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 pro’xss re-engineering; Performance measurement; Quality function deployment; Customer requirements

1. Introduction are closely coupled to the requirements of the cus-

tomer, the voice of the customer will be reflected in
This paper describes a proposed QFD based per- the re-engineered process.
formance measurement tool that can be used in
business process x-engineering. This QFD based
tool can be used to identify the performance mea- 2. Business process re-engineering
sures that closely .reflect the concerns of the cus-
Many approaches exist for improving perfor-
tomer and to ensure that these performance measures
mance but few approaches exist which offer the
are used (and measured) in the re-engineered busi-
opportunity to make dramatic improvements in the
ness process. This QFD tool can also be used to
non-manufacturing or ‘white-collar’ areas of a com-
identify redundant and missing performance mea-
pany’s business. Business Process Re-engineering
sures, as well as identify potential conflicts between
(BPR) is an approach that offers companies the
performance measures and targets for each perfor-
opportunity for achieving dramatic improvements in
mance measure. All of this information can then be
a short period of time. BPR can help them under-
used when re-engineering a business process. By
stand how the different functions or processes in
identifying and integrating performance measures that
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 capa-
* Corresponding author. bility;

0166-3615/97/$17.00 (4 1997 Elsevier Science B.V. All rights reserved.

PU SO166-3615(97)00041-9
358 H. Jagdev et al. /Computers
* 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 re-
design [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 improve-
ments in critical, contemporary measures of perfor-
mance, 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 re-
sources of the organisation to provide defined results
in support of the organisation’s 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. Cus-
tomer order fulfilment is a good example of a busi-
ness process as the output of the process (i.e. prod-
uct/service) is required by a customer and the pro-
cess itself spans several departments in the organisa-
tion. BPR involves re-engineering these processes to
achieve radical improvements in cost, time, respon-
in lndustn 33 (19971357-366
siveness, performance, quality, etc. These re-en-
gineered processes should provide the company with
dramatic improvements in cost, response time, and
performance as well as reflecting the company’s
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 tar-
gets 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.
 H. Jagdev et al. /Computers
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 rela-
tionships between customer requirements and engi-
neering characteristics, right through to production
planning. The principle may also be applied to map-
ping 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 pro-
cesses. The central part of the matrix is used to show
the relationships between customer requirements and
the performance measures used in this business pro-
cess. 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.
in Industry 33 (1997) 357-366 359
used to record the companies performance on partic-
ular customer requirements with respect to competi-
tors, where such information is available, for exam-
ple 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 require-
ments, and the columns the performance measures.
Thus, the relationship between customer require-
ments 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 pro-
cess 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 it’s
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
360 H. Jagdev et al./ Computers in Industry 33 (1997) 357-366
with 65 major product features, a matrix of over
8000 relations results. Thus manual methods in such
problems are tedious, discouraging the implementa-
tion of QFD and the reuse of previous analyses.
Fortunately a number of computerised QFD pack-
ages are now on the market, which are not restricted
to product design [7,8,1 I]. The QFD software cur-
rently available makes QFD accessible and reusable,
but does not provide direct software links to other
tools, although most output files contain matrix in-
formation. 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, qual-
ity, 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 pro-
cess may actually be increased. These potential con-
flicts need to be identified and understood. Also,
these BPR tools do not allow other possible dimen-
sions 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 don’t measure it, you can’t
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 in-
tended 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 mea-
sures which allowed managers to assess the perfor-
mance 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 ori-
ented, the performance measurement systems have
started to become more process oriented. This has
happened through customers and companies becom-
ing 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 im-
portant. 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 account-
ing 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 bene-
fits, 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 mea-
sures that are required;
 H. Jagdeu et al./ Computersin Industry33 (1997) 357-366
. identify conflicts associated with different perfor-
mance measures ;
- identify target values for customer oriented per-
formance 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 require-
ments. 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 perfor-
mance 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 indus-
trial sectors. This makes the task of collecting a
range of performance measures difficult. However,
the approach undertaken in identifying these perfor-
mance 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
A QFD performance measurement methodology
is described in this section. The core of this method-
ology involves the building of a QFD chart. This
chart will be used to identify the performance mea-
sures that meet customer requirements as well as
identifying targets for and conflicts between the dif-
ferent performance measurements. The steps in-
volved in this methodology are listed below and then
explained in more detail.
361
1. Identify customer requirements.
2. Identify existing performance measures.
3. Build QFD chart(s).
4. Identify re-engineering issues.
5. 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 be-
ing 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, compara-
tive assessment and degree of difficulty are com-
pleted. 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 ac-
counted 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 mea-
sures and the degree of difficulty of achieving these
targets can be identified. Also, the customer require-
ments that are not properly addressed by current
performance measures can be identified. This allows
specific performance measures to be created to ad-
dress these user requirements. The performance mea-
362 H. Jagdec et al. / Computers in Industry 33 (1997) 357-366

