Benchmarking for Lean Six Sigma Businesses or Processes for Projects

[Steven Bonacorsi]

Benchmarking Overview:

In 1912, Henry Ford of The Ford Motor Company watched men cut meat
during a tour of a Chicago slaughter house. The carcasses were hanging
on hooks mounted on a monorail. After each man performed his job he
would push the carcass to the next station. Less than six months
later, the worlds first assembly line started producing Magnetos in
the Ford Highland Park Plant. In other words the idea that
revolutionized modern manufacturing and automotive history was
imported from another industry.


•Benchmarking is simple as a concept but much more involved as a
process. The ultimate payoff is that you can become the best of what
you do, and continuously improve upon that superiority.
•Benchmarking is a means of identifying best practices and using this
knowledge to continuously improve our products, services, and systems
so that we increase our capability to provide total customer
satisfaction.
•Today our performance is not of the same world-class standard as a
benchmark business. The delta is the competitive gap
•Benchmarking and improving our business as a result means a surge in
business performance and a Competitive Advantage.


Key Point: Do Not Just Copy, Adopt and Adapt and then Advance

Define Performance Objectives:

What does it mean to Define Performance Objectives?

A performance objective is a statement of your projects output
performance level that will satisfy the project Critical-To-Quality
CTQ(s). It is the projected reduction in defects you plan to achieve
for your process or product. Typically, this is stated in terms of
defects per million opportunities (DPMO) reduction and a corresponding
target Z-value. In the Lean Six Sigma Measure Phase, you determined
the current process performance. In the Analyze Phase you will state
what the end results of the Lean Six Sigma project will be by
statistically defining the goal of the project. In addition, an
estimate of financial benefits is due in Analyze.

Why is it important to Define Performance Objectives?

It is important to identify your improvement goals in measurable terms
in order to define the level of improvement you wish to achieve and
provide a focused target toward which you can direct your efforts.

If I benchmark, performance standards are based upon:


•Closing the gap with the competition
•Exceeded projected competitive performance
•Similar performance in dissimilar businesses
•Gathering best practices from multiple sources to become best in
class
•Becoming as good or better than a substitute product/service


If I do not benchmark, performance objectives are based upon:


•For a process with a 3 Sigma Quality level or less, decrease percent
of defects by 10x and for greater than 3 Sigma Quality level, decrease
% defects by 2x
•If your process is in statistical control (Run Chart or Control
Chart), the next improved performance objective comes from a
capability investment as in facilities, equipment, digitization, etc.
•Corporate mandate
•Compliance/legal
•Voice of the Customer (VOC) data


Key for best results:


•Be creative and think out of the box
•Consider all organizations, not just corporations
•Review all sectors such as Private, Public and NonProfit
•Study domestic and International organizations


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.

Key Point: Benchmarking is a continuous process of measuring products,
services, and practices against the toughest competitors and/or those
companies renowned as the leaders

Example: In the 1980s the Remington Rifle Company, a division of giant
DuPont Corporation, had a technical issue it was struggling with.
Market Research showed that customers wanted the shells of the bullets
to be shiny. Plant Managers pay little or no attention to this CTQ,
after all Remington had been making quality guns for a very long time.
Nearby the plant in Arkansas was a Maybelline cosmetics plant that
produced shiny lipstick cartridges about the same size and shape of
the rifle shells. Remington realised that the company may have useful
information to impart and made a site visit. And thus the problem was
solved.

Benchmarking is:


•A continuous process
•A process of investigation that provides valuable information
•A process of learning from others; a pragmatic search for ideas
•A time-consuming, labor-intensive process requiring discipline
•A viable tool that provides useful information for improving
virtually any business process


Benchmarking is not:


•A one-time event
•A process of investigation that provides simple answers
•Copying, imitating
•Quick and easy
•A buzzword, a fad


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.
•A performance objective is determined by using Zbench, short-term,
benchmarking, or defect reduction goals.
•Benchmarking is a process of identify best practices, measuring our
own practices against those best practices, and adapting the
appropriate best practices to our own processes.
•Revenue & cost implications are also due for benefit analysis.


Process Benchmarking:

Example: A billing and invoicing process. Citibank is has several
clients. They have a robust process for billing and invoicing,
adopting their process is called process benchmarking

Piloting: Implementing the solutions/ improvement plans on a small
scale to find if there are any adverse impacts

Cost benefit analysis: when there are investments required in
implementing a solution, the return on investment is calculated to
judge the benefits got and in what duration

Key Point: Benchmarking is a process used to identify, establish, and
achieve standards of excellence, standards based on the realities of
the market place. It is a process to be used to manage on a continuous
basis.

