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Production Planning & Control,
Vol. 15, No. 8, December 2004, 802ā€“818
Application of QFD for e-Business planning
BOON L. TAN, NELSON K. H. TANG and PAUL L. FORRESTER
Keywords E-Business, SME, QFD, balanced scorecard,
value chain, planning framework
Abstract. E-Business represents new avenues for sustainable
competitive advantage. Small and medium-sized enterprises
(SMEs) are now expected to be digital-ready to continue as
trading partners for their customers. SMEs require
socio-technical skills and organizational skills and know-how
to comprehend e-Potentials and transform them into
e-Implementation. An e-Business planning framework is pro-
posed here which links both in strategic and operations manage-
ment by applying quality function deployment (QFD, also
known as house of quality). The balanced scorecard (BSC)
will be used to provide an organization overview to objectives
setting, critical in ensuring e-Initiatives are aligned with
organization vision and objectives.
The paper presents the pilot stage of this research project,
discussing how the proposed planning framework works. Data
from a case study are employed, and expert advice was sought
to prioritize and rank the system components (the ā€˜whatsā€™) and
their interrelationships. The paper begins with an introduction
to the importance of e-Business to SMEs, and a brief review of
the key components of the proposed framework. Next follows
a discussion of the case study and how the framework can be
applied in this particular situation. The paper concludes with
suggestions for proposed future work; the conclusion can also
be extended to provide a series of matrices to provide a clear,
step-by-step planning framework for SMEs which are planning
and implementing e-Business, by converting customer needs
into feasible e-Business plans.
1. Introduction
In the early 1990s, there were high expectations for
engaging the internet as a platform for business transac-
tions and business management. However, it was not
until the late 1990s that the term e-Business ļ¬nally
Authors: Boon Tan (corresponding author), Technology and Operations Management Research
Group, Aston Business School, Aston University, Aston Triangle, Birmingham, B4 7ET. Email:
tanbl@aston.ac.uk. Paul L. Forrester, Birmingham School of Management, Birmingham
University, Birmingham, UK. E-mail: p.l.forrester@bham.ac.uk
BOON. L. TAN was educated in Singapore, until the completion of his diploma course at Singapore
Ngee Ann Business School in 1996, when he joined the army. He spent two years at Aston Business
School for his ļ¬rst degree and conferred his BSc(Hons) in Operations Management in 2000. Upon
completion of his degree, he started working as a researcher in AMI Singapore for a year, before
returning in 2001 to start his PhD research under the supervision of Dr Nelson Tang and Professor
David Bennett. His PhD topic is on the development of an integrated e-Business planning frame-
work for SME senior managers. He has also taught both large and small groups of undergraduates
and postgraduates in Aston Business School. Boon is currently writing up his PhD. His current
research interests are e-Business management, technology management and total quality
management.
It was with great shock and sadness that friends and colleagues learned of the unexpected passing
away of Nelson Tang at just 41 years of age. To many of us Nelson was a friend who, in the time he
was with us, earned our respect and trust for his professionalism, reliability, enthusiasm and the
valuable contribution he made in the area of operations management. NELSON, K. H. TANG was a
Senior Lecturer of electronic business at Aston University, UK. He joined the staļ¬€ of Aston
Business School in 2000, and his research interests were e-Business management, supply-chain
management, technology management, business process re-engineering, knowledge management,
information resources management and total quality management. He was the co-editor of the
International Journal of Business Performance Management.
Production Planning & Control ISSN 0953ā€“7287 print/ISSN 1366ā€“5871 online # 2004 Taylor & Francis Ltd
http://www.tandf.co.uk/journals
DOI: 10.1080/09537280412331309190
began to appear in management meeting agendas.
e-Business has proven to be able to create competitive
advantages for both big companies and SMEs. e-
Business, however, also represents higher degrees of
potential pitfalls due to the limited amount of time and
money available for investing in innovations such as
e-Business. A successful implementation would enable
the SMEs in the creation of competitive advantage,
while failing in implementation or in embracing
e-Business may spell the end of the business in the near
future having been overtaken by competitors. The aim of
the paper is to establish a planning framework that
is feasible for e-Business planning, for use by SME
managers.
The ļ¬rst part of the paper will discuss the growth of
importance of e-Business and why an e-Business planning
framework is required to assist managers in e-Business
planning. This will be followed by discussions on the
three techniques that are integrated to form the planning
framework. These three techniques are quality function
deployment (QFD), balanced scorecard (BSC) and
value-chain analysis (VCA).
Next, the planning framework for e-Business and its
eight-step approach will be identiļ¬ed and discussed,
thereby establishing on how the three techniques are
integrated and how a step-by-step approach can be
engaged in a framework for e-Business planning. This
will be further illustrated with results generated from
a completed pilot study, to discuss on how the planning
framework was able to customize the list of e-Business
applications while taking into account the needs of
the customers as well as the business objectives and
capabilities.
2. The growth of importance for e-Business
E-Business started as a marketing catchphrase for
technology organizations. It can be deļ¬ned as a way of
integrating applications including ERP, CRM and SCM
in order for them to work together and help in managing,
organizing, routing and transforming information
(Kalakota and Robinson 2001) or simply, ā€˜doing business
digitallyā€™ (Brache and Webb 2000). Society is now mov-
ing towards cashless transactions (Hussain and Hussain
1991) and business communications are moving to a
higher level beyond basic computer-to-computer
exchange of information (Zwass 2002).
The internet, the main architecture behind e-Business,
has evolved from a scientiļ¬c network to a platform that
enables new ways of doing businesses (Amor 2000) and
provides almost unlimited reach and information to cus-
tomers (Jordan 2001), allowing easier access to informa-
tion anywhere as long as computers and networks exist,
the opening new approaches to meeting needs and per-
forming functions (Porter 2001). The internet architec-
ture, currently in its third generation, began its evolution
in 1991 when Tim Berners-Lee posted the language of the
WWW online at alt.hypertext (Duncan and Kenney, 2001).
It now enables the development and deployment of
industrial-strength applications to help bring the web
and existing systems together, which, according to
Kalakota and Robinson (2001), is the key to e-Business.
Coincidentally, e-Business is also in its third phase, with
the ļ¬rst phase (1994ā€“1997) concentrating on making
its presence known, the second phase (1997ā€“2000) on
e-Commerce and the third phase (2000 to present) on
the internetā€™s impact on proļ¬tability, also known as
e-Business (Kalakota and Robinson 2001). Businesses
are now performing and coordinating critical business
processes such as product designing, incoming and
outgoing transactions, manufacturing and providing
services through the extensive use of computer and
communication networks and technologies (Alter 2002).
The ā€˜digital economyā€™ is seen as a major issue and
area of opportunity to many large organizations as it
represents a new avenue to create sustainable competitive
advantage. Thus, with urgency of big business to go
digital, SMEs are expected to be digital-ready in order
to continue as trading partners. We see digital-readiness
as the ability and capability of an organization to
conduct transactions on the web, in essence, being
e-Business-ready. Although SMEs realize they need to
ā€˜go digitalā€™ to survive, many of them are not unable to
value the potential or possess the know-how to manage
the complexity in change. Going electronic is not merely
PAUL FORRESTERā€™s early career experience was in production management in the carpet and
electronics industries. Since then he has held various research and teaching appointments including
eight years at Keele University, where he became Director of MBA Programmes, and three years
prior to joining Birmingham at Aston Business School (Director of Part-time MBA Programmes
and Convenor of the Technology and Operations Management Research Group). He also spent a
period of sabbatical leave at National University of Singapore in 1995 and has supervised a number
of overseas doctoral and postgraduate research projects. He continues to maintain an active
research and teaching career. His research interests lie in the strategic, design and organizational
issues of managing operations, the extension of operations management concepts to service
organizations, and the use of virtual learning for management education.
Application of QFD for e-Business planning 803
getting onto the web. SMEs require organizational and
technical knowledge to assist them in the planning and
managing of digital-ready projects.
Organizations constantly need to evolve the way they
interact with suppliers and customers as well as respond
to the challenges posed by current legacy systems, and
integrating all of these into their e-Business plans. A well-
designed, well-executed e-Business plan can send a con-
sistent and positive message out from the organization
(Butler, 2000). Organizations need to be strong and
clear in their e-Business strategies (Butler 2000). All
too easy to say, perhaps: the underlying question here,
therefore, is how can an organization competently
accomplish this?
Kalakota and Robinson (2001) argued that to meet
this change, organizations must develop a whole new
generation of leaders that can create a digital future
with intent. They suggested 20 trends driving
e-Business, which can be used as a checklist by organiza-
tions to detect and prioritize drivers when formulating
e-Business plans. Organizations must bear in mind not
to focus too intently on the ā€˜eā€™ component, but more on
ā€˜businessā€™ requirements. The greatest threat to an orga-
nization is either failing to deploy the internet or failing
to deploy it strategically (Porter 2001) and therefore
eļ¬€ectively. Organizations should deploy e-Business only
if it complements strategic needs. Not all e-Business
mechanisms are right for every organization (Lord
2000). One of the deadly assumptions would be to believe
that technology is the answer. Tan and Tang (2002)
summarized a list of common pitfalls from various
relevant literatures, which can be seen in table 1. In
order to help organizations avoid the common pitfalls,
this project deploys the quality function deployment
(QFD) by incorporating the balanced scorecard (BSC)
and the value-chain analysis (VCA) into e-Business plan-
ning. It is to this that we now turn our discussions.
