Process Benchmarking

[Vishwadeep Khatri]

Q 661. How does process benchmarking help in Improve phase of a DMAIC project? Provide examples to support your answer.

 

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[Jayanth Sura]

Process Benchmarking:

 

Process benchmarking is a systematic comparison and analysis of once business processes against those of high performing organizations with the goal to of identifying best practices and implementing improvements to enhance your own process efficiency, quality, and performance.

Process benchmarking plays a crucial role in the Improve phase of a DMAIC project by providing valuable insights and inspiration for improvement strategies. Here's how:

 

Identifying Best Practices:

 

Benchmarking exposes your team to how leading companies or similar organizations within your industry tackle similar processes. This allows you to identify best practices in areas like workflow design, automation, error reduction, and resource allocation.

For instance, imagine you're working on improving the efficiency of your order fulfillment process. Benchmarking a company known for its fast and accurate order fulfillment might reveal their use of real-time inventory tracking or automated packaging systems.

 

Setting Realistic Goals:

 

By comparing your current performance metrics with industry benchmarks, you gain a clearer understanding of the potential for improvement. This helps set realistic and achievable goals for your improvement plan.

Let's say your current order fulfillment cycle time is 5 days, while the industry benchmark is 3 days. Benchmarking highlights the potential for a 2-day improvement, guiding your team to focus on strategies that can achieve this target.

 

Sparking Innovation:

 

Benchmarking can spark creative thinking within your team. Studying successful approaches used by others can inspire them to develop innovative solutions for your specific process challenges.

In the order fulfillment example, learning about a company's use of AI-powered order picking systems might inspire your team to explore implementing similar technology or develop alternative automated solutions.

 

Prioritizing Improvement Ideas:

 

By understanding which aspects of the benchmarked process contribute most to their superior performance, you can prioritize your own improvement efforts.

Benchmarking might reveal that the industry leader's focus on clear communication between departments significantly reduces order fulfillment errors. This can guide your team to prioritize improvements in communication channels within your own process.

 

In conclusion, process benchmarking during the Improve phase of DMAIC equips your team with valuable knowledge about successful approaches, helps set achievable goals, inspires creative solutions, and prioritizes improvement efforts for maximum impact.

[AnishMohandas]

Process benchmarking involves evaluating your organization's processes in comparison to those of leading organizations known for their excellence in one or more aspects of their operations. It offers crucial insights to gauge how your organization stacks up against similar entities, even if they operate in different sectors or cater to different customer bases. Additionally, benchmarking aids in pinpointing areas, systems, or processes that warrant enhancements, whether through gradual, continuous improvements or transformative, large-scale business process re-engineering initiatives.

 

Sequence of activities in process Benchmarking :

Step 1: Identify the process to Benchmark

• Select the process
•  Fully understand the process and identify non-value adding areas or scope of improvement
• Find defects, opportunities, and sigma level

Step 2: Select organization to Benchmark

• Find out industries/ functions which perform the process
• Identify the leaders or best performer (different industry or same industry)

Step 3: Research the process to be benchmarked

 

Step 4: Develop a questionnaire based on your requirements

 

Step 5: Exchange Ideas

• Conduct visit, if necessary

Step 6: discuss the comparison internally with the team

 

Step 7: Devise an action plan and implement best practices

 

Example:

 UAE based Bank identified the need to enhance its digital account opening process to provide customers with a seamless and efficient customer experience while onboarding. The bank aimed to achieve the following:

• Reduce the lead time to open an account
•  Enhance customer satisfaction by simplifying the account opening process and provide clear guidance.
• Optimize resource utilization by streamlining internal procedures and reducing manual interventions

Recognizing that other Banks who are considered as Digital leaders might have more advanced digital account opening processes, our Bank decided to leverage benchmarking exercise to expedite improvements without reinventing the wheel.

 

A cross functional team was established, and we began by mapping out the current digital account opening process to establish a baseline, paying particular attention to the steps involved from application submission to account activation.

