XEROX - The Benchmarking Story

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Of the total time spent on the above stages, planning takes up 30%, data collection 50%, and data analysis and reporting take up the remaining 20%. The time taken for the last stage, adaptation, depends on the scope of the exercise being undertaken by the company. The above stages comprise a series of steps that collectively complete the benchmarking process (Refer Exhibit II for steps in a typical benchmarking process). Organizations usually customize this model or develop their own benchmarking model to meet their specific organizational needs. By the early 1990s, many Fortune 500 companies and other major companies were implementing benchmarking to reap the benefits it promised. Benchmarking also became a key criterion for winning the Malcolm Balridge National Quality Award.1 According to research conducted by the International Benchmarking Clearinghouse, a division of American Productivity & Quality Center (APQC2), in 1995, over 30 companies reported a $76 million payback approximately in the very first year of their benchmarking implementation. Some of the companies that derived the benefits of benchmarking included Ford, AT&T, IBM, GE, Motorola and Citicorp. However, the pioneering efforts of Xerox in the field of benchmarking have undoubtedly been the most talked about and successful of such initiatives.

Benchmarking at Xerox

The 'Leadership through Quality' program introduced by Kearns revitalized the company. The program encouraged Xerox to find ways to reduce their manufacturing costs. Benchmarking against Japanese competitors, Xerox found out that it took twice as long as its Japanese competitors to bring a product to market, five times the number of engineers, four times the number of design changes, and three times the design costs.

The company also found that the Japanese could produce, ship, and sell units for about the same amount that it cost Xerox just to manufacture them. In addition, Xerox's products had over 30,000 defective parts per million - about 30 times more than its competitors. Benchmarking also revealed that Xerox would need an 18% annual productivity growth rate for five consecutive years to catch up with the Japanese. After an initial period of denial, Xerox managers accepted the reality.

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1] A highly revered award given for excellence in quality in the US to businesses. It is based on seven parameters - leadership, strategic planning, customer and market focus, information and analysis, human resource focus, process management, and business results.
2] APQC is a US-based nonprofit organization supported by nearly 500 companies, government organizations, and educational institutions. It provides the tools, information, expertise, and support needed by companies to discover and implement best practices in areas such as benchmarking and knowledge management.