3. QFD and its application
QFD (Akao 1990) was initially developed in the late
1960s at Kobe Shipyard, Japan, as a means to motivate
engineers to consider quality early in the design process.
It was introduced into the USA in 1983 by Kogure and
Akao, with the article ā€˜Quality function deployment and
CWQC in Japanā€™, appearing in the journal Quality
Progress. In 1984, Clausing introduced QFD to Ford,
USA, and its supplier companies (Hauser and Clausing
1988) and since then a number of other large organiza-
tions have promoted and successfully utilized QFD.
The original Japanese name of QFD is ā€˜hin shitsu kino
ten kaiā€™, which can be translated into ā€˜quality function
deploymentā€™ (Lockamy and Khurana 1995). QFD is
not simply a quality tool but a planning tool for introduc-
ing new products and upgrading existing ones (Slabey
1990). This can be gleaned from two motives behind
the creation of QFD, suggested by Akao (1990):
 to enable better determination of design quality;
 to determine key manufacturing operations in
advance.
Table 1. Major pitfalls of e-Business.
Internal External
Strategic Customers
We know what we want We know what customers want
Technology is the answer We know how to give customers what they want
e-Business is good for us Our customers are e-ready
Othersā€™ e-Business models will suit our needs Suppliers
We will be able to gain market share with
e-Business
We know what suppliers want
We will be able to increase proļ¬t with e-Business We know how to give suppliers what they want
e-Business will enable us to become a global
enterprise
Our suppliers are e-ready
We have the budget for e-Business implementation Competitors
Processes They will not be able to lure our customers
Our internal business processes are in place
and can support the migration to e-Business
If they can go online, we can and should go online
We know how to achieve what we want Regulators
The systems will integrate Our products can be sold anywhere in the world
Personnel Processes
We know who to appoint to champion/lead and/or
be in the e-Business project team
We can integrate the distribution channels
to support e-Business
Everybody in the organization knows why we
need to go ā€˜eā€™
We can integrate the supply chain to support
e-Business
804 B. L. Tan et al.
QFD is also a tool to ensure that the ā€˜correctā€™ product
is being developed. It does this by incorporating custo-
mer needs into the planning process. In recent years,
QFD has also been evolved into a management tool to
model the dynamics of the design process (Govers 2001).
There are a number of widely reported deļ¬nitions of
QFD. these include QFD being deļ¬ned as a philosophy
(Akao 1990), a method (Akao 1990, Mazur 1993), a
system (Slabey 1990, Terninko 1989, Martins and
Aspinwall 2001), a set of planning and communication
routines (Hauser and Clausing 1988), a process (GOAL/
QPC 1989, Bossert 1991), a cross-functional tool (King
1989), a systematic planning process (Daetz et al. 1995,
GOAL/QPC 1989), a customer-oriented approach
(Govers 1996), a team-based approach (Miller and
Bombino 1992), a mechanism (Sullivan 1986) and as
the ultimate quality assurance system (Powers and
Harter 1995). More importantly in relation to the
research project, QFD is also deļ¬ned as a technique for
identifying the voice of the customer to ensure that this
voice is systematically included in the designing of pro-
ducts/services (Akao 1990, Burn 1990).
The house of quality (HOQ), also known as the QFD
matrix, is the nerve centre and engine that drives the
entire QFD process, and serves as conceptual map for
interfunctional planning and communication (Hauser
and Clausing 1988). HOQ is used to depict customer
requirements, organization measures, target values and
competitive product evaluations (Eureka and Ryan
1994). An HOQ contains seven diļ¬€erent elements, as
shown in ļ¬gure 1.
As with any technique, there are limitations with
QFD. It is not an easy technique to understand and
use. Also, existing working cultures tend to be mainly
functionally inclined and focused on individual contribu-
tions, rather than on a team approach to drive activities.
QFD, however, requires multi-functional teams to
drive activities. Attempting to build the HOQ, in itself,
requires hours of arduous work, as teams still need
to carry out the work of collecting data, designing and
interpreting them (Sullivan 1986). The HOQ is gener-
ated through customer surveys and manual inputs
of survey results, but records relating to QFD were rarely
kept, meaning a lack of established evaluation systems
suited to QFD. Information is needed to track the
progress of the QFD project and to provide links between
the diļ¬€erent QFD phases.
Essentially, the ā€˜voice of the customerā€™ in practice
contains ambiguity, multiplicity of meaning and is qua-
litative in nature. Customers also tend to mix their
primary needs with their desirable needs. There is also
a need to input a large amount of data and make various
decisions, such as determining the optimal tradeoļ¬€
between customer demands, engineering characteristics,
and hence determine the degree of interrelationships
between them and set precise target values. In practice,
many of these decisions have to be based on subjective
evaluation (King 1987). Govers (1996) further argues
that the ability to control the production processes at
a level that warrants an award of ISO certiļ¬cation
(process orientation) is a prerequisite for organizations
to successfully implement QFD.
In addition to the points above, the generation of
ā€˜howsā€™ (the means by which to implement QFD)
may be a very tedious task as there are few models
available to assist the managers in providing a balanced
view of speciļ¬c customersā€™ needs with those of other
stakeholders. These ā€˜howsā€™ have to take into account
customer needs as well as the organizationā€™s broader
strategic objectives and operational capabilities. Despite
these weaknesses of QFD, it is a highly eļ¬€ective tool in
enabling the incorporation of customer needs into a
planning process, prioritizing these needs and feasibilities
of the business processes in order to facilitate the planning
Design requirements or ā€œHowsā€ or service
elements
Correlations between
ā€œHowsā€
Correlations between ā€œWhatsā€ and ā€œHowsā€
Priorities assigned to design requirements
Customer
needs or
ā€œHowsā€
Competitive
assessment
Priorities
assigned to
customer
needs
Figure 1. The house of quality (Evans and Lindsay 1996).
Application of QFD for e-Business planning 805
process. To assist in overcoming these weaknesses of
QFD, we have included the balanced scorecard (BSC)
(Kaplan and Norton 1992) as the starting block to
building the QFD e-Matrix. By use of the term ā€˜e-
Matrixā€™, we are proposing the use of QFD matrices to
assist in e-Business planning, although it is not necessarily
an electronically enabled process. However, the authors
decided to use this terminology as the generation of these
QFD e-Matrices are also done electronically by using the
QFD/CAPTURETM
software. A discussion of BSC and
how it can help to overcome these weaknesses is discussed
below. The further inclusion of the VCA (Porter 1985)
assists in the generation of ā€˜howsā€™ for the e-Matrix. This
will also be discussed below.
4. The basics of the balanced scorecard
The balanced scorecard (BSC) was ļ¬rst created in
1987 at Analog Devices to help improve organizational
performance and competitiveness (Schneiderman 2000),
particularly to overcome weaknesses of the ļ¬nancial
accounting model. Kaplan and Norton (1992) ļ¬rst pub-
lished details on the application of the framework in
the Harvard Business Review. Since then, a number of orga-
nizations (including Mobil, Citicorp, ATT, Rockwater,
Apple Computer, AMD, KPMG Peat Marwick,
Allstate Insurance, as well as not-for-proļ¬t and govern-
mental organizations) have been using the BSC as a
strategic planning and performance measurement tool
(Kaplan and Norton 1993, 1996a, b, 2000, 2001, Chow
et al. 1997). The BSC is a strategic tool that enables
organizations to link a set of guides directly with their
strategy, whilst concurrently allowing them to track all
the issues linked with and aļ¬€ecting performance
(Mendoza and Zrihen 2001). According to Silk (1998),
60% of Fortune 1000 ļ¬rms have experimented with the
BSC.
Figure 2 shows the four perspectives (customer, ļ¬nan-
cial, internal business processes and learning and growth)
of the BSC that can be used to translate the organi-
zationā€™s vision and strategy into planning guidelines
and ultimately ā€˜delightingā€™ stakeholders (Kaplan and
Norton 2001: 90):
 Customers: ā€˜the strategy for creating value and diļ¬€er-
entiation from the perspective of the customerā€™.
 Financial: ā€˜the strategy for growth, proļ¬tability, and
risk viewed from the perspective of the shareholderā€™.
 Internal business processes: ā€˜the strategic priorities for
various business processes that create customer and
shareholder satisfactionā€™.
 Learning and growth: ā€˜the priorities to create a climate
that supports organizational change, innovation,
and growthā€™.
A 10-step methodology was introduced to assist in
the building of a strategic management system using the
BSC (Kaplan and Norton 1996a, b). However, to link
the companiesā€™ long-term strategy to short-term actions,
ā€œTo achieve
our vision,
how should we
appear to our
customers?ā€
Customer
ā€œTo satisfy our
shareholders
and customers,
what business
processes must
we excel at?ā€
Internal Business Process
Objectives Initiatives
Measures Targets
Objectives Initiatives
Initiatives
Measures Targets
Objectives Measures Targets
Initiatives
ā€œTo succeed
financially,
how should we
appear to our
shareholders?ā€
Financial
Objectives Measures Targets
ā€œTo achieve
our vision,
how will we
sustain our
ability to
change and
improve?ā€
Learning and Growth
Vision and
Strategy
Figure 2. Transforming vision and strategy (Kaplan and Norton 1996a).