 

The team conducted surveys and interviews with both existing and potential customers (user testing) to gather insights into expectations regarding the digital account opening process, as well as any pain points, they encountered.

 

Following the survey, team experimented with the digital applications of leading Banks (within UAE) and reached out to Digital Enhancement team to understand the technologies and methodologies utilized, engaging in a dialogue to gain insights into the process.

 

Based on the findings, the team complied a benchmarking report outlining the best practices observed at leading Banks and proposed recommendations tailored to our requirements.

 

Finally, our Bank implemented several of the recommended changes, such as simplifying the online application form, integrating automated verification process and OCR technology. As a result, we witnessed a significant improvement in account opening process by reducing the lead time and providing a seamless experience to customers.

[Sachin Tanwar]

Process benchmarking is like peeking over the neighbor's fence to see how green their grass is so you can make yours just as lush.
 

In the Improve phase of a DMAIC project, it's all about leveling up your own processes by learning from the best. Because sometimes you need Inspiration right?

 

Take, for instance, a local bakery aiming to boost efficiency in their production line. They might look at a competitor who's churning out pastries like nobody's business and figure out what techniques or equipment they're using to streamline things. Maybe they discover that their rival's secret lies in a special oven that cuts baking time in half. Imagine if are aware of this knowledge, our bakery can invest in similar equipment and enhance their own process.

 

Likewise, think about a small-town car repair shop striving to reduce TAT for customers. They could look at how larger, more established garages handle their workflow. Perhaps they find out that these big shops have digital systems for tracking repairs, which helps them prioritize tasks and keep things moving smoothly. Inspired by this, our local repair shop might implement a similar system, allowing them to serve more customers without sacrificing quality.

 

It's all about borrowing wisdom from others to make your own business shine brighter. [ No comparisons please ] 

[Yarra_Nethaji]

• Benchmarking is a method that companies use to compare the performance of their process or products with the standard/Best in Industry
• Every industry has certain criteria or standards that an organization needs to meet to survive the competitive business environment and meet employees and customers’ expectations. In order to do that, organizations need to know where they stand in the competition and what in their operations is lacking compared to other organizations, especially those that are considered leaders in the industry. Therefore, benchmarking – as the term implies – helps in implementing that. 
• There are many way companies are using the benchmarking. The following are the some of the examples. 
  • Compare performance to an industry-standard
  • Increase product performance
  • Improve the product quality
  • Increase market share
  • Reduce manufacturing cost
  • Develop a measurement system
• In a large companies having manufacturing setups at multiple locations, Internal benchmarking conducts to help the lower performance plants to improve their performance. One of the most important thing is, we need to use the similar KPI for comparison. For example, chemical consumption is directly proportionate to production rate, hence we need to consider the specific consumption (chemical usage/ Ton)
• TYPES OF BENCHMARKING
  • Internal benchmarking - Internal benchmarking involves identifying and analyzing best practices established within the same organization.
  • External benchmarking - External benchmarking is quite similar to internal benchmarking; however, external benchmarking focuses more on identifying and analyzing best practices established by different organizations within or outside of the industry.
  • Performance benchmarking - Performance benchmarking involves measuring the quantitative data of employee performance and product characteristics/production (i.e., employee surveys, key performance indicator, cost, reliability, durability, etc.). For example -OEE for manufacturing
  • Process benchmarking - Process benchmarking concentrates on the daily operations/processes conducted within an organization.
  • Competitive benchmarking- Competitive benchmarking is implemented to compare with an organization’s direct competitor.
• The House of Quality matrix and Gantt charts are often used to plot the benchmarking evaluation.

[Avishi Mehta]

Process benchmarking is a tool that involves a comparison between the internal processes/practices of a company against the practices/processes followed by the best-in-class leaders or competitors leading to continuous improvements.

