Measuring Key Performance Indicators of Bench - marking areas in Textile industry
Bench marking meaning refers "As a point of reference from which measurements may be made or something that serves as a standard". Several definitions were evolved to define bench marking and the most often quoted definition is defined by Industry giants as "Bench marking is the continuous process of measuring products, services and practices against the competitors or those companies recognized as industry leaders" . Camp, the first author of a book on bench marking, regards bench marking as an investigative process to search for industry best practices that lead to superior performance. Various models of bench marking were compared with the focus on bench marking, namely, the types of bench marking.
Bench marking meaning refers "As a point of reference from which measurements may be made or something that serves as a standard". Several definitions were evolved to define bench marking and the most often quoted definition is defined by Industry giants as "Bench marking is the continuous process of measuring products, services and practices against the competitors or those companies recognized as industry leaders" . Camp, the first author of a book on bench marking, regards bench marking as an investigative process to search for industry best practices that lead to superior performance. Various models of bench marking were compared with the focus on bench marking, namely, the types of bench marking.
The following
are the main types of bench marking:
Bench marking types
Industry Group Measurements: Measurements of various facets of operation and comparing them with similar measurements.
Result Bench marking: Inter-firm comparison of quantitative data.
Product Bench marking: Customer perception of goods and services of a company is compared with that of the competitors in the market place.
Process Bench marking: Bench marking discrete process against organizations that are considered leaders in those processes.
Competitive Bench marking: The study and measurement of a competitor without their co-operation.
Cooperative Bench marking: Is done with the assistance of the entity being studied - the bench marking partner.
Bench marking Center: It operates like a "Exchange" wherein the Center pools relevant information on industry-wise key result areas of members.
Best Practice Study: These studies can be useful simulators.
Business Process Bench marking: Study the best one followed either in the same or in other industries.
Internal Bench marking: Bench marking against internal operations-the performance of business divisions or geographical operations.
Strategic Bench marking: This is a systematic process for evaluating alternatives.
As reported by several organizations, carrying out the process of Bench marking entails several problems like, constraints in obtaining reliable unpublished data, greater tendency to use financial indicators as compared to non-financial indicators, difficult to move from perception to facts. Within the organization, the problems are, lack of skills to usher change, status conscious and reluctant to accept change, lack of effort and initiative for excellence. Given the typical problems, the challenges are hard for organizations to get out of history, old behavior sneaks back, changing of organization as business changes, preparing human resources for the impending change, and getting qualified, experienced and knowledgeable people.
Model on bench marking
Based on the above types several models of bench marking are used in various industries. Bench marking is usually done within the same industry. However, bench marking is often done between organizations that have similar business process, but are in different industries. By bench marking the business process across industries, the organizations sometimes achieve greater results than by sticking to their own industry. Bench marking a process across industries causes people to challenge some of the assumptions that are part of the problem.
Several models that are available could not be directly applied as a bench marking process to the textile industry, given the method of operations and practices of the Indian textile industry. This is mainly due to (a) The lack of openness within the industry to have partnership bench marking with a centralized agency being the facilitator between two mills (b) Non-availability of data on technical performance, functional areas and business processes.
Performance metrics of the textile industry for bench marking
For the study, spinning mills were selected from the organized mill sector. The metrics were tailor-made for a given mill based on the condition of the mill, performance, existing systems and the level of improvements that can be achieved and the benchmarks are developed for the all the three metrics. Thus the model is more dynamic.
Bench marking types
Industry Group Measurements: Measurements of various facets of operation and comparing them with similar measurements.
Result Bench marking: Inter-firm comparison of quantitative data.
Product Bench marking: Customer perception of goods and services of a company is compared with that of the competitors in the market place.
Process Bench marking: Bench marking discrete process against organizations that are considered leaders in those processes.
Competitive Bench marking: The study and measurement of a competitor without their co-operation.
Cooperative Bench marking: Is done with the assistance of the entity being studied - the bench marking partner.
Bench marking Center: It operates like a "Exchange" wherein the Center pools relevant information on industry-wise key result areas of members.
Best Practice Study: These studies can be useful simulators.
Business Process Bench marking: Study the best one followed either in the same or in other industries.
Internal Bench marking: Bench marking against internal operations-the performance of business divisions or geographical operations.
Strategic Bench marking: This is a systematic process for evaluating alternatives.
As reported by several organizations, carrying out the process of Bench marking entails several problems like, constraints in obtaining reliable unpublished data, greater tendency to use financial indicators as compared to non-financial indicators, difficult to move from perception to facts. Within the organization, the problems are, lack of skills to usher change, status conscious and reluctant to accept change, lack of effort and initiative for excellence. Given the typical problems, the challenges are hard for organizations to get out of history, old behavior sneaks back, changing of organization as business changes, preparing human resources for the impending change, and getting qualified, experienced and knowledgeable people.