806 B. L. Tan et al.
organizations will have to ensure that the 10-step
methodology goes through the four management
processes (Kaplan and Norton 1996a) in a spiral. These
four management processes are:
(1) translating the vision;
(2) communicating and linking;
(3) business planning; and
(4) feedback and learning.
The BSC, however, provides no mechanism for main-
taining the relevance of deļ¬ned measure (Hudson et al.
2001). Also, there is a lack of integration between top-
level strategic scorecard and operational-level measures,
thus making execution of the newly-formed strategies
problematic (Ballantyne and Brignall 1994). This sce-
nario matches the challenges faced by many SMEs,
which need to fulļ¬l the expectation of matching top-
level objectives with operational-level processes, but are
unable to identify precisely what needs to be implemen-
ted. The BSC can, on the other hand, complement QFD
to form a strong alliance. The strengths of BSC make
it easier to generate the ā€˜whatsā€™ for the e-Matrices of
the QFD. Coupled with the measurement functions typi-
cal of any BSC, QFD can be made more robust by incor-
porating the ā€˜voice of customersā€™ and in more eļ¬€ective
performance measurements. This can eliminate the need
for customer surveys since these ā€˜voicesā€™ can be con-
structed from the BSC framework. The QFD can, alter-
natively, provide integration between top-level objectives
and operational-level activities, a major deļ¬ciency in the
typical BSC approach, by making it possible for man-
agers to prioritize needs while taking into account the
business processes, ultimately providing a blueprint for
e-Business planning. QFD can facilitate planning at the
lowest level of implementation with the use of multi-level
matrices as deemed necessary by the organization and/or
for the speciļ¬c planning exercise. To provide a deeper
understanding of the essence of the planning framework,
there will be further discussions on this later. Next, we
shall look at how the value-chain analysis process model
ļ¬ts into the planning framework.
5. The value-chain analysis
One of the main challenges of QFD is the generation of
factors as inputs for ā€˜whatsā€™ and ā€˜howsā€™ (Sullivan 1986,
King 1987, Tan and Tang 2002). While it was discussed
earlier that the BSC can be utilized to assist in the gen-
eration of ā€˜whatsā€™, the value-chain analysis (VCA)
(Porter 1985) is better suited to aiding the generation
of ā€˜howsā€™. The VCA (see ļ¬gure 3) can help to develop
a clearer understanding of how the business operates,
Inbound Logistics
ā–  Real-time integrated
scheduling, shipping,
warehouse
management, demand
management and
planning and advance
planning and
scheduling across the
company and it's
suppliers
ā–  Dissemination across
the company of real-
time inbound and in-
progress inventory data
Operations
ā–  Integrated information
exchange, scheduling
and decision-making in
in-house plants,
contract assemblers
and components
suppliers
ā–  Real-time available-to-
promise and capable-
to-promise information
available to the sales-
force and channels
Outbound Logistics
ā–  Real-time transaction
of orders whether
initiated by an end-
consumer, a sales
person or a channel
ā–  Customer and channel
access to product
development and
delivery status
ā–  Collaborative
integration with
customer forecasting
systems
ā–  Integrated channel
management including
information exchange,
warranty claims and
contract management
Marketing and Sales
ā–  Online sales channels
including websites and
marketplaces
ā–  Real-time inside and
outside access to
customer information,
product catalogues,
dynamic pricing,
inventory availability,
online order entry
ā–  Online product
configurators
ā–  Customer profiling
ā–  Push advertising
ā–  Real-time customer
feedback through web
surveys and promotion
response tracking
After-sales service
ā–  Online support of
customer service
representatives through
e-mail response
management, billing
integration
ā–  Customer self-service
via websites and
intelligent service
request processing
including updates to
billing and shipping
profiles
ā–  Real-time field
service access to
customer account
schematic review, parts
availability and
ordering
Procurement
ā–  Internet-enabled demand planning
ā–  System integration of purchase, inventory and forecasting systems with suppliers
ā–  Automated requisition to pay
ā–  Direct and indirect procurement via market places, exchanges and auctions
Business development
ā–  Collaborative product design across locations and among multiple value-system participants
ā–  Knowledge directories accessible from all parts of the organization
ā–  Real-time access by RD to online sales and service information
Human Resource Management
ā–  Self-service personnel and benefits administration
ā–  Web-based training
ā–  Internet-based sharing and dissemination of company information
ā–  Electronic time and expense reporting
Firm infrastructure
ā–  Web-based distributed financial and ERP systems
ā–  Online investor relations (e.g. information dissemination, broadcast conference calls)
Figure 3. E-Value chain application (Porter 2001).
Application of QFD for e-Business planning 807
indicating where value is generated and how existing
elements can be reconļ¬gured or re-engineered to meet
the strategic intentions.
Porterā€™s VCA structures business operations into ļ¬ve
primary activities from inbound logistics to after-sales
services and four support activities. Depending on the
organizationā€™s size, it is useful to break down each ele-
ment of the VCA into the core operational processes and
assess the customer value that is added by these processes.
When followed rigorously, this analysis can be used to
identify the cost and revenue generated by each of the
VCA processes. At the same time, e-Business enhance-
ments should be considered such as the elimination of
errors through better communication, and collaboration
and information-sharing with process stakeholders. With
regard to procurement and supply-chain management, it
is useful to distinguish between diļ¬€erent process types
such as the identiļ¬cation of new supply sources, the
ordering process, the materials planning process and
the tendering process.
A recent article by Porter (2001) on VCA in an
e-Business environment demonstrates a particular appli-
cation that is useful for analysing the relationships
between the business and its various stakeholder groups
from an operational perspective (see ļ¬gure 3). This facil-
itates the process of identifying e-Business applications
that can support or enable current or future relation-
ships. By mapping the interfaces to commercial business
partners, a ļ¬rm can make judgements on the nature of
existing and future relationships. In the process of identi-
fying focus areas in the VCA, the main stakeholders, who
should subsequently be involved in the planning process,
will emerge.
6. The planning framework for e-Business
planning in SMEs
The European Commission (EC) deļ¬nition of small
ļ¬rms is based on the criteria of eļ¬€ective management
independence and workforce categories of less than 250
salaried employees for medium-sized ļ¬rms, less than 50
for small ļ¬rms and less than 10 for micro-ļ¬rms.
According to Eurostat, the statistical oļ¬ƒce of the EC,
some 90% of ļ¬rms are micro-ļ¬rms and they account
for one-third of all employment (with wide variations
between member states), with roughly half of all EU
jobs in the broader SME sector taken as a whole. In
the UK there are more than 3 million of these ļ¬rms.
They account for one-half of private sector employment
and one-quarter of GDP (DTI 1998, 2001, ENSR 1997).
In the ļ¬rst step, the employment of BSC will assist
in ensuring that all-round business strategic planning
is exercised within the process of e-Business planning
process. Customersā€™ needs (the ā€˜whatsā€™) will then be gen-
erated from the results of this strategic planning process.
Upon the completion of step 1 (or at least under way), the
manager may commence step 2, the development of the
VCA to aid in the generation of ā€˜howsā€™ (business processes)
for the QFD e-Matrix I (step 3). The purpose of QFD
e-Matrix I is to prioritize the business processes according
to their ability to meet the critical needs of customers. QFD
e-Matrix II on the other hand, is being employed for the
purpose of identifying and prioritizing the e-Business
applications in accordance with the prioritized business
processes obtained from QFD e-Matrix I.
The current authors have developed an eight-step
approach to assist in the understanding and creation of
the planning framework works (see ļ¬gure 4). They are
identiļ¬ed as follows:
Step 1. Using BSC to develop ā€˜whatā€™ for QFD
e-Matrix I.
Step 2. Using VCA to develop ā€˜howā€™ in QFD
e-Matrix I.
Step 3. Completing QFD e-Matrix I.
Step 4. Identiļ¬cation of critical business processes
from QFD e-Matrix I.
Step 5. Inputting critical business processes to QFD
e-Matrix IIā€™s ā€˜whatā€™.
Step 6. List of e-Business applications to QFD
e-Matrix IIā€™s ā€˜howā€™.
Step 7. Completing QFD e-Matrix II.
Step 8. Identiļ¬cation of critical e-Business applications
from QFD e-Matrix II.
6.1. Step 1: Using BSC to develop ā€˜whatā€™ for QFD e-Matrix I
The development of the BSC is always and ideally top-
down (Kaplan and Norton 2000). Therefore, we have to
ļ¬rst identify the vision of the organization. The identiļ¬ca-
tion of organization vision can be done through gathering
information from documentation, followed by conļ¬rming
the vision with senior managers. Once achieved, we can
start to formulate the objectives from a ļ¬nancial perspec-
tive. Only after these ļ¬nancial objectives are identiļ¬ed will
the organization be able to determine, at the customer
perspective level, the objectives that can help to achieve
the identiļ¬ed ļ¬nancial objectives.
Kaplan and Norton (2000) listed three types of custo-
mer perspectives: operational excellence, customer inti-
macy or product leadership. So at the customer
perspective level, the organization must be able to decide
which of these they should be concentrating on. Once this
is agreed by managers, it will then be possible for the
organization to formulate a list of performance measure-
ments that, upon meeting the requirements, will enable
the organization to achieve its customer perspective
objectives.
