Benchmarking for Improvement

1. Benchmarking for Improvement Presented by: Enrico C. Mina Kaizen Management Systems, Inc.

2. Introduction • Benchmarking is the search for best practices in other organizations that can be adapted to one’s own organization. • It is the search for models that one’s organization can emulate, thus eliminating the “not-invented-here” paradigm. Benchmarking for Improvement

3. Objectives (1) At the end of this seminar, the participants would have been able to: • Understand and appreciate the principles and practices behind benchmarking • Identify opportunities for conducting a benchmarking exercise involving an actual high-priority business process • Create a detailed benchmarking action plan Benchmarking for Improvement

4. What Is the Primary Purpose of a Business Enterprise? • Old paradigm: To make profit • New paradigm: To meet or exceed customers’ requirements in the most cost-efficient way. Satisfied customers reward the firm with repeat business and long-term loyalty, which generates sales, growth, market share, and profits. • Profits are a reward for doing this well. Benchmarking for Improvement

5. What Is a Paradigm? • A paradigm is a mental model, a deeply-held mindset that influences the perception of reality and the identification of solutions to problems encountered in that reality. Benchmarking for Improvement

6. Customer Goals • QUALITY - the ability of the product or service to satisfy customer needs • COST - the price, plus the costs of operating, maintaining, and disposing • DELIVERY - the timeliness, quantity, and manner of making the product or service available Customers, including internal ones, want all three. Benchmarking for Improvement

7. Process and Results (1) • The three customer goals are all end-results of a process. • A processis a series of interrelated activities that transform inputs into desirable and predictable outputs. • Characteristics: • On-going, continuous • Not based on existing organizational structures; usually cuts across boundaries Benchmarking for Improvement

8. Process and Results (2) • Often unnamed and unrecognized • Typically not many; around 10-12 major ones in an enterprise • Ideally, should start and end with the customer or recipient of the output. • Understanding business processes is essential to implementing effective and efficient improvement programs. Benchmarking for Improvement

9. Process and Results (3) • Process creates results. If results are not satisfactory, the only permanent way to improve them is to improve the process first. • Results are needed to verify if process improvements are working. • Therefore, there must be a balanced emphasis on both process and results. Benchmarking for Improvement

10. Process Elements (1) Most processes have six elements: • Man (people) - the personnel that perform the work in the process • Machines - the process equipment, physical facilities, vehicles, tools, etc. Benchmarking for Improvement

11. Process Elements (2) • Materials - the raw materials, supplies, components, packaging, fuel, forms, source documents, raw data, etc. • Methods - standards, procedures, guidelines, instructions, techniques Benchmarking for Improvement

12. Process Elements (3) • Measurements - the capturing, recording, summarizing, and reporting of quantitative data generated by the process during operation • Environment - working conditions under which the process operates Benchmarking for Improvement

13. The Process System • The six process elements are distinctive but interdependent. Outputs (products and services) are the result of their systemic interaction. • W. Edwards Deming: the “common causes” inherent in the process system account for 94% of process failures. A bad system will always beat a good performer. Benchmarking for Improvement

14. Cause-and-effect Relationship • The process elements and their interaction produce the output or results. • If the results are not satisfactory to customers, the only logical way to improve them is to improve first the process. • No change in process, no permanent change in results, same problems occur. Benchmarking for Improvement

15. Total Systems Focus • A system is an integrated whole made up of distinct but interdependent and interacting parts. • The only real improvement is that which enables the entire organization to serve customer requirements better. • Systemic problems can only be solved through cross-functional teamwork. Benchmarking for Improvement

16. Non-blaming/Non-judgmental Behavior • A blaming culture causes people to hide problems. • Problems are really opportunities for improvement in disguise. • Focus on the problem and make people problem-solvers. • “The first time you get angry is the last time you get the truth.” (Ishikawa) Benchmarking for Improvement

17. A S A P C D C D SDCA to PDCA • Standardization and Improvement Benchmarking for Improvement

18. Process Muda (1) • Muda is the Japanese word for waste. • The presence of muda in a process, through one or more of its elements, deteriorates quality, increases costs, and delays delivery by lengthening the cycle time. • Muda is non-value-adding and therefore unproductive. Benchmarking for Improvement