Model on bench marking
Based on the above types several models of bench marking are used in various industries. Bench marking is usually done within the same industry. However, bench marking is often done between organizations that have similar business process, but are in different industries. By bench marking the business process across industries, the organizations sometimes achieve greater results than by sticking to their own industry. Bench marking a process across industries causes people to challenge some of the assumptions that are part of the problem.
Several models that are available could not be directly applied as a bench marking process to the textile industry, given the method of operations and practices of the Indian textile industry. This is mainly due to (a) The lack of openness within the industry to have partnership bench marking with a centralized agency being the facilitator between two mills (b) Non-availability of data on technical performance, functional areas and business processes.
Performance metrics of the textile industry for bench marking
For the study, spinning mills were selected from the organized mill sector. The metrics were tailor-made for a given mill based on the condition of the mill, performance, existing systems and the level of improvements that can be achieved and the benchmarks are developed for the all the three metrics. Thus the model is more dynamic.
-
The technical metrics relate to the operational performance of spinning mill.
-
Financial metrics include key financial performance indicators based on the annual financial performance of the mills.
-
Managerial metrics refers to the management systems across the functions of management.
-
Business process metrics include core and sub process ie, a set of processes cutting across functions.
Technical Metrics
It covers both market related factors which, to a large extent, beyond control of an individual management at least in a short span of time and a large number of production related factors - Work Complement, material wastage, Yarn Realisation, Machine productivity, utilization , Energy Consumption ,Key Quality indicators, Manufacturing Costs and so-on, are to a large extent within the control of mill management. It is important to note that the purpose of the entire analysis is towards identifying the areas, which need priority attention from the management, and not to predict the profits accurately, if actions were being taken. Out of the many controllable production related factors, which influence the profitability of a spinning mill, the model considers only major factors that contribute about 90% of the profits.
Financial Metrics
Financial metrics are for assessing the financial performance of the mills and they include performance indicators along the following:
It covers both market related factors which, to a large extent, beyond control of an individual management at least in a short span of time and a large number of production related factors - Work Complement, material wastage, Yarn Realisation, Machine productivity, utilization , Energy Consumption ,Key Quality indicators, Manufacturing Costs and so-on, are to a large extent within the control of mill management. It is important to note that the purpose of the entire analysis is towards identifying the areas, which need priority attention from the management, and not to predict the profits accurately, if actions were being taken. Out of the many controllable production related factors, which influence the profitability of a spinning mill, the model considers only major factors that contribute about 90% of the profits.
Financial Metrics
Financial metrics are for assessing the financial performance of the mills and they include performance indicators along the following:
-
Cost Structure
-
Profitability
-
Solvency and Liquidity
-
Asset Turnover
-
Inventories
Managerial Metrics
Managerial metrics here refers to
managerial system bench marking. A managerial system of a best in class of
another textile mill can either be emulated else the existing system that is
present in the mill is improved for bench marked performance. The systems
such as cost management, cash flow analysis, MIS, Production Planning,
Recruitment, selection and training of manpower to name a few can be taken
up for bench marking.
Business Process Metrics
Organisations are made up of processes, and all work is a process, whether production, delivery of product to the market, selling, collection of payments, preparation of annual report, filing tax return and so-on. Work process defines the supplier and customer, ie, defines the outputs that are produced and handed off to the next step in the overall process. It defines the sequence of the various steps in the process. It forces the organisation to define that produces the output. It reveals the boundaries of the elemental processes. It clarifies the boundaries of the processes, often the most ambiguous and unclear of understandings: The interface hand offs where much of the organisation's inefficiencies exist.
Besides, this classification forces the organisation to define who owns the process and who, therefore, is accountable for its detailed understanding and improvement through bench marking. There are several processes that can be identified in a manufacturing organisation and few processes are key or core processes to the organisation and any favorable/unfavorable impacts on those processes will have respective impacts on the performance of the organisation.
Benchmark those key processes for performance improvement in terms of cost, quality, time, efficiency and response time as the case may be in a systematic and attaining them are in the domain of Business Process Metrics. Here, business process improvement methodology is used to improve the processes. There could be many processes that can be important for a textile company to improve upon and for bench marking business metrics; Such key processes will be identified in consultation with the top management. In general, in any business organisation around 175 business processes can be traced.