808 B. L. Tan et al.
The next phase is to identify a list of key business
processes that can enable the organization to achieve
the objectives set from both the ļ¬nancial and customer
perspectives. In short, these will be the business processes
that the organization will ļ¬nd vital in excelling at,
as these processes are critical in allowing the organiza-
tion to achieve its vision. Finally, senior managers
are required to identify any innovation and growth
objectives for the organization. These objectives will ulti-
mately provide the blueprint in the creation of an infra-
structure for the organization to create long-term
improvements and growth. While objectives in ļ¬nancial,
Step 7
Completing
QFD eMatrix II:
Prioritising
e-business
applications
Step 4
Identification of critical business processes.
Absolute imp
Relative imp
Prioritising
Step 6 - Proposed e-business applications
Step 8
Identification of critical e-business applicatons
Absolute imp
Relative imp
Rrioritising
Action
Processes
Requirements
How?
What?
Step 3
Completing
QFD eMatrix I:
Prioritising
business process
Applications
Processes
Step 5
Critical
Processes
Identified
from
Step 4
e-business applications
Impor-
tance
( see
above)
Impor-
tance
Step 2
Balanced Scorecard
Identify internal and
external needs
Step 1
Value Chain Analysis
Identify business process
Figure 4. Proposed planning framework prototype.
Application of QFD for e-Business planning 809
customer and business process perspectives can be both
current and for the future, there are likely to be gaps (e.g.
technology and employee skills) that act as barriers to
meeting these objectives. Therefore, objectives identiļ¬ed
from the innovation and growth perspectives will most
likely seek to narrow these gaps.
The present authors developed a BSC for a Chinese
printing business, which can be seen in ļ¬gure 5. The
levels of perspectives are shown clearly from top to bot-
tom in the order of how the BSC is formulated. This list
can then be inputted as the ā€˜whatsā€™ for QFD e-Matrix 1
(see ļ¬gure 4).
6.2. Step 2: Using VCA to develop ā€˜howā€™ in QFD e-Matrix I
To most SMEs, managerial decisions have always been
functionally-oriented and tend to reļ¬‚ect the background
of the restricted number of individuals on the manage-
ment team. The VCA process model was thus brought
into the framework with the intention of identifying the
basic, generic business processes that all businesses should
possess. The VCA helps to provide an overview of the
business processes, thus limiting the inļ¬‚uences of func-
tionally-oriented managerial styles in the development
of ā€˜howsā€™.
Using the VCA, senior managers have a clear view of
those key business processes that add value to the diļ¬€er-
ent products and services an organization provides. The
VCA further allows senior managers to analyse processes
at diļ¬€erent key stages and levels. From the identiļ¬ed
key business processes, managers are able to formulate
a comprehensive list of ā€˜howsā€™ to be inputted into QFD
e-Matrix I.
6.3. Step 3: Completing QFD e-Matrix I
The list of identiļ¬ed internal and external needs are
inputted as the ā€˜whatsā€™ in the QFD e-Matrix I. Surveys
and/or expert advice are consulted at this point to list the
importance and criticality of the ā€˜whatsā€™. Usually, custo-
mers have to be consulted to determine which among the
ā€˜needsā€™ are the ones they truly desire, or to provide any
ā€˜needsā€™ missing from the list. Of course, managers must
take note that the needs that are truly desirable may not
be verbally explicit from customers and so have to use
some judgements to ascertain any implicit customer needs.
The importance ratings of these needs can range from
1 to 10. The list of identiļ¬ed business processes is also
inputted as the ā€˜howsā€™ in the same e-Matrix (QFD
e-Matrix I).
Financial
perspective
Customer
perspective
Customer intimacy
Vision: One-stop solution medium-sized printer providing
friendly, reliable and cost-effective printing and design services
Sales
growth
Product
profitability
Costs
growth
High
retention
On-time
delivery
Complaints
Resource
planning
Preferred supplier- survey
Sustained product
quality
Product cycle
time
Process
reliability
Innovation and
growth
perspectives
Business process
perspectives
Training
investments
New account
opened
New product
introductions
Staff satisfaction- survey
Figure 5. United Printing balanced scorecard.
810 B. L. Tan et al.
The ā€˜whatsā€™ and ā€˜howsā€™ in QFD e-Matrix I will then
undergo an interrelationship analysis (obtained from the
survey and/or expert advice) to determine the business
processes that are the most important and relevant in
meeting the needs and demands ranked most highly by
customers.
The QFD/CAPTURETM
software is being used in this
project to capture and analyse the relationships between
the ā€˜whatsā€™ and the ā€˜howsā€™. The interrelationship of the
needs and business processes are then calculated using the
correlation matrix function of the QFD/CAPTURETM
software. The correlation between the ā€˜howsā€™ will also
be taken into account, as there might be complementar-
ity as well as tradeoļ¬€s for each of the diļ¬€erent business
processes selected.
The scoring of each factor of ā€˜whatsā€™ is ļ¬rst entered into
QFD e-Matrix I, followed by the scorings of the relation-
ships between each of the ā€˜whatsā€™ and the ā€˜howsā€™. The
relationship scoring deļ¬ned as ā€˜9ā€™ means a strong rela-
tion, ā€˜3ā€™ means an average relation and ā€˜1ā€™ represents a
weak relation. No entry means there is no relationship
between the ā€˜whatā€™ and ā€˜howā€™. The software will then be
able to calculate and display a list of prioritized business
processes for the organization to look into for the purpose
of e-Business application planning.
6.4. Step 4: Identiļ¬cation of critical business processes from
QFD e-Matrix I
The product from this round of rigorous calculation is
a list that prioritizes those key business processes that
should be the critical areas of focus. This list highlights
the business processes that will enable the organization to
satisfy these highly vital external and/or internal needs
identiļ¬ed.
6.5. Step 5: Inputting critical business processes to QFD
e-Matrix IIā€™s ā€˜whatā€™
The next step in the framework is to integrate the list
of prioritized business processes (product from QFD
e-Matrix I) by inputting it as the list of ā€˜whatsā€™ in QFD
e-Matrix II. The rationale behind this is to transform the
identiļ¬ed critical business processes into ā€˜whatsā€™, in order
for us to measure the relationships of these processes
with available or proposed e-Business applications. This
also allows for the identiļ¬cation of e-Business applications
that can help to streamline and enhance the eļ¬€ectiveness
and eļ¬ƒciency of the business processes in order to meet
both internal and external needs.
6.6. Step 6: List of e-Business applications to QFD e-Matrix
IIā€™s ā€˜howā€™
The list of e-Business applications to be inputted as
ā€˜howsā€™ in QFD e-Matrix II could either be those already
available in the company or new applications as pro-
posed by managers. Further e-Business resources can be
obtained from vendors or in-house, including researching
information online. The list of e-Business applications
should not limit creativity as putting these applications
through the analysis of relationships in the e-Matrix will
provide the managers with a clearer picture by prioritiz-
ing these e-Business applications in relation to the list
of critical business processes.
6.7. Step 7: Completing QFD e-Matrix II
The next step in the planning framework is to calculate
the interrelationships of the prioritized business process
(ā€˜whatsā€™) and e-Business applications (ā€˜howsā€™) in QFD
e-Matrix II. This calculation is again carried out with
the use of the QFD/CAPTURETM
software, to prioritize
the ranking of the e-Business applications in terms of the
strengths of relationships with the key business processes.
The scoring for these relationships is, as before in QFD
e-Matrix I, obtained via survey and/or expert advice.
The scoring will again be 9 for a strong relationship, 3
for average and 1 for weak between the business process
and the e-Business applications. A zero or blank entry
equates to no relationship between the process and
application.
6.8. Step 8: Identiļ¬cation of critical e-Business applications
from QFD e-Matrix II
The product from this round of e-Matrix analysis pro-
vides managers with a prioritized list of e-Business appli-
cations upon which to take action. This list is based on
the e-Business applicationsā€™ ability and criticality in
meeting the needs identiļ¬ed (both lists of needs from
QFD e-Matrix I and QFD e-Matrix II). These
e-Business applications allow the organization to explore
which key business processes need to be improved in
order to meet both internal and external critical
demands.
The purpose of this paper is to establish the use of
the planning framework as a feasible step-by-step
methodology in e-Business planning. The framework is
thus being further discussed below, by using results of a
recently concluded pilot study carried out before more
case study research is begun. The pilot study will there-
fore also serve as the feasibility study of employing QFD,
Application of QFD for e-Business planning 811
BSC and VCA to assist SME managers in e-Business
planning. This planning framework was ļ¬rst presented
as a prototype at MIM 2002 Conference (Tan and
Tang 2002) and utilized a dataset from the case study
on Marshall Industries, US (Olofson, 1999).
For the purpose of further examining the feasibility of
using the planning framework, we will now illustrate the
use of the planning framework within a case companyā€”a
Chinese printing company.
7. Case study illustration: Guangzhou United
Printing Co. Ltd
Guangzhou United Printing Co. Ltd (United
Printing) was established in 1992 as a Sino-foreign
cooperative, with a vision to be a ā€˜One-stop solution
medium-sized printer providing friendly, reliable and
cost-eļ¬€ective printing and design servicesā€™.