19. Process Muda (2) • Overproduction- Each work station or process stage tries to operate at full capacity, leading to a build-up of WIP or FGI. These hide problems by making them tolerable, although at high cost, and prevent them from being addressed. This is the “mother of all muda.” Benchmarking for Improvement

20. Process Muda (3) • Inventory - Excessive supplies and parts are costly to carry: cost of tied-up capital, storage, security and pilferage, supervision, insurance, obsolescence and deterioration. • Waiting - Waste of time when people and work stations are capable of work but are idle. Benchmarking for Improvement

21. Process Muda (4) • Transportation - Additional cost and time created by transferring the location of people, materials, or products without any value being added. • Motion - Created by people being made to exert physical efforts that merely add to fatigue and time but do not create value. Benchmarking for Improvement

22. Process Muda (5) • Overprocessing - Created when the process is performing work that is unnecessary from the customer’s point of view. • Producing failures - Process failures like defects and errors result in customer dissatisfaction, higher costs, and delays. Benchmarking for Improvement

23. Process Muda (6) • In most companies, mudas are considered normal and have been tolerated over a long period of time. Many even have provisions in budgets. • Every muda removed and prevented from recurring improves process quality and reduces cost and cycle time, thus automatically increasing productivity. Benchmarking for Improvement

24. Process Flowcharting (1) • The first step in identifying muda is to draw a flowchart, a graphical representation of a process. It is essential to process analysis and improvement. • The flowchart must be based on the actual sequence of activities, not on the theoretical one in the manual. Benchmarking for Improvement

25. Process Flowcharting (2) • The best sources of information are the people who are actually working on the process. Benchmarking for Improvement

26. Basic Symbols (1) Beginning and end Operation Sub-process Wait/delay Benchmarking for Improvement

27. Basic Symbols (2) Transportation Storage Connector A Benchmarking for Improvement

28. Y ? N Basic Symbols (3) Direction of process flow Document Decision Benchmarking for Improvement

29. F D F D C C B E E B A A Dept. Z Dept. Y Dept. X Customer START Total Cycle Time: Min.: ___hrs Max.: ___hrs Ave.: ___hrs N N OK? N OK? OK? Y Y Y Total Distance Traveled: Min.: ___m Max.: ___m Ave.: ___m N Y END

30. Identifying Muda (1) • After making a flowchart, ask the following questions: • What are we doing? Can we avoid doing it at all? • Who is doing it? Can it be done better by someone else (e.g., a subcontractor)? • Where are we doing it? Can it be done better somewhere else? Benchmarking for Improvement

31. Identifying Muda (2) • When and how often are we doing it? Can it be done better at other times or with another frequency? • How are we doing it? Can it be done better through another way? • If it is done manually, can we automate it? • Can it be done simultaneously or in parallel? • Can we apply Information Technology and tele-communications effectively? Benchmarking for Improvement

32. Identifying Muda (3) • If there is no clear value-added, then that particular activity is muda and should be eliminated. • If it is value-adding, apply simplification and mistake-proofing. • Create, document, and continuously improve standards for each process element. Use the standards for training staff. Benchmarking for Improvement

33. Muda Elimination • The process should be revised to eliminate all identified muda. Every muda eliminated and prevented from recurring reduces costs and cycle time and improves process quality. • The opportunities for improvement through the continuous elimination of muda are infinite. • Benchmarkingis a very good way to see how others have avoided or eliminated muda in a similar process. Benchmarking for Improvement

34. Benchmarking (1) • Benchmarking is the search for and adoption of ideas for improvement and best practices from other organizations. • It provides an identification of opportunities for improvement even if current processes are “good enough.” • It avoids “reinventing the wheel.” Benchmarking for Improvement

35. Benchmarking (2) • Three levels of benchmarking: • Internal – the best practices of a particular branch, plant, or facility of the same organization become models for the others to follow (e.g., best practices of a particular plant or branch are communicated to the others to have them adopt these also) Benchmarking for Improvement

36. Benchmarking (3) • Competitive– the best practices of another organization engaged in the same business are identified, analyzed, and copied (e.g., GM adopted the essential features of the Toyota Production System or JIT in order to improve quality and reduce costs). Benchmarking for Improvement

