ELSEVIER

Computers in Industry 33 (1997) 357-366

A QFD based performance measurement tool

H. Jagdev a,*, P. Bradley b, 0. Molloy b
a Computation Department, UMIST, PO Box 88, Manchester MO lQD, UK
b CIMRU, University College Galway, Galway, Ireland

Abstract
The re-engineering of its business processes should allow an organisation to obtain dramatic performance improvements while also emphasising the focus on the customer. It is widely accepted that in order to improve the performance of a process, it must be measured and this forms the basis of the approach undertaken and described in this paper. This performance measurement approach identifies a range of high level, customer oriented performance measures that can be used to measure any business process. A Quality Function Deployment (QFD) based tool incorporating this approach is described. This QFD based tool allows a user to develop a set of performance measures (or use the measures provided) that accurately measure the performance of a particular process. 0 1997 Elsevier Science B.V.
Keywords: Business proxss re-engineering; Performance measurement; Quality function deployment; Customer requirements

1. Introduction This paper describes a proposed QFD based performance measurement tool that can be used in business process x-engineering. This QFD based tool can be used to identify the performance measures that closely .reflect the concerns of the customer and to ensure that these performance measures are used (and measured) in the re-engineered business process. This QFD tool can also be used to

are closely coupled to the requirements of the customer, the voice of the customer will be reflected in the re-engineered process.

2. Business process re-engineering Many approaches exist for improving performance but few approaches exist which offer the opportunity to make dramatic improvements in the non-manufacturing or white-collar areas of a companys business. Business Process Re-engineering (BPR) is an approach that offers companies the opportunity for achieving dramatic improvements in a short period of time. BPR can help them understand how the different functions or processes in their business are related. Some of the goals of BPR include [31: . achieving step changes in performance; . moving from a function to a process based capability;

identify redundant and missing performance measures, as well as identify potential conflicts between performance measures and targets for each performance measure. All of this information can then be used when re-engineering a business process. By identifying and integrating performance measures that

* Corresponding

author.

0166-3615/97/$17.00 (4 1997 Elsevier Science B.V. All rights reserved. PU SO166-3615(97)00041-9

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* emphasising customer focus; - integrating work; - developing a process management culture. A wide range of very similar terms are used to describe business process re-engineering. These terms include process innovation [4], business process redesign [5], and re-engineering [6]. The approaches advocated by each of these terms are nearly identical and can be collectively grouped, in our opinion, under the term business process re-engineering. Hammer and Champy [6] define re-engineering as the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service and speed. This definition highlights the important features of all BPR programs; namely, the changes must be fundamental, radical, dramatic and process oriented. Business processes can be defined as: a collection of activities that takes one or more kinds of input and creates an output that is of value to the customer. [61 a set of logically related tasks performed to achieve a definite business outcome. [41 a group of logically related tasks that use the resources of the organisation to provide defined results in support of the organisations objectives. [31 All of these definitions are reasonably similar and relate to a set of tasks/activities and having a value to the customer or organisation. Business processes have two common traits, namely [5]: 1. they have customers; 2. they cross organisational boundaries. BPR focuses on examining the workflows and processes within and between organisations. Customer order fulfilment is a good example of a business process as the output of the process (i.e. product/service) is required by a customer and the process itself spans several departments in the organisation. BPR involves re-engineering these processes to achieve radical improvements in cost, time, respon-

siveness, performance, quality, etc. These re-engineered processes should provide the company with dramatic improvements in cost, response time, and performance as well as reflecting the companys strategy. The focus in BPR is on why a particular process activity is undertaken.