Finalised Benchmarking Methodology for all the four Metrics
Business Process Metrics
Organisations are made up of processes, and all work is a process, whether production, delivery of product to the market, selling, collection of payments, preparation of annual report, filing tax return and so-on. Work process defines the supplier and customer, ie, defines the outputs that are produced and handed off to the next step in the overall process. It defines the sequence of the various steps in the process. It forces the organisation to define that produces the output. It reveals the boundaries of the elemental processes. It clarifies the boundaries of the processes, often the most ambiguous and unclear of understandings: The interface hand offs where much of the organisation's inefficiencies exist.
Besides, this classification forces the organisation to define who owns the process and who, therefore, is accountable for its detailed understanding and improvement through bench marking. There are several processes that can be identified in a manufacturing organisation and few processes are key or core processes to the organisation and any favorable/unfavorable impacts on those processes will have respective impacts on the performance of the organisation.
Benchmark those key processes for performance improvement in terms of cost, quality, time, efficiency and response time as the case may be in a systematic and attaining them are in the domain of Business Process Metrics. Here, business process improvement methodology is used to improve the processes. There could be many processes that can be important for a textile company to improve upon and for bench marking business metrics; Such key processes will be identified in consultation with the top management. In general, in any business organisation around 175 business processes can be traced.
Finalised Benchmarking Methodology for all the four Metrics
-
Selection of areas for bench marking.
-
Identification of key performance factors.
-
Identification of persons responsible for the selected areas.
-
Collection of relevant data/information/analysis.
-
Development of measurements for a given area.
-
Identification of benchmarks/best practice/best systems.
-
Deciding areas for improvement.
-
Developing actions required for improvement.
-
Implement plans to monitor results.
-
Repeat bench marking.
To develop capabilities that result in improved revenues and
reduced costs.
Textile business is sustainable
when we ….
➵
Understand the Competence
➵
Capabilities
Mapping with
o Customer Needs
o Customer Requirements &
o Customer Desires
Sustainability
is the ability
to understand emerging trends
✴
Quick Transformation to Suit Customer
Preferences
✴
Adaptability with Emerging Changes
✴
Grabbing the New Emerging Markets
✴
Excelling
Sustainability
is adjusting strategy to focus
on
emerging
opportunities
§ Adopting
new Capabilities to suit the Emerging Markets
§ Preparing
for the Global Market Dynamics
§ Focus on
Re-Defined Targets
§ Armoring
for new Challenges
Key Determinants of Textile Business
Success
➵
Productivity
➵
Utilization of Resources
➵
Quality
➵
Customer Satisfaction
➵
Profitability
➵
Competency
➵
Innovation
➵
Market Orientation
➵
Organization development
➵
People Development
is to be adopted for achieving the GOAL.
The proper
METHODOLOGY
PERCEIVE – a gap analysis of where we stand
•
Analyze and understand the value gap in the operations.
•
Ensure that services offered narrow the
gap.
•
Contact the concerned and study the
operations, and confirm that the gap exists
•
Discuss with the team and organize a thorough
assessment of the operation
Diagnose – financial and operational issues
of
the enterprise
•
Confirm through extensive analysis that value gap exists
•
Discuss with the team about the gap analysis and scope for
improvement
•
Estimate the financial impact of the value gap
•
Estimate the cost of narrowing the gap
•
Estimate the benefit of narrowing the gap
•
Discuss with the Team about the findings
Configure – solutions for
enhanced
capabilities by Team
•
Discuss with the
team about the range of possible solutions
• Brainstorm and to choose
the most cost effective solution
•
Agree on the outcomes
•
Agree on the outcomes
measurement
•
Agree on the cost and benefit of the program
•
Agree on the milestones
•
Agree on the returns
on investment
ACHIEVE – The Deliverable
capacity building
solutions
•
Submitting viable solutions acceptable to the Management
•
Joint evaluation of the outcomes
•
Outcomes are accepted by the members of team
•
Follow up on the outcomes achieved is sustained after the completion
of the program
What finally the Mills Delights is ………………….
☀ Implementation of best shop floor practices
like to
drive the business towards GPTP
☀ Quality checks, norms & controls at
different stages of
manufacturing (Raw Material &
Finished Goods)
☀ Manufacturing norms where applicable,
suitably.
☀ System of Identify training needs to
escalate the
workforce productivity
☀ Optimised Preparation of annual budget of
business
☀ Breakdown analysis trend and plan for development
/
up gradations for repetitive failures of machine/system
☀ SOPs for every operational system
☀ Improved revenues
☀ Optimised Expenditure
☀ Becomes
Sustainable Competitive Business Model
The above model is being implemented in Reputed textile mills where the results are seen highly consistent.