It involves different steps of

1. Identifying a process

2. Selecting the best in class/benchmarking processes to whom you want to compare to

3. Collection of data

4. Analysis and comparison

5. Identifying areas of improvement and monitoring the process and its performances

DMAIC

DMAIC is a structured approach that stands for Define, Measure, Analyze, Improve, and Control. Proper implementation of this approach results in reducing cost, enhancing quality, and improving customer satisfaction across different industries.

Benefits of process benchmarking in DMAIC projects

1. Identification of a best-in-class process: This is a major part that helps DMAIC projects identify the best-in-class projects across the industry. This step helps them to understand what measures the industry leaders are implementing to be the top in class.

2. Setting a benchmark to compare your project: Once you have identified the project, it is crucial to set a benchmark that enables you to drive your actions/planning towards achieving the set objectives/benchmarks.

3. Data collection: This step involves the collection of data that is to be compared and analyzed. The data can be qualitative and quantitative.

4. Comparison and analysis: Involves comparison between your process with the set standard. It helps you to identify the difference between where you are and where you want to be “Gaps”. Once gaps are identified, it helps you to brainstorm and identify what effective measures can be implemented to reach the set standard.

5. Control/Measure: This step focuses on monitoring the performance/results of the process and ensuring that improvements are made as and when required.

Example: Certainly! Here's a reframed version:

 

Company Y Ltd., a paper manufacturing company, produces 10 short tons of paper napkins with a total production cost of $500/short ton. Upon benchmarking their processes against the industry leader - Company X Ltd, they found out that Company X Ltd. is producing the same production volume at a total cost of $300/short ton. On further data collection market analysis and comparison, Company Y Ltd. identified a substitute for their current raw material, priced at half the cost. Implementing the new raw material, helped them achieve a 47% reduction in production costs, resulting in Cost savings.

[Vishal Melwani1]

During the course of a DMAIC project, we establish current process performance, or baseline, at the Define stage. This tells us where the process is at the start of the project or what the current baseline metric is. With the baseline established, we establish a project goal. The goal is typically one that is stated by the customer or by internal stakeholders.

 

The DMAIC project aims to meet the defined project goal. At the Improve phase, we identify potential solutions that will help us achieve our project goal.

 

Process Benchmarking helps us get more out of our project by meeting industry standards or best process performance. Simply put, benchmarking is our final goal and is determined by understanding best practices at the market or even within the organisation.

 

Let's take an example of a cycle time reduction project in an insurance process:

 

Insurer ABC takes on an average 60 days to resolve a claim. This has been deemed high since it leads to customer complaints, customer churn, loss of revenue, etc. A GB project was taken to reduce the overall claim process cycle time from 60 days to 45 days since it was observed that customers usually start following up post 45 days of claim submission.

 

The project started and solutions were identified at the Improve phase that would help achieve the goal of 45 days. However, when a study was conducted, it was observed that the average time taken by top Insurers in the same geography was around 30 days. These Insurers had the highest customer retention and minimal complaints.

 

Therefore, while the project goal of 45 days could have been met, in order to achieve best-in-class solutions at an industry level, the Project Lead added more solutions that would help him meet the goal of 30 days.

[Nikita Chordia]

In the improve phase, process benchmarking can help in identifying best practices by comparing the current process to the benchmark organization. This way the team can easily identify solutions and implement in their organization. This makes the improvement much faster as it reduces the time for experimentation and team can find lot of quick wins to improve their process. In some cases, team can also save cost of designing new solutions or prototype building as they can use the exiting design from the benchmark organization. In case of solutions needing investments, it is easier to get the data from benchmark organization to build business case/justification. Thus, process benchmarking can make the entire Improve phase more efficient and cost effective and team can target realistic solutions.

Edited April 19, 2024 by Nikita Chordia
Typo

[Mayank Gupta]

It was a pleasure reading all the answers. Jayanth Sura has written the best answer to this question.

 

Answers from Anish and Sachin are a must read.

 

Well done!