The company deals mainly with the printing and
manufacturing needs of both domestic and foreign cus-
tomers, both public and private. United Printing pro-
duces a wide variety of products including colour
trademarks, picture brochures, manuals, packing bags,
paper boxes, wall calendars and envelopes. United
Printing also provides services in printing design, copy
and plate-making, paper compression moulding, paper
mounting and cartons, etc.
The company is relatively ā€˜low techā€™ and labour inten-
sive in its operations. There are currently no established
training policies within the company. The main investor
in United Printing, HK Luensun Printing Co. Ltd on the
other hand, is famous for its state-of-the-art equipment
and technology.
7.1. Generating the BSC of United Printing (ā€˜whatsā€™)
The ļ¬rst step of the planning framework is to establish
the companyā€™s BSC for the purpose of generating a list of
ā€˜whatsā€™ for QFD e-Matrix I. The vision of United
Printing was clearly stated, providing a clear starting
point to the establishment of a BSC for the company.
As was identiļ¬ed from the vision, United Printing will,
from the ļ¬nancial perspective, seek to measure sales
growth, product proļ¬tability and costs growth.
Furthermore, to achieve its vision as a friendly, reliable
and cost-eļ¬€ective supplier, United Printing will have to
strive for high customer retention rate, high rate of on-
time delivery, low number of complaints and should, in
surveys, be identiļ¬ed as the most preferred supplier.
These targets coincided with objectives that Kaplan
and Norton (2000) identiļ¬ed in a company seeking to
excel in customer intimacy on the customer perspective
level of the BSC.
In order to distinguish the business processes that
are critical to achieving United Printingā€™s vision to
excel, the authors had to ļ¬rst identify the main business
processes in United Printing. These business processes
included its inbound logistics, operations, sales/market-
ing, outbound logistics and support services. From these
business processes, it was clear that there are four objec-
tives that must be included in the companyā€™s BSC. They
are: (1). resource planning; (2). product cycle time; (3).
sustained product quality; and (4). process reliability.
It is important for the business to provide for sustained
growth and ongoing innovation, as United Printing will
need to meet its long-term objectives. It will also have to
identify how to bridge gaps in technology, employee
skills, etc. United Printing will therefore have to measure
its performance in training investments, new product
introductions, new accounts opened and its staļ¬€ satisfac-
tion through a survey. The BSC created in United
Printingā€™s context can be seen in ļ¬gure 5. The list of
ā€˜whatsā€™ generated from the BSC for QFD e-Matrix I
are listed in table 2.
Expert advice was sought from a senior manager
with extensive printing experience, to assist in the rank-
ing of these initial ā€˜whatsā€™. The ā€˜whatsā€™ deemed most
important were awarded the highest points, and the
lower scored were given to those which were felt to be of
lesser importance. It was acknowledged that in relation
to United Printing, the highest scoring (9.5 out of 10)
ā€˜whatsā€™ would be to (i) sustain a high customer retention
rate; (ii) providing on-time delivery; and (iii) being
the preferred supplier of its customers. It must be empha-
sized that diļ¬€erent company visions and diļ¬€erent
managers inļ¬‚uence the ratings of the ā€˜whatsā€™. This is
due to the fact that diļ¬€erent managers place diļ¬€erent
levels of emphasis, on diļ¬€erent areas of the business,
which will result in diļ¬€erent ratings.
7.2. Generating the key business processes of United Printing
with the VCA (ā€˜howsā€™)
Once the ā€˜whatsā€™ for QFD e-Matrix I were identiļ¬ed,
the next step was the identiļ¬cation of ā€˜howsā€™ for QFD
e-Matrix I, which will be developed from VCA. Using
VCA, the present authors were able to categorize the
business processes of United Printing into ļ¬ve main
categories under the banners of ā€˜Logisticsā€™, ā€˜Operationsā€™,
ā€˜Marketing and Salesā€™, ā€˜Servicesā€™ and ā€˜Supportingā€™.
Within each category, the key critical value-adding
business processes are further identiļ¬ed. A complete list
of the key business processes is shown in the ā€˜QFD
e-Matrix I, ā€˜ā€˜howsā€™ā€™ column in table 2.
812 B. L. Tan et al.
7.3. Completing QFD e-Matrix I
The list of ā€˜whatsā€™ and ā€˜howsā€™ as generated in
the previous steps, was now entered into the QFD
e-Matrix I. Expert insight was again sought at this
step to assist the researchers in determining the strengths
of the relationships between the ā€˜whatsā€™ and ā€˜howsā€™. Once
these ratings were keyed in to the QFD/CAPTURETM
software, the software automatically prioritized the key
business processes (ā€˜howsā€™) in order of importance,
according to the capability of the process to meet the
requirements of the ā€˜whatsā€™ (that were already rated in
importance). Therefore, the more relevant the business
process was in meeting the requirements of the higher
ranked ā€˜whatsā€™, the higher was the business process of
the list of priority.
7.4. Results of QFD e-Matrix I
The top three critical business processes from this
ļ¬rst round of prioritization can be seen in table 3.
It is clear that these three business processes are
critical in meeting the requirements of the top three
ranked ā€˜whatsā€™ identiļ¬ed earlier. Figure 6 shows United
Printingā€™s QFD e-Matrix I.
7.5. Establishing the ā€˜whatsā€™ in QFD e-Matrix II
The ā€˜whatsā€™ inputted into the QFD e-Matrix II were a
straight transfer from the results of QFD e-Matrix I. The
important point to note is that the prioritized scorings of
the business processes from QFD e-Matrix I were entered
as the rating scores for the business processes (as the
business processes are now serving the function of
ā€˜whatsā€™ in QFD e-Matrix II).
Table 2. List of factors inputted into the eMatrices.
QFD e-Matrix I ā€˜whatsā€™ QFD e-Matrix I ā€˜howsā€™ QFD e-Matrix II ā€˜howsā€™
Financial Logistics Logistics
(inbound/outbound) (inbound/outbound)
 Sales growth Inventory management  Auto-replenishment system
 Product proļ¬tability  Delivery  Computerized logistic management
 Costs growth  Order tracking
Customer Operations Operations
 High retention  Scheduling  Graphic design
 On-time delivery  Design  Online veriļ¬cation of design
 Complaints  Typesetting  Online design customization
 Preferred supplierā€“surveys  Printing  Advance machinery
 Binding/folding  Content management service (website)
 Packaging for delivery
Business process Marketing and Sales Marketing and Sales
 Resource planning  Advertising  Online quotation
 Product cycle time  Quotation  News bulletin board
 Sustained product quality  Accounting  E-Newsletter
 Process reliability  Online ordering
 Online transaction
 E-Auction
Innovation and growth Service Service
 Training investments  After-sales services  E-Catalogue
 New product introductions  Customer complaints  Online sourcing
 New account opened
 Staļ¬€ satisfactionā€“survey
Supporting Supporting
 Purchasing  ERP (enterprise resources planning)
 Training and education  CRM (customer relationship management)
 Employee performance measurementā€“bonus  Online customer surveyā€“feedback form
 E-Learning
Table 3. Top three business processes (results from QFD
e-Matrix I).
Scoring 264.8 214.6 212.6
Percentage 10.7% 8.7% 8.6%
Business processes Scheduling Delivery After-sales services
Application of QFD for e-Business planning 813
Figure 6. United Printing QFD e-Matrix I.
814 B. L. Tan et al.
Figure 7. United Printing QFD e-Matrix II.
Application of QFD for e-Business planning 815
7.6. Establishing the list of e-Business applications (ā€˜howsā€™ in
QFD e-Matrix II)
For the purpose of further illustrating the planning
framework, the list of potential e-Business applications
was generated through:
(1) the understanding of key processes required to
undergo change for the organization to embrace
e-Business;
(2) the researchersā€™ knowledge and interpretation
of e-Business applications in the printing
industry; and
(3) from the case study itself, as there could be
suggestions on the e-Business applications the
organization were considering bringing aboard.
This list of e-Business applications (ā€˜howsā€™ in QFD e-
Matrix II) can be seen in table 2.
7.7. Completing QFD e-Matrix II
At this step, the researchers need to establish a deļ¬ni-
tion of what the ratings of strengths will mean in the
case of United Printing, so as to be applied in QFD
e-Matrix II. A score of ā€˜9ā€™ was determined to be critical
and should be implemented immediately, ā€˜3ā€™ as in
moderately critical and should ideally be implemented
within the next 12 months, while ā€˜1ā€™ would signify that
the e-Business application is not important but should
merely be kept under consideration and future review.
7.8. Identiļ¬cation of critical e-Business applications from
e-Matrix II
The ratings were entered in the software and the rela-
tionships between the business processes and the potential
e-Business applications were calculated and displayed as
a prioritized list. Table 4 shows the three most critical
and feasible potential e-Business applications identiļ¬ed
by the planning framework in the context of United
Printingā€™s case study. The QFD e-Matrix II for United
Printing can also be seen in ļ¬gure 7.
