Transcript Document

Benchmarking
Introduction and Application
T.K.Magazine
Director, Traam Services Pvt. Ltd.
[email protected]
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Highlights

What is bench mark ?
 Bench marking – background
 Why bench mark?
 DANTOTSU
 Bench marking – evolution
 Bench mark – a bird’s eye view
 Bench marking - where to apply
 How to bench mark?
 Bench mark – information sources
 Bench marking – who practice?
 Bench mark – live experience on inventory
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What is bench mark?
“A bench mark is a standard of excellence, or
achievement, against which performance must be
measured or judged.”
“Bench marking is the continuous process of
measuring products, services and practices
against the company’s toughest competitors or
those companies renowned as industry leaders”
=Robert camp=
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What is bench mark?
Bench marking is learning from the best. Bench
marking is the process of continuous comparing and
measuring own business processes, against
business leaders anywhere in the world, to gain
information, pick up best practices, set your own
standards, which will help the organization, take
action, to improve its performance, on a continuous
basis, to become world class.
Bench marking is external orientation, instead of only
extrapolating from internal practices and past trends.
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Bench marking-background
After world war II , “ imitation” was regarded as a
prominent corporate trait of the Japanese, who
were known for copying anything produced in the
world, from a pin to a ship, and vastly improving
upon the copied model.
In modern management parlance, “imitation” has
grown into a major business survival tool world
wide, used to improve business competitiveness,
except that it is now termed as “bench marking”.
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Why bench mark?
“The arrival of the world economy has presented
tougher challenges for most organizations- more
and better competitors, shorter product life cycles
and accelerating technology changes. Business as
usual in such a market climate could be
fatal….Even for market leaders.
To stay
competitive, organizations must continually reinvent
how they do things… in every department, at
every level… and maybe look at what world-class
organizations are doing to find innovative ideas and
adopt best work practices.
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Why bench mark?
The usual methods of improving performance –
downsizing and cost cutting – do not solve systematic
performance problems. To become more productivity
requires redesigning old work methods, scrapping
internally-protected agendas, tossing out obsolete work
practices and looking outside for innovative work
methods…wherever they are.
This practice of emulating world –class practices, called
“bench marking” simply means”…
“…finding and
implementing best practices that lead to superior
performance.”
=Robert camp=
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BENCH MARKING IS CARVED OUT OF JAPANESE WORD
DANTOTSU
“STRIVING TO BE THE BEST OF THE BEST”
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Bench marking-Evolution
Taiicho Ohno, Japanese management expert, the
founder of just in time (JIT) and bench marking
concepts, highlights this technique in his book about the
Toyota production system.
On a visit to us in 1956, he had called on various
American car manufactures, for ideas and information.
But , he got break through idea from a large supermarket,
displaying thousands of items, which were tracked and
replaced individually, the moment customers bought
these. Ohno noticed that the customers pulled the items
on their trolleys, through the store.
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Bench marking-Evolution
Initiating the practice, Toyota started pulling auto
parts, through its production system at the precise
moment of usage, in exact quantities needed.
American companies, who were condemning
Japanese “imitation policies”, since world war ii ,
adopted bench marking in 1979, when Xerox
corporation found that a popular model of
photocopier manufactured and sold by them was at
double the price compared to an identical product
manufactured by cannon of Japan.
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Bench marking-Evolution
While utilizing bench marking techniques, Xerox
discovered that their manufacturing process was
grossly inefficient and cost ineffective. Xerox did
massive business re-engineering during 1980 -85
and slashed its production cost by half and pruned
its inventory cost by two third. The man
responsible was Robert camp, who is regarded
as modern international guru in bench marking.
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Benchmarking-a bird’s eye
view -Where we want to be
WORLD CLASS
CUSTOMER
REQUIREMENTS
GOAL 3
GOAL 2
INDUSTRY BEST
GOAL 1
WHERE WE ARE
CURRENT
PERFORMANCE
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Bench marking-where to
apply?
 Strategic
Planning……Forecasting
 Marketing…..Customer Satisfaction
 Manufacturing……….Quality Control
 Buying……….Inventory Control
 Employee Skills……Goal Setting
 Asset Utilization………Cost Reduction
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How to bench mark?
