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Xerox Benchmarking Success Story

Xerox faced intense competition in the 1980s that drastically reduced its market share and profits in copiers. In 1982, new CEO David Kearns discovered Xerox's manufacturing costs were much higher than Japanese competitors. Xerox then initiated a comprehensive benchmarking process, comparing its operations to best practices from various industries to identify areas for improvement. This included benchmarking inventory management against L.L. Bean and reducing suppliers from 5,000 to 400. As a result of benchmarking, Xerox significantly cut costs and defects while improving customer satisfaction, productivity, and reliability to regain market leadership.

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Vidya Kudasomannavar
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119 views13 pages

Xerox Benchmarking Success Story

Xerox faced intense competition in the 1980s that drastically reduced its market share and profits in copiers. In 1982, new CEO David Kearns discovered Xerox's manufacturing costs were much higher than Japanese competitors. Xerox then initiated a comprehensive benchmarking process, comparing its operations to best practices from various industries to identify areas for improvement. This included benchmarking inventory management against L.L. Bean and reducing suppliers from 5,000 to 400. As a result of benchmarking, Xerox significantly cut costs and defects while improving customer satisfaction, productivity, and reliability to regain market leadership.

Uploaded by

Vidya Kudasomannavar
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

Benchmarking

Benchmarking is the process of comparing


one's business processes and performance
metrics to industry bests and/or best
practices from other industries. Dimensions
typically measured are quality, time, and
cost. Improvements from learning mean
doing things better, faster, and cheaper.
Benchmarking of xerox
History
The history of Xerox goes back to 1938,
when Chester Carlson, a patent attorney and
part-time inventor, made the first
xerographic image in the US.
In the early 1980s, Xerox found itself increasingly
vulnerable to intense competition from both the US
and Japanese competitors

marketshare in copiers came down sharply from 86%


in 1974 to just 17% in 1984. Between 1980 and 1984,
Xerox's profits decreased from $ 1.15 billion to $ 290
million

In 1982, David T. Kearns (Kearns) took over as the


CEO. He discovered that the average manufacturing
cost of copiers in Japanese companies was 40-50% of
that of Xerox. As a result, Japanese companies were
able to undercut Xerox's prices effortlessly.
Inventory management
Xerox initiated functional benchmarking with the
study of the warehousing and inventory management
system of L.L. Bean (Bean), a mail-order supplier of
sporting goods and outdoor clothing that allowed stock
pickers to travel the shortest possible distance in
collecting goods at the warehouse.

--------Increased speed and accuracy of order filling


achieved by Bean attracted Xerox. As a result, working
capital cycle time was cut by 70% leading to savings of
about $200 million.
Similarly, Xerox zeroed in on various other best practice

companies to benchmark its other processes. These


included American Express (for billing and collection),
Cummins Engines and Ford (for factory floor layout),
Florida Power and Light (for quality improvement), Honda
(for supplier development), Toyota (for quality
management), Hewlett-Packard (for research and product
development), Saturn (a division of General Motors) and
Fuji Xerox (for manufacturing operations) and DuPont (for
manufacturing safety).
Xerox found that all the Japanese copier
companies put together had only 1,000
suppliers, while Xerox alone had 5,000.

---Xerox reduced the number of vendors for


the copier business from 5,000 to just 400.
Xerox also created a vendor certification
process in which suppliers were either
offered training or explicitly told where they
needed to improve in order to continue as a
Xerox vendor
After benchmarking
Highly satisfied customers for its
copier/duplicator and printing systems
increased by 38% and 39% respectively.
Customer complaints to the president's
office declined by more than 60%. Customer
satisfaction with Xerox's sales processes
improved by 40%, service processes by 18%
and administrative processes by 21%.
Overall customer satisfaction was rated at more than 90% in
1991. Some of the other benefits Xerox derived were:

• Number of defects reduced by 78 per 100 machines.


• Service response time reduced by 27%.
• Inspection of incoming components reduced to below
5%.
• Defects in incoming parts reduced to 150ppm.
• Inventory costs reduced by two-thirds.
• Marketing productivity increased by one-third.
• Distribution productivity increased by 8-10 %.
• Increased product reliability on account of 40% reduction in
unscheduled maintenance.
• Notable decrease in labour costs.
• Errors in billing reduced from 8.3 % to 3.5% percent.
• Became the leader in the high-volume copier-duplicator
market segment.
• Country units improved sales from 152% to 328%
Xerox went on to become the only company
worldwide to win all the three prestigious
quality awards: the Deming Award (Japan)
in 1980, the Malcolm Baldridge National
Quality Award in 1989, and the European
Quality Award in 1992.
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