2.1. Current BPR tools A wide range of BPR tools are commercially available today. These tools allow the user to build specific models of the current (or As-Is) process and of the desired (or To-Be) process. These tools offer a wide range of capabilities and features that allow the user to construct either generic high level models or detailed low level models of current or desired processes. Very few BPR tools are available which identify the issues and trade-offs that need to be identified and addressed during the development of a To-Be process configuration. Bradley et al. [2] compared a number of different BPR software tools and described a methodology for comparing these tools which takes into account the requirements of the user. One of their conclusions was that a tool was needed which would help in describing the issues and trade-offs to be addressed, and in defining targets for these issues. The QFD tool proposed in this paper would be useful before the re-engineering process occurs and after the current process model has been built. The relevant information relating to the current process has been collected at this stage and the proposed QFD tool will allow some of the issues, targets and conflicts for the performance measurement system to be identified, understood and assessed. The position of this proposed QFD based tool, within the overall context of process re-engineering, is shown in Fig. 1.

As-Is Model

QFD

To-Be Model

Fig. 1. The positioning

of QFD in the re-engineering

process.

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3. Quality functional deployment QFD originated in Japan during the 1970s as a systematic technique for identifying those product features which contribute strongly to product quality, and where engineering effort is needed [l]. QFD is based on a matrix approach to design, mapping the requirements (starting with customer requirements) onto the means of achieving them. Therefore, a series of charts is developed which maps the relationships between customer requirements and engineering characteristics, right through to production planning. The principle may also be applied to mapping customer requirements to business processes. An example of ,a QFD chart is shown in Fig. 2. Using this chart it i,s possible to create a hierarchy of customer requirements with respect to business processes. The central part of the matrix is used to show the relationships between customer requirements and the performance measures used in this business process. It is thus possible, for example, to identify performance measures which, although they may seem important from the business point of view, are not viewed as such by the customer. The conflicts matrix is used to collate information on conflicting performance measures (a common example would be time and cost). The right hand side of the matrix is

Fig. :!. A typical QFD chart.

used to record the companies performance on particular customer requirements with respect to competitors, where such information is available, for example from customer surveys. Finally, after sufficient analysis of the current (As-Is) situation, targets may be set for particular characteristics (the To-Be situation), and recorded in the Targets section of the chart. The degree of difficulty of achieving these targets for the particular performance measures is also identified. The matrix rows represent the customer requirements, and the columns the performance measures. Thus, the relationship between customer requirements and performance measures can be identified in this matrix. It is important to note that the customer requirements are usually ranked (or scored) in order of importance to the customer. This is useful in establishing the priority of different actions within the overall re-engineering strategy. A cascade of charts can be created, dealing with a business process hierarchy. In this way, all business processes, at whatever level, may be traced back to the customer, and the effect of changes at any level in performance checked against the overall company targets for its business processes. As several charts can be worked on concurrently, QFD is an effective team tool for process re-engineering. A correctly designed business process has the voice and perspective of the customer built in. A process should be designed to produce outputs that satisfy the requirements of the customer. Before any processes are re-engineered, the following question should be asked: who are the customers of the process and what do they want out of it? The QFD based tool proposed here allows these type of issues to be understood and measured. This will allow re-engineering teams to understand the various trade-offs required. Although QFD is normally applied to product design, the basic QFD matrix, relating requirements to solutions via a relationships matrix reflects the activities of the design process and can thus be applied to most design problems [7], including that of business process redesign. The potential complexity of the QFD method, when dealing with a reasonably complex product, can be daunting. Perry [9] shows that in a project dealing with 128 customer requirements, correlated

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with 65 major product features, a matrix of over 8000 relations results. Thus manual methods in such problems are tedious, discouraging the implementation of QFD and the reuse of previous analyses. Fortunately a number of computerised QFD packages are now on the market, which are not restricted to product design [7,8,1 I]. The QFD software currently available makes QFD accessible and reusable, but does not provide direct software links to other tools, although most output files contain matrix information. These data can potentially be used as input to BPR tools. Manufacturing organisations compete on the basis of one or more dimensions such as time, cost, quality, flexibility or the environment. Many BPR tools allow processes to be measured in terms of time and cost. However, these tools do not highlight the trade-offs that are required if organisations are to compete on the basis of time or cost (or both). For example, in reducing the time required to carry out a particular process, the cost of carrying out this process may actually be increased. These potential conflicts need to be identified and understood. Also, these BPR tools do not allow other possible dimensions of competition like quality and flexibility to be measured or for their impact(s) on the current or desired process to be evaluated. Using QFD allows the re-engineering team to capture and include the voice of the actual customer in the re-engineered process.