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Bench marking is hard investigative work,
with open mind, in sight, “nothing impossible
concept”
futuristic
vision and good
judgment.
Know your operation.
Fix your goal.
Know industry leaders, competitors.
Bench mark partners.
Incorporate the best.
Gain superiority and competitive edge.
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How to bench mark?
Plan – Search – Data – Consolidate.
 Dissect – Analyze – Investigate
 Act – Implement – Adapt – Achieve
 World class best practices,
 Functional best practice,
 Industry best practices.
 Bench marking should be an integrated
effort on a business purpose, and not an
isolated department effort, or reducing the
costs, at the cost of quality
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Bench mark potential
information sources
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Companies in identical or allied business.
Balance sheet information.
Give and take information.
Government and trade association
statistics.
Research statistical data compiled by
professional institutes,
Professional conferences.
Research scholars.
Books, journals, news papers.
Internet sites.
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Bench marking – who practice?
TOYOTA
XEROX
FORD
AT&T
DUPONT
HEWLETT PACKARD
JOHNSON AND JOHNSON
IBM
HINDUSTAN LEVER
CITIBANK
MOTOROLA
CANNON
RPG GROUP
ARVIND MILLS
RANBAXY
DCM
ACC
ETC.
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ABC Chemicals Limited
Inventory Management
Case Study On Bench Marking
MAA Saraswati Institute of Continuous Learning
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Inventory Management
 Problem:
Excess and Erratic Inventory
 Solution: Benchmark – Ideal Levels
 To Ensure: - Smooth Flow Of Raw
Materials
 Reduce Working Capital To Ideal Levels
(Determine)
 Comfort Level In Procurement
 (Avoid Rush/ Emergency Purchase)
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Inventory Management
 Magnitude
of problem : Feb. ’96 all time
high inv. Rs. 499 mil.
 Objective: Reduce to 250 mil. In 6 months
 How achieved ? how to improve further ?
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(IMPORTED RAW MATERIALS) -RS. CRORES
MODEL
(IMPORTED RAW MATERIALS) -RS. CRORES
BUDGET PLANT
ACTUAL(*)
CAPACITY CAPACITY CAPACITY
I.BUDGETED PRICE
19.98
22.95
II.ACTUAL PRICE
18.92
21.88
3.6
3.77
1.6
1.21
0.81
0.39
0.38
3.79
5.19
1.75
1.7
0.92
0.4
0.36
3.79
3.62
1.62
1.21
0.78
0.39
0.38
11.76
14.11
11.7
REMARKS
18.6 BASED ON AVG. PERFORMANCEAPR.SEPT. 96
17.58 ITEMWISE DETAILS AS PER ANNEXURE
III.TOP TEN ITEMS (ACTUAL PRICE BASIS)
A.seven items which can be airfreighted
1.PEN G
2.6-APA
3.PEN-V
4.DANE SALT
5.D-ALPHA
6.ENZYME
7.PYR.HBR.
TOTAL:III-A
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B.THREE ITEMS WHICH CANNOT BE AIR FRIETED
FRIGHTED
8.TPP
9.HMDS
10.MECL2
TOTAL:III-B
IV. ITEMS OTHER THAN
TOP TEN
(ACTUAL PRICE BASIS)
0.52
0.45
0.37
0.56
0.49
0.43
0.5
0.46
0.36
1.34
1.48
1.32
5.82
6.29
4.56
V. VENDOR COMPAIGN ITEMS (NEEDING HIGHER INVERNTORY)-ADDITIONAL VALUE;
1. 3,4 LUTIDINE
2. CO-POLYMER
3.FLU - CMIC
4. CYCLOHEXANE
0.03
0.41
0.36
0.28
0.03
0.45
0.36
0.3
DAYS : C + A = T
0.05 45+135=180
0.42 45+135=180
0.52 60+30=90
0.52 60+60=120
TOTAL:V
1.08
1.14
1.28
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RECOMMENDED INVENTORY
MODEL IMPORTED RAW MTRL
SR. NO. INVENTORY/
GROUP CLASSIFICATION
1 TOP SEVEN ITEMS
2 TOP THREE ITEMS
3 REST OF THE ITEMS
4 VENDOR COMPAIGN ITMES
5 25% PROVISION FOR PLAN VARIATIONS
6 ADDITIONAL COMFORT LEVEL TO I.P.
7 MAXIMUM LIMIT-BENCHMARK
BASIS
ACTUAL PROD. PLAN
OPTIMUM PLANT CAP.
