Finding the mark

24 April 2008

Like cranes, the crane and rigging industry is constantly changing, evolving and looking for new and better ways to stay competitive. More than ever crane companies are holding their employees to higher standards when it comes to practices such as operator qualification and safety management. As business shifts and the need to be proactive in a demanding market becomes glaringly apparent, some companies are looking to an old process for new results.

Modern benchmarking didn't exist before the 1970s. Simply defined as “a continuous process of measurement of products, services and work processes, against those recognized as leaders,” benchmarking only existed in its infantile state; commonly known as reverse engineering. Reverse engineering, used mainly in the manufacturing industry, was the process of tearing things apart, examining them, improving them, and putting them back together. The dawn of modern benchmarking, referred to as competitive benchmarking, began with Rank Xerox in 1976.

In the 1970s Xerox was the largest manufacturer of copiers in the world but was being upstaged by Japanese manufacturers that were producing better machines, selling them for less and making more profit. Intent on reclaiming its throne in the industry, Xerox was prompted into expressly comparing itself with its direct and best competitors to determine what it could do to increase productivity while decreasing costs.

The results from the benchmarking were astounding:

•Xerox's ratio of indirect to direct staff was twice that of direct competition

•It had nine times the number of production suppliers

•Assembly line rejects were in the order of 10 times worse; product time to market was twice as long

•Defects per 100 machines were seven times worse

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Over the next five years Xerox would have to increase productivity a lofty 18% to stay competitive – and it did. Through a strategy known as “leadership through quality,” which became the foundation of the company's revival, Xerox benchmarked over 230 areas in which it needed performance improvement, and went on to win the Malcolm Baldridge Quality Award in 1989. Xerox even benchmarked L.L. Bean, a Maine outdoor sporting goods retailer, because of its excellent warehouse procedures – procedures that are now the standard at most companies

Crane companies, quite literally, are moving the world, but in doing so they are also taking risk. Risk management isn't a byproduct of a successful crane company, rather, it's a requirement. Techniques such as benchmarking, as evidenced by the amazing turnaround of Xerox, which had revenues of over $15 billion in 2005, are unparalleled tools in quality management. Benchmarking is used a lot in organizations that want to continuously improve practices and processes. It allows trends to be identified and areas of opportunity to drive down the cost of risk.

How does it all fit in?

As the building industrial movement continues to grow, the crane industry has never been more needed. Urban development projects are flourishing in cities that are gentrifying, and taxi jobs continue to provide steady revenue streams for busy rental shops. Competition is steady and fierce, and benchmarking is the perfect way to see exactly where your company stands.

Xerox eventually turned the data acquired from the benchmarking effort into dollar signs by taking what was learned and applying it to daily operations. So too can your company. By benchmarking, long term and short term benefits can be seen immediately.

•Benchmarking brings out the newness and innovative ways of managing operations.

•It is an effective team-building tool.

•It has increased general awareness of costs and performance of products and services in relation to those of competitor organizations.

•It brings together all the divisions and helps to develop a common front for facing competition.

•It highlights the importance of employee involvement and, as such, encourages recognition of individual and team efforts.

It used to be that the general perception of benchmarking was that it is only effective in the manufacturing industry. In 2002, however, statistics proved otherwise. PricewaterhouseCoopers (PWC), a major international accounting and consulting firm, performed a study labeled “Trendsetters Barometer.” PWC interviewed 405 CEOs from product and services companies that were identified in the media as the fastest growing businesses in the US in the last five years.

The results showed that benchmarking was a risk management tool poised for a renaissance. The fastest growing companies were using a benchmarking database to measure business performance against their peers and were much more productive than those who did not. “Benchmarking is the first step for identifying performance gaps between a business and its peers. Next, the gaps need to be analyzed to determine their underlying causes, and to develop strategies and plans that address them,” said Brad Allen, leader of PWC's middle market benchmarking initiative. “The ability to view key metrics for companies on the next rung of the growth ladder is also critical for strategic forecasting, and could identify internal operations to target for competitive advantage.”

How does it all fit in?

In addition to revenue related benchmarks, issues including critical lift plans, operator certification statistics, accident causation, side-loading, and overloading are all crane-specific items that can be benchmarked. A crane company can take itself to the next level by watching and studying industry leaders with track records that shine in safety, employee retention and other areas.

To know where you're going, you need to figure out where you are and the easiest way to do that is to benchmark. To raise the bar and perform at a level higher than the status quo your company needs to find out who the best is, figure out how they got there and find a way to beat them. Dan Kugler, assistant treasurer for risk management at Snap-on Inc says it nicely, “Benchmarking puts shape to the landscape.


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