8. Future work
Once we have attained the list of potential e-Business
applications that is prioritized according to feasibility
and criticality, the next step is to look at the key
business processes vital to the successful implementation
of potential e-Business applications. Once we had
identiļ¬ed and veriļ¬ed the list of key business processes,
we would be able to plan out the road map for the
implementation of e-Business applications. This road
map would allow SME managers to look at the business
processes in a more linear way, thereby making it
possible to formulate strategies that facilitate and
encourage change using a customized, context-speciļ¬c,
step-by-step approach.
The next stage of research will be a set of case studies to
provide for further development, testing and reļ¬nement
of the planning framework. A key concern is to ensure
that the framework matches and addresses the realities
of the real business world. To ensure consistency and
a common sectoral context, the printing industry has
been selected for this study and access has already been
obtained from two more printing SMEs.
9. Conclusion
This paper has presented a feasible application of BSC
to assist the generation of input for QFD ā€˜whatsā€™. The
BSC helps to create a business overview when planning
objectives for the organization. VCA can be deployed
in aiding the generation of ā€˜howsā€™ and ensuring that all
key business processes that add values are considered.
QFD can be extended to establish a series of matrices
to provide a clear, step-by-step planning framework for
SMEs entering the e-Business arena, by providing a
methodology for converting both internal and external
needs into a feasible e-Business plan. The key to accurate
ratings for the interrelationship matrix is to identify what
the scores actually mean in the matrix. E-Business
planning can then be built on a multi-stage QFD e-
Matrix system, linking the internal and external
needs of the organization to the business processes,
through an e-Business initiatives prioritization and
feasibility study.
Table 4. Top three critical e-Business applications (results from QFD e-Matrix II).
Scoring 266.6 199.6 157.3
Percentage 14.5% 10.9% 8.6%
e-Business applications Advance machinery e-Learning Auto replenishments
816 B. L. Tan et al.
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Ā 

Application Of QFD For E-Business Planning

  • 1. Production Planning & Control, Vol. 15, No. 8, December 2004, 802ā€“818 Application of QFD for e-Business planning BOON L. TAN, NELSON K. H. TANG and PAUL L. FORRESTER Keywords E-Business, SME, QFD, balanced scorecard, value chain, planning framework Abstract. E-Business represents new avenues for sustainable competitive advantage. Small and medium-sized enterprises (SMEs) are now expected to be digital-ready to continue as trading partners for their customers. SMEs require socio-technical skills and organizational skills and know-how to comprehend e-Potentials and transform them into e-Implementation. An e-Business planning framework is pro- posed here which links both in strategic and operations manage- ment by applying quality function deployment (QFD, also known as house of quality). The balanced scorecard (BSC) will be used to provide an organization overview to objectives setting, critical in ensuring e-Initiatives are aligned with organization vision and objectives. The paper presents the pilot stage of this research project, discussing how the proposed planning framework works. Data from a case study are employed, and expert advice was sought to prioritize and rank the system components (the ā€˜whatsā€™) and their interrelationships. The paper begins with an introduction to the importance of e-Business to SMEs, and a brief review of the key components of the proposed framework. Next follows a discussion of the case study and how the framework can be applied in this particular situation. The paper concludes with suggestions for proposed future work; the conclusion can also be extended to provide a series of matrices to provide a clear, step-by-step planning framework for SMEs which are planning and implementing e-Business, by converting customer needs into feasible e-Business plans. 1. Introduction In the early 1990s, there were high expectations for engaging the internet as a platform for business transac- tions and business management. However, it was not until the late 1990s that the term e-Business ļ¬nally Authors: Boon Tan (corresponding author), Technology and Operations Management Research Group, Aston Business School, Aston University, Aston Triangle, Birmingham, B4 7ET. Email: tanbl@aston.ac.uk. Paul L. Forrester, Birmingham School of Management, Birmingham University, Birmingham, UK. E-mail: p.l.forrester@bham.ac.uk BOON. L. TAN was educated in Singapore, until the completion of his diploma course at Singapore Ngee Ann Business School in 1996, when he joined the army. He spent two years at Aston Business School for his ļ¬rst degree and conferred his BSc(Hons) in Operations Management in 2000. Upon completion of his degree, he started working as a researcher in AMI Singapore for a year, before returning in 2001 to start his PhD research under the supervision of Dr Nelson Tang and Professor David Bennett. His PhD topic is on the development of an integrated e-Business planning frame- work for SME senior managers. He has also taught both large and small groups of undergraduates and postgraduates in Aston Business School. Boon is currently writing up his PhD. His current research interests are e-Business management, technology management and total quality management. It was with great shock and sadness that friends and colleagues learned of the unexpected passing away of Nelson Tang at just 41 years of age. To many of us Nelson was a friend who, in the time he was with us, earned our respect and trust for his professionalism, reliability, enthusiasm and the valuable contribution he made in the area of operations management. NELSON, K. H. TANG was a Senior Lecturer of electronic business at Aston University, UK. He joined the staļ¬€ of Aston Business School in 2000, and his research interests were e-Business management, supply-chain management, technology management, business process re-engineering, knowledge management, information resources management and total quality management. He was the co-editor of the International Journal of Business Performance Management. Production Planning & Control ISSN 0953ā€“7287 print/ISSN 1366ā€“5871 online # 2004 Taylor & Francis Ltd http://www.tandf.co.uk/journals DOI: 10.1080/09537280412331309190
  • 2. began to appear in management meeting agendas. e-Business has proven to be able to create competitive advantages for both big companies and SMEs. e- Business, however, also represents higher degrees of potential pitfalls due to the limited amount of time and money available for investing in innovations such as e-Business. A successful implementation would enable the SMEs in the creation of competitive advantage, while failing in implementation or in embracing e-Business may spell the end of the business in the near future having been overtaken by competitors. The aim of the paper is to establish a planning framework that is feasible for e-Business planning, for use by SME managers. The ļ¬rst part of the paper will discuss the growth of importance of e-Business and why an e-Business planning framework is required to assist managers in e-Business planning. This will be followed by discussions on the three techniques that are integrated to form the planning framework. These three techniques are quality function deployment (QFD), balanced scorecard (BSC) and value-chain analysis (VCA). Next, the planning framework for e-Business and its eight-step approach will be identiļ¬ed and discussed, thereby establishing on how the three techniques are integrated and how a step-by-step approach can be engaged in a framework for e-Business planning. This will be further illustrated with results generated from a completed pilot study, to discuss on how the planning framework was able to customize the list of e-Business applications while taking into account the needs of the customers as well as the business objectives and capabilities. 2. The growth of importance for e-Business E-Business started as a marketing catchphrase for technology organizations. It can be deļ¬ned as a way of integrating applications including ERP, CRM and SCM in order for them to work together and help in managing, organizing, routing and transforming information (Kalakota and Robinson 2001) or simply, ā€˜doing business digitallyā€™ (Brache and Webb 2000). Society is now mov- ing towards cashless transactions (Hussain and Hussain 1991) and business communications are moving to a higher level beyond basic computer-to-computer exchange of information (Zwass 2002). The internet, the main architecture behind e-Business, has evolved from a scientiļ¬c network to a platform that enables new ways of doing businesses (Amor 2000) and provides almost unlimited reach and information to cus- tomers (Jordan 2001), allowing easier access to informa- tion anywhere as long as computers and networks exist, the opening new approaches to meeting needs and per- forming functions (Porter 2001). The internet architec- ture, currently in its third generation, began its evolution in 1991 when Tim Berners-Lee posted the language of the WWW online at alt.hypertext (Duncan and Kenney, 2001). It now enables the development and deployment of industrial-strength applications to help bring the web and existing systems together, which, according to Kalakota and Robinson (2001), is the key to e-Business. Coincidentally, e-Business is also in its third phase, with the ļ¬rst phase (1994ā€“1997) concentrating on making its presence known, the second phase (1997ā€“2000) on e-Commerce and the third phase (2000 to present) on the internetā€™s impact on proļ¬tability, also known as e-Business (Kalakota and Robinson 2001). Businesses are now performing and coordinating critical business processes such as product designing, incoming and outgoing transactions, manufacturing and providing services through the extensive use of computer and communication networks and technologies (Alter 2002). The ā€˜digital economyā€™ is seen as a major issue and area of opportunity to many large organizations as it represents a new avenue to create sustainable competitive advantage. Thus, with urgency of big business to go digital, SMEs are expected to be digital-ready in order to continue as trading partners. We see digital-readiness as the ability and capability of an organization to conduct transactions on the web, in essence, being e-Business-ready. Although SMEs realize they need to ā€˜go digitalā€™ to survive, many of them are not unable to value the potential or possess the know-how to manage the complexity in change. Going electronic is not merely PAUL FORRESTERā€™s early career experience was in production management in the carpet and electronics industries. Since then he has held various research and teaching appointments including eight years at Keele University, where he became Director of MBA Programmes, and three years prior to joining Birmingham at Aston Business School (Director of Part-time MBA Programmes and Convenor of the Technology and Operations Management Research Group). He also spent a period of sabbatical leave at National University of Singapore in 1995 and has supervised a number of overseas doctoral and postgraduate research projects. He continues to maintain an active research and teaching career. His research interests lie in the strategic, design and organizational issues of managing operations, the extension of operations management concepts to service organizations, and the use of virtual learning for management education. Application of QFD for e-Business planning 803