4. Performance

measurement

Measurement is the trigger for improvement and the statement if you dont measure it, you cant improve it very often holds to be true. In general, the activities of an organisation are usually measured using a wide range of performance measures and, based on the results obtained, management make specific decisions. However, the measures used by most enterprises are very wide ranging and are intended to show how well (or badly) the company is performing. Most of the traditional measures used in the decision making process tend to be financial measures and business decisions are often taken in an attempt to maximise or reduce the impact of these financial indicators.

Most companies have numerous functional measures which allowed managers to assess the performance of their particular function and to see if it is meeting the goals or targets laid out for the function. Very few traditional performance measures, if any, are customer related. As companies have become more customer oriented, the performance measurement systems have started to become more process oriented. This has happened through customers and companies becoming interested in world class manufacturing (WCM). As the traditional performance measures were still being collected, workers and managers used these measures as a gauge of their performance and thus these measures were perceived as being important and reflecting what the company thought to be important. This could not be further from the truth. The traditional approach to performance measurement was based on cost accounting techniques which have been found to have the following limitations, namely [lo]: - Most performance measures are derived from cost accounting information. - Cost accounting data is often based on out-dated and irrelevant principles. - Performance is often tracked in isolated areas. - Management decisions are based on cost accounting information. - Cost accounting information is unable to map process performance. 9 Performance measures were unable to take into account the customer perspective. - Performance measures which produce bottom line financial results are too late for carrying out corrective action. As companies re-engineer their business process in an effort to obtain significant improvement benefits, the performance measurements used to measure the process should reflect the new views of what is important. This paper proposes a QFD based performance measurement tool that can be used to: - identify current performance measures that are closely linked to customer requirements; - identify current performance measures that are redundant; - identify new customer oriented performance measures that are required;

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. identify conflicts associated with different performance measures ; - identify target values for customer oriented performance measures; - assess the degree of difficulty of achieving the target value(s) for specific performance measures. This proposed QFD based tool can be used by a re-engineering team to identify a set of performance measures that are closely related to customer requirements. This new sl:t of performance measures can then be used as the performance measures for the re-engineered process. This QFD tool will also allow the various conflicts between the various performance measures to be understood and accounted for in the new process. For example, if the customer order fulfilment process is being re-engineered, and the objective is to minimise the time taken to fulfil customer orders, this may lead to an increase in the cost of carrying out the process. This would lead to a conflict if another objective of the process was to reduce cost. If an organisation wishes to improve one or more of its processes, then the performance of the process needs to be measured. The impact of the changes made to this process can then be correctly assessed by comparing the performance measurements before and after the process changes have been made. A tremendous range of performance measures are used by organisations operating in different industrial sectors. This makes the task of collecting a range of performance measures difficult. However, the approach undertaken in identifying these performance measures is important as it can be applied by different organisations in different industrial sectors. Such an approach is described explicitly in this paper. 4.1. A QFD approach
to performance measurement

1. 2. 3. 4. 5.

Identify customer requirements. Identify existing performance measures. Build QFD chart(s). Identify re-engineering issues. Re-engineer the process.

