Question

Xerox benchmarking
Possibly the best-known pioneer of benchmarking in Europe is Rank Xerox, the
document and imaging company, which created the original market for copiers. The
virtual monopoly the company had in its sector almost became its undoing, however.
Spurred by the threat from the emerging Japanese copier companies, an in-depth study
within the company recognized that fundamental changes were needed. To understand
how it should change, the company decided to evaluate itself externally – a process
which became known as competitive benchmarking.
The results of this study shocked the company. Its Japanese rivals were selling machines
for about what it cost Xerox to make them. Nor could this be explained by differences
in quality. The study found that, when compared with its Japanese rivals, the company
had nine times more suppliers, was rejecting 10 times as many machines on the
production line and taking twice as long to get products to market. Benchmarking also
showed that productivity would need to grow 18 per cent per year over five years if it
was to catch up with its rivals.
Rank Xerox sees benchmarking as helping it achieve two objectives. At a strategic level
it helps set standards of performance, while at an operational level it helps the company
understand the best practices and operations methods which can help it achieve its
performance objectives. The benchmarking process developed by Rank Xerox has five
phases. Its experience of using this approach has led Xerox to a number of conclusions:
• The first phase, planning, is crucial to the success of the whole process. A good plan
will identify a realistic objective for the benchmarking study, which is achievable and
clearly aligned with business priorities.
• A prerequisite for benchmarking success is to understand thoroughly your own
processes. Without this it is difficult to compare your processes against those of other
companies.
• Look at what is already available. A lot of information is already in the public domain.
Published accounts, journals, conferences and professional associations can all provide
information which is useful for benchmarking purposes.
• Be sensitive in asking for information from other companies. The golden rule is:
‘Don’t ask any questions that we would not like to be asked ourselves.’

a) Discuss in details what kind of information did Xerox discover in its
benchmarking study.

b) Critically evaluate which of the five performance objectives (quality, speed,
dependability, flexibility, cost) you think are the most difficult to discover about
your competitors’ performance.

Answer 1

a) Xerox in their benchmarking study found the following :

- The sales price of the japanese machines was the same as the cost price of Xerox machines - indicating that their production costs were lower than xerox's. The japanese manufacturers seemed to have found some cost efficiencies in the manufacturing processes that lead them to having lower operating costs and cost of goods sold.

- The quality of the japanese machines did not match the difference in sales prices - indicating that the japanese manufacturers were able to attain higher quality levels at lower prices, than xerox. The japanese firms had enough quality standards to be able to be competitive in terms of final machine quality in the market.

- Xerox also had a more complicated supply chain network with 9 times more suppliers suggesting that the japanese firms had managed to establish a more streamlined supply network in their manufacturing processes. Having fewer suppliers or a more lean network could be helping japanese firms achieve economies of scale - bigger orders from few suppliers could get them more discounts and benefits.

- Performance and quality along the manufacturing process was also worse in xerox as they rejected 10 times the machines that their rivals did, possibly due to defects being introduced and not caught during the earlier processes. Rejections due to bad quality can cost a company a lot of money which is why quality needs to be embedded within the entire system from planning to product launch. Japanese firms seemed to have fared better in achieving a total quality management system in their production efforts.

- Time to market, a crucial aspect of successful growth, was also slower in xerox possibly due to a reduced or lack of focus on the final stages of product launch, or in the entire planning process itself. Time to market is critical in gaining an early mover advantage in the market, by having a longer time to market Xerox was not capitalising on their monopoly and in fact losing ground to other rivals who were able to launch new products and innovations faster and therefore to early success and bigger market shares.

- Xerox's productivity was considerably lower than its rivals and would need to grow substantially (18%) and continuously for multiple (5) years before it could match its competitors. The low productivity meant that the firm could not hope to catch up to its rivals for some years unless it made some significant changes to enhance efficiency in its processes.

b) Quality is a metric that is exceptionally difficult to discover about performance in a rival firm. While the quality of the finished product can be easily ascertained by reviewing the product, service and parts etc., the quality of the work that is expended to achieve the product is harder to define. Different companies can have different quality KPIs, mechanisms, triggers etc. which can be difficult to extricate as they are likely to be embedded within the entire business process of the organisation. These quality measures and measurements can also be driven by different company ideologies such as TQM, Kaizen (continuous improvement) etc. which different firms might adopt to different degrees. Adoption of the various methodologies in existence is also likely to be dissimilar due to national or cultural norms that could apply in case of international competitors. The japanese way of adopting the lean manufacturing paradigm could be significantly divergent from xerox's due to cultural influences. Manner of work, hierarchies, work environment, labour unions etc. can all play a part in the quality of performance that can be extracted from a workforce. Morale and motivation are also significant influencers of quality of work performance and not easily measurable in any companies. The size of the organisation can also play a big role in the variance - bigger firms might have more workflows that can result in longer time frames for authorisations etc. that smaller firms can avoid, but in contrast, smaller firms can have fewer resources (personnel, experts etc.) that can be re-applied to different tasks in the overall business process of producing goods.

(Marr, 2020)

References :

Marr, Bernard (2020) The Biggest Benchmarking Mistakes And Pitfalls You Must Avoid. Bernard Marr and Co.