Identify the Process to Benchmark

How to


•Select process and define defect and opportunities
•Measure current process capability and establish goal
•Understand detailed process that needs improvement


Select Organization to Benchmark


•Outline industries/functions which perform your process
•Formulate list of world class performers
•Contact the organization and network through to key contact


Prepare for the Visit


•Research the organization and ground yourself in their processes
•Develop a detailed questionnaire to obtain desired information
•Set up logistics and send preliminary documents to organization


Visit the Organization


•Feel comfortable with and confident about your homework
•Foster the right atmosphere to maximize results
•Conclude in thanking organization and ensure follow-up if necessary


Debrief & Develop an Action Plan


•Review team observations and compile report of visit
•Compile list of best practices and match to improvement needs
•Structure action items, identify owners and move into Improve phase


Retain and Communicate


•Report out to business management and Lean Six Sigma leaders
•Post findings and/or visit report on local server/6s bulletin board
•Enter information on your business Intranet benchmarking project
database


Key Point: Benchmarking draws upon the integration of competitive
information, practices, and performance into the decision-making and
communication function at all levels of the business.

A good starting point is asking customers, suppliers, and distributors
whom they rate as doing the best job. In addition major consulting
firms have built voluminous files of best-practices.

Directories, Annual Reports, Brochures, and Press Releases are good
sources of historical information, but they are often not good enough
if a company hopes to compete against a recently introduces product or
service.


1.Watch the small companies in your industry and related industries.
True innovation often comes from small, inconspicuous companies.
2.Follow pattern applications. Not all applications need to lead to
products or services. Still, pattern filings indicate a companies
direction. Pattern application information can be found in various
online and CD Rom databases.
3.Track the job changes and other activities of industry experts.
Seek the answers to such questions as: Whom have the competitors
hired? Have the new hires written papers or made presentations at
conferences? What is the value of their expertise to the competitor?
If the company gains this expertise, will it affect your firms
competitive position?
4.Be aware of licensing agreements. These provide useful information
about where, how, and when a company can sell a new product or
service.
5.Monitor the formation of business contracts and alliances.
6.Find out about new business practices that are saving your
competitors money. What does it mean if a competing insurance company
has bought thousands of laptops and portable printers? Very likely,
that its claims adjusters soon will be writing estimates and
generating checks on the spot, saving time and overhead.
7.Follow changes in pricing. For instance, when luxury items become
cheap enough for the mass market, they supplant some of the more
expensive equipment, as when camcorders supplanted home movie cameras
in the late 1980s.
8.Be aware of social changes and changes in consumer tastes and
preferences that could alter the business environment. Consumers are
fickle. During the past 15 years, jogging has given way to aerobics,
and now walking is the preferred leisure activity. By anticipating
changing fads, some shoe companies were able to introduce new types of
athletic shoes.


Key Point: By exposing organizations and people to new ideas and
approaches, the benchmarking experience often spurs extraordinary
insights and Breakthrough thinking.

Ethical Conduct:

Because discussions between benchmarking partners can involve
competitively sensitive data, conceivably rising questions, about
possible restraint of trade or improper business conduct, the
Strategic Planning Institutes Council on Benchmarking and the
International Benchmarking Clearinghouse urge all individuals and
organizations involved in benchmarking to abide by a code of conduct
grounded in ethical business behavior.

The code is based on the following principles and guidelines:


•In benchmarking with competitors, establish specific ground rules up
front, such as We don't want to talk about those things that will give
either of a competitive advantage; rather, we want to see where we
either can mutually improve or gain benefit. Do not discuss costs with
competitors if costs are an element of pricing.
•Do not ask competitors for sensitive data or cause the benchmarking
partner to feel that sensitive data must be provided to keep the
process going. Be prepared to provide the same level of information
that you request. Do not share proprietary information without prior
approval from the proper authorities of both parties.
•Use an ethical third party to assemble and blind competitive data,
with inputs from legal counsel, for direct competitor comparisons.
•Consult with legal counsel if any information gathering procedure is
in doubt (e.g., before contacting a direct competitor).
•Treat any information obtained from a benchmarking partner as
internal, privileged information. Any external use must have the
partners permission.


Key Point: The tough part of benchmarking is not whether or how to do
it but rather gaining access to the information about other companies
practices and costs

Look at a similar process in the industry. How are they doing? Can we
do the same?


Steven Bonacorsi is a Certified Lean Six Sigma Master Black Belt
instructor and coach. Steven Bonacorsi has trained hundreds of Master
Black Belts, Black Belts, Green Belts, and Project Sponsors and
Executive Leaders in Lean Six Sigma DMAIC and Design for Lean Six
Sigma process improvement methodologies.

Author for the Process Excellence Network (PEX Network / IQPC)

Process Excellence Network
Steven Bonacorsi, President of International Standard for Lean Six
Sigma(ISLSS)
Certified Lean Six Sigma Master Black Belt
47 Seasons Lane
Londonderry, NH 03053
Phone: +(1) (603) 401-7047
E-mail: sbona...@islss.com
Process Excellence Network: http://bit.ly/n4hBwu

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