37. Benchmarking (4) • Functional– another organization’s practices that have been identified as “best in class” are analyzed and copied or adapted into one’s own organizational processes. The target benchmark organization is not necessarily from the same business (e.g., a hospital adopting the billing process of a hotel in order to discharge patients quickly). Benchmarking for Improvement

38. Process Identification (1) • Identify a high-priority business process (to be targeted for improvement) exhibiting one or more of these characteristics: • Vital to maintaining competitiveness in a tough, turbulent business environment • Is a frequent source of customer complaints about quality failures or delays/long cycle time • Has too high a cost; consumes too much resources • Is prone to accidents or environmental hazards Benchmarking for Improvement

39. Process Identification (2) • Solicit regular feedback from customers (both external and internal) regarding their level of satisfaction with the outputs of the process. • Make it easy for customers to communicate complaints. These are a direct indication of opportunities for improvement. • Welcome bad news from operators and other personnel directly working on the process. Institute “bad news reporting.” Benchmarking for Improvement

40. The Benchmarking Team (1) • Benchmarking is an undertaking too complex for an individual. It must be undertaken by a team organized for the purpose (i.e., a task force). • The composition of the task force should be cross-functional, i.e., the members come from various departments or functional units that are involved in the process or affected by it. Benchmarking for Improvement

41. The Benchmarking Team (2) • Typical team size is 5 – 9. Too large a team is unwieldy; too small a size does not generate enough synergy. • The team leader should be a process owner, someone whose job function is most directly concerned with the effective and efficient operation of the process. Benchmarking for Improvement

42. The Benchmarking Team (3) • The team should have access to resource persons, specialists within the organization whose expert advice and services will be helpful to the team, but whose membership in the team is not required. Examples: IT professionals, financial analysts, logistics analysts, engineering experts, R & D experts, etc. Benchmarking for Improvement

43. The Benchmarking Team (3) • The team must have an executive sponsor(or “godfather”), a senior-level executive who will play the role of team champion and adviser, and whose influence and stature in the organization are vital in convincing the other senior executives to accept and support the benchmarking results. Benchmarking for Improvement

44. The Benchmarking Team (4) • Arrangements must be made with the respective superiors of the team members to transfer some of their regular workload to other personnel while the benchmarking project is on-going. Otherwise, conflicts in priorities will occur. • Corollarily, their key performance goals must be modified to include their participation in the benchmarking project. Benchmarking for Improvement

45. The Benchmarking Team (5) • The team members will have to undergo shared experiences and personal interaction to facilitate the development of team cohesiveness. One way is to train together or undergo teambuilding exercises. • Each team member must understand clearly the team’s mission and his/her particular role or contribution in achieving it. Benchmarking for Improvement

46. Defining and Analyzing the Current Process (1) • The team should draw an “as is” flowchart of the current process and analyze it for the presence of muda. • The team should identify the key measurement indicators or metrics of the current process for both process and results. Benchmarking for Improvement

47. Defining and Analyzing the Current Process (2) • Result indicators • Quality level, number of rejects/errors • Cycle time (overall and per station) • Volume per unit time • Cost per unit • Accident rate • Inventory levels (RM, WIP, FGI) • Number of customer complaints Benchmarking for Improvement

48. Defining and Analyzing the Current Process (3) • Process indicators: • Man: manning complement, training, skill certification, education, physical condition, morale, how organized, organizational culture • Machines: type, brand, capacity, number, speed, settings, tooling, maintenance program indicators (MTBF, MTTR, OEE, etc.) • Materials: type, specifications, vendor accreditation and QA, packaging, yield Benchmarking for Improvement

49. Defining and Analyzing the Current Process (4) • Methods: procedures, work instructions, standards • Measurement: critical process parameters, how measured, where measured, how many readings or samples, what instruments used, degree of accuracy and precision, what analysis performed, instrument calibration program • Environment: lighting, noise, dust count, sanitation and housekeeping, ambient temperature, relative humidity, reliability of utilities, Benchmarking for Improvement

50. Generation of Baseline Measurements on Own Process • After identifying the process and result indicators, the team should generate baseline or current data on process performance. • Customers of the process as well as operators should be involved in the generation of these data. • Efforts should be exerted to get competitive performance data on the same process. Benchmarking for Improvement