sures closely linked with the customer requirements period. In this example, the following customer re-
should then be used in the new process, thus integrat- quirements were identified as being important,
ing the perspective of the customer in the new namely:
process. shorter order delivery times;
higher delivery accuracy;
high quality products;
4.1.5. Re-engineer the process
cheaper products;
The re-engineering team can thus re-engineer the
accurate pricing information;
business process while taking into account the infor-
up to date product listings;
mation identified in the QFD chart(s). This will
faster order confirmation;
involve using the performance measures identified in
the ability to meet customer specified delivery
the new process as well as addressing the various
dates.
issues and conflicts identified through the use of the
Each of these customer requirements are ranked
QFD chart.
in order of importance and placed in the customer
requirements position of the QFD chart. These cus-
4.2. Applying the methodology to a business process tomer requirements, and their respective rank, are
shown in Table 1 below.
The methodology described in the previous sec-
tion is now used to show how the proposed QFD
tool can be used to relate the performance measures 4.2.2. Stage II: Identify existing performance mea-
to the customer requirements. A sample business sures
process (customer order fulfilment) is used here to In this stage, the performance measures used in
show how the methodology works, and how it identi- the current customer order fulfilment process are
fies issues that need to be considered in the re-en- identified. These performance measures give an indi-
gineering phase of the project (step 5). cation of what was viewed as being important in this
The customer order fulfilment process is con- process. All performance measures relate to the per-
cerned with receiving an order from a customer and formance of a process (or activity) and how well this
with delivering it within an agreed timeframe. The process (or activity) is performed. The performance
product(s) ordered by the customer may already have measures used in the current process are identified
been manufactured and are currently being stored in and placed in the QFD chart. This allows their
a warehouse, or some of the products ordered may impact on the customer requirements to be assessed
require to be completely or partially manufactured. as well as targets to be set for each measure. The
The customer order fulfilment process described here direction of improvement for each performance mea-
is an example of a common order fulfilment process. sure can also be identified.
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 Table 1
Customer requirements
re-engineer the business process.
Customer requirements Rank
Short order delivery times 1
4.2.1. Stage I: identify customer requirements High delivery accuracy 1
The customer requirements can be identified in a High quality products 2
number of different ways. They can often be ob- Cheaper products 2
tained by directly surveying the customers of the The ability to meet customer specified dates 4
Faster order confirmation 5
company, or by looking at the data available to the
Accurate pricing information 7
marketing department and by examining the com- Up to date product listings 9
plaints made by the customers over a specific time
 H. Jagdec et al./Computers
The current performance measures used in a cus-
tomer 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 pro-
cess. By focusing ton the wrong measures the com-
pany is focusing on the wrong areas. Also, the areas
focused on may nor be related to customer require-
ments. All of the performance measures identified
above can now be placed in a QFD chart and their
impact on the cusmmer requirements assessed. Tar-
get 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
in Industry 33 (1997) 357-366 363
types of information is displayed. This information
needs to be obtained by the re-engineering team and
some of this information will require detailed bench-
marking.
Each of the pieces of information shown in Fig. 3
is now explained further.
The customer requirements and current perfor-
mance 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 min-
imise 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 deliv-
ery 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 perfor-
mance measure. This is a subjective opinion that the
company needs to identify and the degree of diffi-
culty 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;
364 H. Jagdev et al. / Computers in Industry 33 (1997) 357-366

@ strong Positive
L
Positive
T
Negative I
:: p
d
>#< Strong Negative
;.
g .E
*
-
0
-

01. 0
-

I
T
High Quality
2 0 l-2-3 4
Products I 0
-

Cheaper Products
- -

0 0 0
- -
Faster Order
Confirmation 0
- -

I Accurate Pricing
Information
7
-
Up to Date
9
Product Listings +-
0 StrongRelatIonship 4 13 3
0 Medium RelationshIp
0 weail Relatlonshlp

9 $ mr
b 0 u
r

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

. redundant with regard to the customer require- the customer requirements as well as performance
ments; measures that are missing. These desired perfor-
- missing. mance measures need to be measured in the new
process. The conflicts between these performance
4.2.4. Stage IV: Identify re-engineering issues measures need to be identified and understood before
Before undertaking the re-engineering of a busi- they can be addressed. The QFD chart also allows
ness process, a set of requirements for the new targets for these measures to be identified and these
process need to be identified. The various conflicts tell the re-engineering team what needs to be incor-
that will arise in the re-engineering process need to porated.
be identified, understood and addressed. The new The QFD based tool proposed here allows several
process should have the perspective of the customer important issues to be highlighted before the actual
built into it. This can be done by using the perfor- process re-engineering occurs. These issues relate to:
mance measures identified as being closely related to - what performance measures should be used;
 H. Jagdev et al. / Computers in Industry 33 (1997) 357-366
. what possible conflicts might occur in the pro-
cess;
- what are the targets for the new process.
In their definition of re-engineering, Hammer and
Champy talk about achieving dramatic improve-
ments 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 antici-
pated.
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 pro-
cess and the potential/actual conflicts that may arise
in the new process.
365
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 cus-
tomer 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 mea-
sures 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 con-
flicts between the performance measures can be
identified. These conflicts can then be addressed
during the development of the new (or re-en-
gineered) business process. Targets for each of the
performance measures can be identified and the de-
gree of difficulty of attaining these targets can be
specified. Also the performance of the business pro-
cess, 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-en-
gineering 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 dur-
ing 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.
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366 H. Jagdel: et al./ Computers in Industry 33 (1997) 357-366

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