4.1.1. Identify customer requirements The customer requirements can be obtained in several ways including customer surveys, examining customer complaints, etc. These requirements will then be used in the QFD chart. This will allows the voice of the customer to be incorporated into the re-engineering of the business process. 4.1.2. Identify existing peformance measures All of the existing performance measures used in the business process are identified (if possible). These performance measures reflect what is viewed as being important in the current process. In the QFD chart, these performance measures will be assessed to see if they meet any of the customer requirements which have been identified. 4.1.3. Build QFD chart(s) This step involves building a QFD chart using the customer requirements (identified in step 1) and the current performance measures (identified in step 2). Then the various other pieces of the QFD chart like the correlation matrix (conflicts), targets, comparative assessment and degree of difficulty are completed. This provides information that needs to be taken into account in the re-engineering of a business process. More importantly, using QFD allows the perspective of the customer to be accurately accounted for in the re-engineered process. 4.1.4. IdentifL re-engineering issues The QFD chart allows the re-engineering team to identify the current performance measures that are closely related to the customer requirements and the conflicts that arise between the different performance measures. Targets for each of the performance measures and the degree of difficulty of achieving these targets can be identified. Also, the customer requirements that are not properly addressed by current performance measures can be identified. This allows specific performance measures to be created to address these user requirements. The performance mea-

A QFD performance measurement methodology is described in this section. The core of this methodology involves the building of a QFD chart. This chart will be used to identify the performance measures that meet customer requirements as well as identifying targets for and conflicts between the different performance measurements. The steps involved in this methodology are listed below and then explained in more detail.

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sures closely linked with the customer requirements should then be used in the new process, thus integrating the perspective of the customer in the new process.

4.1.5. Re-engineer the process The re-engineering team can thus re-engineer the business process while taking into account the information identified in the QFD chart(s). This will involve using the performance measures identified in the new process as well as addressing the various issues and conflicts identified through the use of the QFD chart.

4.2. Applying

the methodology

to a business process

period. In this example, the following customer requirements were identified as being important, namely: shorter order delivery times; higher delivery accuracy; high quality products; cheaper products; accurate pricing information; up to date product listings; faster order confirmation; the ability to meet customer specified delivery dates. Each of these customer requirements are ranked in order of importance and placed in the customer requirements position of the QFD chart. These customer requirements, and their respective rank, are shown in Table 1 below.

The methodology described in the previous section is now used to show how the proposed QFD tool can be used to relate the performance measures to the customer requirements. A sample business process (customer order fulfilment) is used here to show how the methodology works, and how it identifies issues that need to be considered in the re-engineering phase of the project (step 5). The customer order fulfilment process is concerned with receiving an order from a customer and with delivering it within an agreed timeframe. The product(s) ordered by the customer may already have been manufactured and are currently being stored in a warehouse, or some of the products ordered may require to be completely or partially manufactured. The customer order fulfilment process described here is an example of a common order fulfilment process. The process itself is not examined directly as the performance measures used in the process are of specific interest. The stages of the methodology are now used to re-engineer the business process.

4.2.2. Stage II: Identify existing performance measures In this stage, the performance measures used in the current customer order fulfilment process are identified. These performance measures give an indication of what was viewed as being important in this process. All performance measures relate to the performance of a process (or activity) and how well this process (or activity) is performed. The performance measures used in the current process are identified and placed in the QFD chart. This allows their impact on the customer requirements to be assessed as well as targets to be set for each measure. The direction of improvement for each performance measure can also be identified.

Table 1 Customer requirements Customer requirements Rank 1 1 2 2 4 5 7 9

4.2.1. Stage I: identify customer requirements The customer requirements can be identified in a number of different ways. They can often be obtained by directly surveying the customers of the company, or by looking at the data available to the marketing department and by examining the complaints made by the customers over a specific time

Short order delivery times High delivery accuracy High quality products Cheaper products The ability to meet customer specified dates Faster order confirmation Accurate pricing information Up to date product listings

