600 3. Design project plan for installation Senior management 10/7 – 10/14 28 hours $1, 200

Action Plan Action Step Responsible Person or Group 4. Purchase and Vendors plus install new three staff equipment members 5. Test Begin – End Date Estimated Duration Estimated Cost 11/1 – 3/2 1, 280 hours $44, 800 40 hours #1, 200 Vendor plus 2 1/30 – 2/15 staff members

Step-7: Monitor the process ► Track the change ► Make benchmarking a habit ► Benchmarking progress report ► Regular progress meeting ► Monitor customers (internal and external) ► Monitor suppliers (internal and customer)

Discussion

Conclusion ► VS continuous improvement ► VS reengineering ► 7 Step benchmarking model

Thank you for your time.