OPTIMUM PLANT CAP.
OPTIMUM PLANT CAP.
RS (CR) RS( CR)
11.7
1.48
6.29
1.14
4.87
0.66
REMARKS
OUT OF TOP 10
OUT OF TOP 10 CANNOT BE AIRFREIGHTED
19.47 ADDITIONAL INVENTORY
5.53
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NOTES: 1.PROVISION FOR NEW PRODUCTS NOT INCLUDED . ONCE THESE ARE ESTABLISHED INVENTORY
HOLDING VALUE WOULD PROPORTIONATELY INCREASE.
2. SINCE D-ALPHA AND MECL2 ARE PURCHASED ON DEEMED ROUTE, SCOPE TO REDUCE HOLDING
NORMS FURTHER, BY ONE WEEK , AMOUNTING TO RS. 45 LACS; IS POSSIBLE. TO TEVIEW
REVIEW IN APRIL 1997
3. VALUES WORKED OUT ON ACTUAL PURCHASE PRICE.
4. INDENTED QUANTITIES (MONTH'S DELIVERY SCHEDULE) WOULD BE DELIVERED BY 15 TH OF EACH MONTH
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MATERIALS GROUP
MONTH FEB.'96 MAR. APR
MAY
RUPEES
CRORES
49.93 45.31 35.73 34.51
INVENTORY PERFORMANCE (IMPORTED RAW MTRL)
FEBRURAY '96 - MARCH 97
JUN
JUL
AUG
37.96
30.6
NOTES: 1. IDEAL MAX. LEVEL - RS. 25 CRORES.
2. FACTORS RESPONSIBEL FOR REDUCTION
OWNERSHIP
ANALYTICAL STUDY AND PROBLEM DIAGNOSIS
TIGHTENING OF PLAN
CLOSE INTERACTION AND MONITORING BETWEEN PLANT/ IP
WEEKLY REVIEW
ACTION ON OBSOLETE
ACTION ON REJECTION
SELECTIVE REDUCTION OF FORMS
SEP
25.2
OCT
19.5
NOV.