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The current performance measures used in a customer order fulfilment process are shown below, namely: - percentage of products returned by customers; - percentage of on-time deliveries; - percentage of incorrect orders received; - percentage of orders delivered incorrectly; - number of orders received per unit time; - number of orders shipped per unit time; * customer order fulfilment time; - customer order fulfilment cost; - delivery cost per order; * time taken to process customer order; 0 time taken to deliver customer order; - cost of processing customer order. Each of these performance measures is used to measure the current customer order fulfilment process. By focusing ton the wrong measures the company is focusing on the wrong areas. Also, the areas focused on may nor be related to customer requirements. All of the performance measures identified above can now be placed in a QFD chart and their impact on the cusmmer requirements assessed. Target values and the direction of improvement for each of the performance measures can also be identified. Once the current performance measures have been identified, the next stage in the methodology should be carried out, nalmely the filling out of the QFD chart(s). 4.2.3. Stage III: Build QFD chart(s) The QED chart needs to be filled with eight separate pieces of information, all of which is needed in the re-engineering of business processes. The eight types of information are as follows: 1. customer requirements; 2. current performance measures; 3. direction of improvement (for the performance measures); 4. correlation matrix; 5. comparative assessment; 6. targets; 7. degree of difficulty; 8. customer requirements/process measurements matrix. The QFD chart for the customer order fulfilment chain is shown in Fig. 3. Each of the above eight

types of information is displayed. This information needs to be obtained by the re-engineering team and some of this information will require detailed benchmarking. Each of the pieces of information shown in Fig. 3 is now explained further. The customer requirements and current performance measures have been obtained in stages I and II earlier. The direction of improvement for each of the performance measures is identified. For example, if customer order fulfilment time is being measured, the objective of the company is probably to minimise this time (denoted by a downward arrow). The correlation matrix identifies the conflicts that arise between individual performance measures. For example, the objective of the company is to minimise customer order fulfilment time and to reduce the cost of fulfilling customer orders. Yet, if the company is to try to minimise both, then a conflict will arise as reducing one may result in an increase in the other. The comparative assessment section identifies how our customers rate us against our competitors on each of the requirements that they have identified. For example, the customers might rate the company lowly with regard to the price of the products but might rate us very highly with regard to order delivery lead-times. Targets for each of the performance measures should be identified. For example the target for customer order fulfilment time might be one day. This target value is the value that the company would like to or needs to achieve for this particular performance measure. The degree of difficulty is an assessment made by the company on how difficult it will be to achieve the target value identified for a particular performance measure. This is a subjective opinion that the company needs to identify and the degree of difficulty can be used to determine which performance measurement targets are more realistic. Each of the performance measures are rated for suitability for meeting the requirements identified by the customer. This allows the re-engineering team to identify the performance measures to identify the performance which are: - closely related to the customer requirements;

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strong Positive
Positive

:: >#<

Negative Strong Negative

I p
d ;. g

.E *

0 -

01.

High Quality Products Cheaper Products

0 Faster Order Confirmation

T
0 0

0 0 0 l-2-3 0 4

I
0
0

Accurate Pricing Information Up to Date Product Listings 0 StrongRelatIonship

Medium weail RelationshIp Relatlonshlp

+4 13 3 mr u r

$
0

Fig. 3. QFD chart for the customer order fulfilment business process.

. redundant ments; - missing.

with regard

to the customer

require-

4.2.4. Stage IV: Identify re-engineering issues Before undertaking the re-engineering of a business process, a set of requirements for the new process need to be identified. The various conflicts that will arise in the re-engineering process need to be identified, understood and addressed. The new process should have the perspective of the customer built into it. This can be done by using the performance measures identified as being closely related to

the customer requirements as well as performance measures that are missing. These desired performance measures need to be measured in the new process. The conflicts between these performance measures need to be identified and understood before they can be addressed. The QFD chart also allows targets for these measures to be identified and these tell the re-engineering team what needs to be incorporated. The QFD based tool proposed here allows several important issues to be highlighted before the actual process re-engineering occurs. These issues relate to: - what performance measures should be used;