  • 3. getting onto the web. SMEs require organizational and technical knowledge to assist them in the planning and managing of digital-ready projects. Organizations constantly need to evolve the way they interact with suppliers and customers as well as respond to the challenges posed by current legacy systems, and integrating all of these into their e-Business plans. A well- designed, well-executed e-Business plan can send a con- sistent and positive message out from the organization (Butler, 2000). Organizations need to be strong and clear in their e-Business strategies (Butler 2000). All too easy to say, perhaps: the underlying question here, therefore, is how can an organization competently accomplish this? Kalakota and Robinson (2001) argued that to meet this change, organizations must develop a whole new generation of leaders that can create a digital future with intent. They suggested 20 trends driving e-Business, which can be used as a checklist by organiza- tions to detect and prioritize drivers when formulating e-Business plans. Organizations must bear in mind not to focus too intently on the ā€˜eā€™ component, but more on ā€˜businessā€™ requirements. The greatest threat to an orga- nization is either failing to deploy the internet or failing to deploy it strategically (Porter 2001) and therefore eļ¬€ectively. Organizations should deploy e-Business only if it complements strategic needs. Not all e-Business mechanisms are right for every organization (Lord 2000). One of the deadly assumptions would be to believe that technology is the answer. Tan and Tang (2002) summarized a list of common pitfalls from various relevant literatures, which can be seen in table 1. In order to help organizations avoid the common pitfalls, this project deploys the quality function deployment (QFD) by incorporating the balanced scorecard (BSC) and the value-chain analysis (VCA) into e-Business plan- ning. It is to this that we now turn our discussions. 3. QFD and its application QFD (Akao 1990) was initially developed in the late 1960s at Kobe Shipyard, Japan, as a means to motivate engineers to consider quality early in the design process. It was introduced into the USA in 1983 by Kogure and Akao, with the article ā€˜Quality function deployment and CWQC in Japanā€™, appearing in the journal Quality Progress. In 1984, Clausing introduced QFD to Ford, USA, and its supplier companies (Hauser and Clausing 1988) and since then a number of other large organiza- tions have promoted and successfully utilized QFD. The original Japanese name of QFD is ā€˜hin shitsu kino ten kaiā€™, which can be translated into ā€˜quality function deploymentā€™ (Lockamy and Khurana 1995). QFD is not simply a quality tool but a planning tool for introduc- ing new products and upgrading existing ones (Slabey 1990). This can be gleaned from two motives behind the creation of QFD, suggested by Akao (1990): to enable better determination of design quality; to determine key manufacturing operations in advance. Table 1. Major pitfalls of e-Business. Internal External Strategic Customers We know what we want We know what customers want Technology is the answer We know how to give customers what they want e-Business is good for us Our customers are e-ready Othersā€™ e-Business models will suit our needs Suppliers We will be able to gain market share with e-Business We know what suppliers want We will be able to increase proļ¬t with e-Business We know how to give suppliers what they want e-Business will enable us to become a global enterprise Our suppliers are e-ready We have the budget for e-Business implementation Competitors Processes They will not be able to lure our customers Our internal business processes are in place and can support the migration to e-Business If they can go online, we can and should go online We know how to achieve what we want Regulators The systems will integrate Our products can be sold anywhere in the world Personnel Processes We know who to appoint to champion/lead and/or be in the e-Business project team We can integrate the distribution channels to support e-Business Everybody in the organization knows why we need to go ā€˜eā€™ We can integrate the supply chain to support e-Business 804 B. L. Tan et al.
  • 4. QFD is also a tool to ensure that the ā€˜correctā€™ product is being developed. It does this by incorporating custo- mer needs into the planning process. In recent years, QFD has also been evolved into a management tool to model the dynamics of the design process (Govers 2001). There are a number of widely reported deļ¬nitions of QFD. these include QFD being deļ¬ned as a philosophy (Akao 1990), a method (Akao 1990, Mazur 1993), a system (Slabey 1990, Terninko 1989, Martins and Aspinwall 2001), a set of planning and communication routines (Hauser and Clausing 1988), a process (GOAL/ QPC 1989, Bossert 1991), a cross-functional tool (King 1989), a systematic planning process (Daetz et al. 1995, GOAL/QPC 1989), a customer-oriented approach (Govers 1996), a team-based approach (Miller and Bombino 1992), a mechanism (Sullivan 1986) and as the ultimate quality assurance system (Powers and Harter 1995). More importantly in relation to the research project, QFD is also deļ¬ned as a technique for identifying the voice of the customer to ensure that this voice is systematically included in the designing of pro- ducts/services (Akao 1990, Burn 1990). The house of quality (HOQ), also known as the QFD matrix, is the nerve centre and engine that drives the entire QFD process, and serves as conceptual map for interfunctional planning and communication (Hauser and Clausing 1988). HOQ is used to depict customer requirements, organization measures, target values and competitive product evaluations (Eureka and Ryan 1994). An HOQ contains seven diļ¬€erent elements, as shown in ļ¬gure 1. As with any technique, there are limitations with QFD. It is not an easy technique to understand and use. Also, existing working cultures tend to be mainly functionally inclined and focused on individual contribu- tions, rather than on a team approach to drive activities. QFD, however, requires multi-functional teams to drive activities. Attempting to build the HOQ, in itself, requires hours of arduous work, as teams still need to carry out the work of collecting data, designing and interpreting them (Sullivan 1986). The HOQ is gener- ated through customer surveys and manual inputs of survey results, but records relating to QFD were rarely kept, meaning a lack of established evaluation systems suited to QFD. Information is needed to track the progress of the QFD project and to provide links between the diļ¬€erent QFD phases. Essentially, the ā€˜voice of the customerā€™ in practice contains ambiguity, multiplicity of meaning and is qua- litative in nature. Customers also tend to mix their primary needs with their desirable needs. There is also a need to input a large amount of data and make various decisions, such as determining the optimal tradeoļ¬€ between customer demands, engineering characteristics, and hence determine the degree of interrelationships between them and set precise target values. In practice, many of these decisions have to be based on subjective evaluation (King 1987). Govers (1996) further argues that the ability to control the production processes at a level that warrants an award of ISO certiļ¬cation (process orientation) is a prerequisite for organizations to successfully implement QFD. In addition to the points above, the generation of ā€˜howsā€™ (the means by which to implement QFD) may be a very tedious task as there are few models available to assist the managers in providing a balanced view of speciļ¬c customersā€™ needs with those of other stakeholders. These ā€˜howsā€™ have to take into account customer needs as well as the organizationā€™s broader strategic objectives and operational capabilities. Despite these weaknesses of QFD, it is a highly eļ¬€ective tool in enabling the incorporation of customer needs into a planning process, prioritizing these needs and feasibilities of the business processes in order to facilitate the planning Design requirements or ā€œHowsā€ or service elements Correlations between ā€œHowsā€ Correlations between ā€œWhatsā€ and ā€œHowsā€ Priorities assigned to design requirements Customer needs or ā€œHowsā€ Competitive assessment Priorities assigned to customer needs Figure 1. The house of quality (Evans and Lindsay 1996). Application of QFD for e-Business planning 805
  • 5. process. To assist in overcoming these weaknesses of QFD, we have included the balanced scorecard (BSC) (Kaplan and Norton 1992) as the starting block to building the QFD e-Matrix. By use of the term ā€˜e- Matrixā€™, we are proposing the use of QFD matrices to assist in e-Business planning, although it is not necessarily an electronically enabled process. However, the authors decided to use this terminology as the generation of these QFD e-Matrices are also done electronically by using the QFD/CAPTURETM software. A discussion of BSC and how it can help to overcome these weaknesses is discussed below. The further inclusion of the VCA (Porter 1985) assists in the generation of ā€˜howsā€™ for the e-Matrix. This will also be discussed below. 4. The basics of the balanced scorecard The balanced scorecard (BSC) was ļ¬rst created in 1987 at Analog Devices to help improve organizational performance and competitiveness (Schneiderman 2000), particularly to overcome weaknesses of the ļ¬nancial accounting model. Kaplan and Norton (1992) ļ¬rst pub- lished details on the application of the framework in the Harvard Business Review. Since then, a number of orga- nizations (including Mobil, Citicorp, ATT, Rockwater, Apple Computer, AMD, KPMG Peat Marwick, Allstate Insurance, as well as not-for-proļ¬t and govern- mental organizations) have been using the BSC as a strategic planning and performance measurement tool (Kaplan and Norton 1993, 1996a, b, 2000, 2001, Chow et al. 1997). The BSC is a strategic tool that enables organizations to link a set of guides directly with their strategy, whilst concurrently allowing them to track all the issues linked with and aļ¬€ecting performance (Mendoza and Zrihen 2001). According to Silk (1998), 60% of Fortune 1000 ļ¬rms have experimented with the BSC. Figure 2 shows the four perspectives (customer, ļ¬nan- cial, internal business processes and learning and growth) of the BSC that can be used to translate the organi- zationā€™s vision and strategy into planning guidelines and ultimately ā€˜delightingā€™ stakeholders (Kaplan and Norton 2001: 90): Customers: ā€˜the strategy for creating value and diļ¬€er- entiation from the perspective of the customerā€™. Financial: ā€˜the strategy for growth, proļ¬tability, and risk viewed from the perspective of the shareholderā€™. Internal business processes: ā€˜the strategic priorities for various business processes that create customer and shareholder satisfactionā€™. Learning and growth: ā€˜the priorities to create a climate that supports organizational change, innovation, and growthā€™. A 10-step methodology was introduced to assist in the building of a strategic management system using the BSC (Kaplan and Norton 1996a, b). However, to link the companiesā€™ long-term strategy to short-term actions, ā€œTo achieve our vision, how should we appear to our customers?ā€ Customer ā€œTo satisfy our shareholders and customers, what business processes must we excel at?ā€ Internal Business Process Objectives Initiatives Measures Targets Objectives Initiatives Initiatives Measures Targets Objectives Measures Targets Initiatives ā€œTo succeed financially, how should we appear to our shareholders?ā€ Financial Objectives Measures Targets ā€œTo achieve our vision, how will we sustain our ability to change and improve?ā€ Learning and Growth Vision and Strategy Figure 2. Transforming vision and strategy (Kaplan and Norton 1996a). 806 B. L. Tan et al.