DEC
JAN
FEB
MAR
20.2
21.58
21.68
26.41
27.18
24.89
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INVENTORY MANAGEMENT
FUNCTIONAL PROCESS
SUB PROCESS
OUTPUTS
PRIORITY
IMPRO POTENTIAL
MARKETING
A. ANNUAL BUDGET RELEASED
B. MONTHLY PLAN RELEASED
C. NON PLAN MARKET SCHEDULE RELEASED
A
A
C
H
H
L
PRODUCTION PLANNING
A. QUARTERLY PROD. P. RELEASED
B. MONTHLY UPDATED P. RELEASED
C. EMERGENCY PROD. P .RELEASED
D. PROD. MONI. STATEMENT ISSUED
E. FINISHED GOODS DESPATCH STATUS ISSUED
A
A
C
B
A
H
H
L
M
H
DIVISIONAL MATERIALS
A. QUARTLY. MTRL. PLAN RELEASED
B. ITEMWISE INDENTS RELEASED
C. CRITICAL STATUS RELEASED
D. INVENTORY MONITORING STAT. ISSUED.
A
A
A
A
H
H
H
H
INTERNATIONAL PURCHASE
A. SHIPMENT PLAN ISSUED
B. PO RELEASED
C. WEEKLY SHIPMENT STATUS
D. CUSTOMS CLEARANCE
E. CUCTOMS CLEARANCE EFFECTED
F.TRANSPORTATION TO PLANT ORGANISED
A
A
B
B
A
A
H
H
M
M
H
H
(*) H-HIGH, M-MEDIUM, L-LOW
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FUNCTION
MARKETING
FORECAST
ANNUAL BUDGET
PROCESS
P. PLANNING
P.PLAN
QUARTERLY
ROLLING PLAN
DIVISIONAL MATERIALS
INTERNATIONAL
PURCHASE
MATERIALS
PLANT INDENT
MATERIALS
PLANT INDENT
PROCUREMENT
SHIPMENT LOGISTICS
QUARTERLY PLAN ONE MONTH
FIRM
MATERIALS
PLANT INDENT
MONTHLY
UPDATING
TWO MONTHS
TENTATIVE
MATERIALS
PLANT INDENT
UPDATED EVERY
MONTH
MATERIALS
PLANT INDENT
SHORT TERM
REACTION TO
MARKET NEEDS
UPDATED EVERY
MONTH
MATERIALS
PLANT INDENT
CONSUMPTION
NORMS
LEAD TIME
NORMS
PLANT CAPACITIES STORAGE
NORMS
SHIPPING PERIOD
SINGLE SOURCE
CAMPAIGN
CUSTOMS CLR.
2 MONTHS FIRM DUE TO
LONG LEAD TIME
1 MONTH TENTATIVE
TRANSPORT
NORMS
ALL PROCESS PARAMETERS
CONTRIBUTE FOR DETERMINING
INVERNTORY NORMS
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INVENTORY MANAGEMENT
MEASUREMENT
IN PROCESS
OUTPUT
QUALITY:
TIMELY DELIVERY.
ENSURE
UN-INTERRUPTED
PRODUCTION
CYCLE TIME:
3 MONTHS TENTATIVE
1 MONTH FIRM
2 MONTHS
TENTATIVE,
1 MONTH FIRM
ASSET UTILIZATION INVENTORY LEVEL RS
500 MILLION FOR TURNOVER
OF RS. 5000 MILLION
VALUE /COST.
HIGH INVENTORY
CARRYING COST
OF RS. 125 MILLION
INVENTORY LEVEL
RS. 250 MILLION
FOR TURNOVER OF RS. 5000
MILLION
INVENTORY CARRYING
COST REDUCED
TO 50% RS. 62.5 MILLION27
PROCESS: INVENTORY MANGAEMENT
INDUSTRY BEST COMPARISON
WORK
STEPS
INTERNAL
OPERATIONS
DIRECT
COMPETITORS
FUNCTIONAL
LEADERS
GENERIC
PROCESS
MARKET FORECAST
GLAXO
HINDUSTAN LEVER GEERAL ELECTRIC
ANNUAL
BUDGET
REGIONWISE
INFORMATION
PAST BUDGET
PERFORMANCES
LILLY
HINDUSTAN LEVER GEERAL ELECTRIC
PRODUCTION
PLAN
PAST VARIATION
AND REASONS
HOECHST
HINDUSTAN LEVER GEERAL ELECTRIC
MATERIALS
PALN
ACCURACY
IN SERVICE
LILLY
HINDUSTAN LEVER GEERAL ELECTRIC
MATERIALS
INDENTING
FIRM DATA
EMERGENCY DATA
LILLY
HINDUSTAN LEVER GEERAL ELECTRIC
PLACEMENT
OF ORDERS
LILLY
HINDUSTAN LEVER GEERAL ELECTRIC
SHIPMENT
PLACEMENT
LEAD TIME
ADHERENCE
TO DELIVERIES
LUPIN
HINDUSTAN LEVER GEERAL ELECTRIC
SHIPMENT
TIME
QUICKEST
TRANSIT TIME
LUPIN
HINDUSTAN LEVER GEERAL ELECTRIC
CUSTOMS
CLEARANCE
DATA ON
CLEARNACE TIME
KOPRAN
HINDUSTAN LEVER GEERAL ELECTRIC
PLANT DELIVERIES
INLAND TRANSPORT
SCHEDULE ADHERENCE
MAX
HINDUSTAN LEVER GEERAL ELECTRIC
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Constraints
 Industry
data not available
 How to bench mark with the best
questions?
 Are we on the right track?
 Can we do still better?
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Thank You
T.K.Magazine
Contact: [email protected]
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