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. what possible conflicts might occur in the process; - what are the targets for the new process. In their definition of re-engineering, Hammer and Champy talk about achieving dramatic improvements in performance measures such as time, cost and quality. Before a process is re-engineered the performance measures that require improvement need to be identified and the level of improvement should also be specified. This proposed tool allows the critical performancle measures to be identified and their levels of improvement to be specified. The re-engineering team also needs to identify any possible conflicts that might occur in the new process. The reasons for these conflicts occurring need to be fully understood so that these conflicts can be eliminated (if possible) from the new process. For example (see Fig. 31, if the company wishes to reduce both the time and cost of fulfilling customer orders, then certain conflicts arise. The process of driving down the cost of fulfilling the order will increase the cost of fulfilling the order in some places. How and where this occurs needs to be understood and this will allow an optimum solution to be found. If these conflicts are ignored, then the new process will probably not achieve the desired performance improvements over the long term. Targets for the new performance measures need to be identified. This allows the re-engineering team to gauge the scope of improvement required in the new process. Also, the level of difficulty will allow the re-engineering :team to identify the performance measures that can achieve their targets values easily, thus identifying some quick wins which will help to convince both the process managers and workers that the new process is actually working as anticipated.

5. Conclusions The proposed QFD tool allows the perspective of the customer to be integrated into the re-engineering of a business process. The perspective of the customer is integrated by identified the performance measures that closely measure specific requirements identified by the customer as being important. By including these customer oriented performance measures in the re-engineered process and ensuring that they are used to assess the performance of the new process, the new business process will then have a customer orientation. Another advantage of using QFD is that the conflicts between the performance measures can be identified. These conflicts can then be addressed during the development of the new (or re-engineered) business process. Targets for each of the performance measures can be identified and the degree of difficulty of attaining these targets can be specified. Also the performance of the business process, with regard to the customer requirements, against similar processes of their competitors can be rated. This proposed QFD tool should be used by a re-engineering team before and during the re-engineering of a business process. The tool can be used before the re-engineering process begins to identify the Various customer requirements, conflicts, targets, etc. The tool can be used during the re-engineering process to show how the performance measurements, their targets and conflicts have been addressed during the development of the new process.. This can be done by using a cascade of QFD charts or by build a QFD estate (i.e. a set of QFD house charts). Finally, this QFD tool could be used to help generate a detailed process model of a business process. This process model could then be input into a range of BPR software tools which would allow simulation and analysis of the model to carried out. In this way, more qualitative analysis of process models could be carried out.

4.2.5. Stage V: Re-engineer the process The re-engineermg team should re-engineer the business process and account for all the changes in the new process. The QFD tool cannot tell the re-engineering team how to re-engineer the process, but should only provide a mechanism for identifying the performance measures required in the new process and the potential/actual conflicts that may arise in the new process.

References
[l] Y. Akao, Quality Function Deployment, Cambridge, MA, USA, 1990. Productivity Press,

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H. Jagdel: et al./ Computers in Industry 33 (1997) 357-366 [7] 0. Molloy, A Design Environment for Concurrent Engineering, Ph.D. Thesis, University College, Galway, Ireland, 1995. [8] OConnor, D. Partridge, B. Seely, W. Guthmiller, K. Lovette, The SeeQFD software: an environment for QFD, Worldwide Passenger Car Conference and Exposition, Dearborn, MI, 1992, pp. 17-37. [9] Perry, Real life re-usable QFD, Electra-92 Conference, Hynes Convention Center, Boston, MA, May 12-14 1992, IEEE, pp. 423-426. [lo] M. Zairi, Measuring Performance for Business Results, Chapman and Hall, London, 1994. [l I] QFD Designer, Qualisoft Corporation, West Bloomfield, MI, USA.

[2] Bradley, J. Browne, S. Jackson, H. Jagdev, Business Process Re-engineering (BPR)--A Study of the Software Tools Currently Available, Computers in Industry, vol. 25, No. 3, 1995, pp. 309-331. [3] A. Classe, Software Tools for Re-engineering, Business Intelligence, London, 1994. [4] H. Davenport, Process Innovation: Reengineering Work through Information Technology, Harvard Business School Press, Boston, MA, 1993. [5] H. Davenport, J.E. Short, The New Industrial Engineering: Information Technology and Business Process Redesign, Sloan Management Review, Summer 1990, pp. 1 l-27. [6] Hammer, J. Champy, Reengineering the Corporation: A Manifesto for Business Revolution, Harper Business Press, New York, 1994.