Benchmarking – A key to success

In the late 1970s, Xerox turned to benchmarking when it found that foreign competition could sell its equivalent copier at a price equal to Xerox’s manufacturing cost. To find a benchmark, Xerox used its Japanese affiliate, Fuji Xerox as a window into the competition. By observing the efficient processes of selected competitors, Xerox was able to streamline its own operations without compromising service or quality. For instance, Xerox found that it could cut the number of steps in storing and handling materials from four to two, saving time and money.

Although Xerox managers looked to the competitors in the early days of their benchmarking efforts, they have focused their more recent benchmarking efforts on firms outside the industry. Managers believe they find their most innovative ideas studying seemingly unrelated firms. In addition, if attention is focused only on the competition, playing catch is the best you can do according to Robert C Camp manager of benchmarking competency, quality and customer satisfaction.

For ideas on how to improve their processes for filling customer orders. Like Xerox, the Freeport, Maine company ships products that do not come in standard size packages. Additionally, LL Bean selects its orders manually like Xerox, only three times faster. Xerox found that LL Bean had superior systems for processing and filling orders.

Xerox has also looked internally for benchmarks, identifying the locations within its own organization that have the best processes then bringing the other locations or units up to the same performance level. Process has improved understanding of operations at Xerox, providing the necessary perspective to make external comparisons valuable.

Since the early 1980s, benchmarking has enabled Xerox to cut manufacturing costs in half and reduce in-process inventories by two-thirds. In addition, it has reduced service labor costs and substantially raised the productivity rate of its distribution organization. In its second decade of benchmarking, Xerox is focusing on improving processes rather than solving problems. The company is firmly committed to continuing use of this tool as an important part of its drive toward continuous improvement.

A Focus on customers:

Many early attempts to improve quality systematically failed precisely because managers became enamored of the tools of quality. They spent a great deal of time creating diagrams, doing statistical process control and benchmarking. If customer needs are not the starting point, though using the tools of quality may result in products and services that no one wants to buy. Joseph Juran defined quality as fitness for use – the ability of product or service top satisfy a customer’s real needs. By focusing on real needs, Juran believes managers and workers can concentrate their efforts where it really matters.

Ford Motor Co. installed a single nationwide, toll free customer services telephone system to get a continuous pulse of customer satisfaction. In doing so, the company scrapped a system of regional customer service telephone lines that was frustrating customers with slow response time and frequent busy signals. Customer satisfaction pays. Ford estimates that attracting a new customer costs the company five times more than retaining an old one.

Toyota’s focus on customer satisfaction has led to impressive results. While industry sales were dropping in the United States market, Toyota’s market share was increasing. Toyota’s improvement in customer satisfaction began with a deep commitment from top management. Managers implemented a business plan called The Toyota Touch which calls for a commitment to excellence, concern for superior quality, and caring for people based on communication and cooperation Toyota also created a corporate level customers relations organization that reports directly to top management. The company established a Customer Assistance Center whose primary goal is the measurement of customer satisfaction. Forty employees at the center handle over 300,000 calls each year. In addition, the company appoints Action Dealers to handle customer complaints. The action dealer has two days to contact the customer and 15 days to resolve the problems. Toyota turns up the heat on poorly performing dealers by assigning them to their Bottom 20 Dealer Program. Bottom 20 dealers must submit action plans to headquarters that outline their strategy to improve quality.