  • 6. organizations will have to ensure that the 10-step methodology goes through the four management processes (Kaplan and Norton 1996a) in a spiral. These four management processes are: (1) translating the vision; (2) communicating and linking; (3) business planning; and (4) feedback and learning. The BSC, however, provides no mechanism for main- taining the relevance of deļ¬ned measure (Hudson et al. 2001). Also, there is a lack of integration between top- level strategic scorecard and operational-level measures, thus making execution of the newly-formed strategies problematic (Ballantyne and Brignall 1994). This sce- nario matches the challenges faced by many SMEs, which need to fulļ¬l the expectation of matching top- level objectives with operational-level processes, but are unable to identify precisely what needs to be implemen- ted. The BSC can, on the other hand, complement QFD to form a strong alliance. The strengths of BSC make it easier to generate the ā€˜whatsā€™ for the e-Matrices of the QFD. Coupled with the measurement functions typi- cal of any BSC, QFD can be made more robust by incor- porating the ā€˜voice of customersā€™ and in more eļ¬€ective performance measurements. This can eliminate the need for customer surveys since these ā€˜voicesā€™ can be con- structed from the BSC framework. The QFD can, alter- natively, provide integration between top-level objectives and operational-level activities, a major deļ¬ciency in the typical BSC approach, by making it possible for man- agers to prioritize needs while taking into account the business processes, ultimately providing a blueprint for e-Business planning. QFD can facilitate planning at the lowest level of implementation with the use of multi-level matrices as deemed necessary by the organization and/or for the speciļ¬c planning exercise. To provide a deeper understanding of the essence of the planning framework, there will be further discussions on this later. Next, we shall look at how the value-chain analysis process model ļ¬ts into the planning framework. 5. The value-chain analysis One of the main challenges of QFD is the generation of factors as inputs for ā€˜whatsā€™ and ā€˜howsā€™ (Sullivan 1986, King 1987, Tan and Tang 2002). While it was discussed earlier that the BSC can be utilized to assist in the gen- eration of ā€˜whatsā€™, the value-chain analysis (VCA) (Porter 1985) is better suited to aiding the generation of ā€˜howsā€™. The VCA (see ļ¬gure 3) can help to develop a clearer understanding of how the business operates, Inbound Logistics ā–  Real-time integrated scheduling, shipping, warehouse management, demand management and planning and advance planning and scheduling across the company and it's suppliers ā–  Dissemination across the company of real- time inbound and in- progress inventory data Operations ā–  Integrated information exchange, scheduling and decision-making in in-house plants, contract assemblers and components suppliers ā–  Real-time available-to- promise and capable- to-promise information available to the sales- force and channels Outbound Logistics ā–  Real-time transaction of orders whether initiated by an end- consumer, a sales person or a channel ā–  Customer and channel access to product development and delivery status ā–  Collaborative integration with customer forecasting systems ā–  Integrated channel management including information exchange, warranty claims and contract management Marketing and Sales ā–  Online sales channels including websites and marketplaces ā–  Real-time inside and outside access to customer information, product catalogues, dynamic pricing, inventory availability, online order entry ā–  Online product configurators ā–  Customer profiling ā–  Push advertising ā–  Real-time customer feedback through web surveys and promotion response tracking After-sales service ā–  Online support of customer service representatives through e-mail response management, billing integration ā–  Customer self-service via websites and intelligent service request processing including updates to billing and shipping profiles ā–  Real-time field service access to customer account schematic review, parts availability and ordering Procurement ā–  Internet-enabled demand planning ā–  System integration of purchase, inventory and forecasting systems with suppliers ā–  Automated requisition to pay ā–  Direct and indirect procurement via market places, exchanges and auctions Business development ā–  Collaborative product design across locations and among multiple value-system participants ā–  Knowledge directories accessible from all parts of the organization ā–  Real-time access by RD to online sales and service information Human Resource Management ā–  Self-service personnel and benefits administration ā–  Web-based training ā–  Internet-based sharing and dissemination of company information ā–  Electronic time and expense reporting Firm infrastructure ā–  Web-based distributed financial and ERP systems ā–  Online investor relations (e.g. information dissemination, broadcast conference calls) Figure 3. E-Value chain application (Porter 2001). Application of QFD for e-Business planning 807
  • 7. indicating where value is generated and how existing elements can be reconļ¬gured or re-engineered to meet the strategic intentions. Porterā€™s VCA structures business operations into ļ¬ve primary activities from inbound logistics to after-sales services and four support activities. Depending on the organizationā€™s size, it is useful to break down each ele- ment of the VCA into the core operational processes and assess the customer value that is added by these processes. When followed rigorously, this analysis can be used to identify the cost and revenue generated by each of the VCA processes. At the same time, e-Business enhance- ments should be considered such as the elimination of errors through better communication, and collaboration and information-sharing with process stakeholders. With regard to procurement and supply-chain management, it is useful to distinguish between diļ¬€erent process types such as the identiļ¬cation of new supply sources, the ordering process, the materials planning process and the tendering process. A recent article by Porter (2001) on VCA in an e-Business environment demonstrates a particular appli- cation that is useful for analysing the relationships between the business and its various stakeholder groups from an operational perspective (see ļ¬gure 3). This facil- itates the process of identifying e-Business applications that can support or enable current or future relation- ships. By mapping the interfaces to commercial business partners, a ļ¬rm can make judgements on the nature of existing and future relationships. In the process of identi- fying focus areas in the VCA, the main stakeholders, who should subsequently be involved in the planning process, will emerge. 6. The planning framework for e-Business planning in SMEs The European Commission (EC) deļ¬nition of small ļ¬rms is based on the criteria of eļ¬€ective management independence and workforce categories of less than 250 salaried employees for medium-sized ļ¬rms, less than 50 for small ļ¬rms and less than 10 for micro-ļ¬rms. According to Eurostat, the statistical oļ¬ƒce of the EC, some 90% of ļ¬rms are micro-ļ¬rms and they account for one-third of all employment (with wide variations between member states), with roughly half of all EU jobs in the broader SME sector taken as a whole. In the UK there are more than 3 million of these ļ¬rms. They account for one-half of private sector employment and one-quarter of GDP (DTI 1998, 2001, ENSR 1997). In the ļ¬rst step, the employment of BSC will assist in ensuring that all-round business strategic planning is exercised within the process of e-Business planning process. Customersā€™ needs (the ā€˜whatsā€™) will then be gen- erated from the results of this strategic planning process. Upon the completion of step 1 (or at least under way), the manager may commence step 2, the development of the VCA to aid in the generation of ā€˜howsā€™ (business processes) for the QFD e-Matrix I (step 3). The purpose of QFD e-Matrix I is to prioritize the business processes according to their ability to meet the critical needs of customers. QFD e-Matrix II on the other hand, is being employed for the purpose of identifying and prioritizing the e-Business applications in accordance with the prioritized business processes obtained from QFD e-Matrix I. The current authors have developed an eight-step approach to assist in the understanding and creation of the planning framework works (see ļ¬gure 4). They are identiļ¬ed as follows: Step 1. Using BSC to develop ā€˜whatā€™ for QFD e-Matrix I. Step 2. Using VCA to develop ā€˜howā€™ in QFD e-Matrix I. Step 3. Completing QFD e-Matrix I. Step 4. Identiļ¬cation of critical business processes from QFD e-Matrix I. Step 5. Inputting critical business processes to QFD e-Matrix IIā€™s ā€˜whatā€™. Step 6. List of e-Business applications to QFD e-Matrix IIā€™s ā€˜howā€™. Step 7. Completing QFD e-Matrix II. Step 8. Identiļ¬cation of critical e-Business applications from QFD e-Matrix II. 6.1. Step 1: Using BSC to develop ā€˜whatā€™ for QFD e-Matrix I The development of the BSC is always and ideally top- down (Kaplan and Norton 2000). Therefore, we have to ļ¬rst identify the vision of the organization. The identiļ¬ca- tion of organization vision can be done through gathering information from documentation, followed by conļ¬rming the vision with senior managers. Once achieved, we can start to formulate the objectives from a ļ¬nancial perspec- tive. Only after these ļ¬nancial objectives are identiļ¬ed will the organization be able to determine, at the customer perspective level, the objectives that can help to achieve the identiļ¬ed ļ¬nancial objectives. Kaplan and Norton (2000) listed three types of custo- mer perspectives: operational excellence, customer inti- macy or product leadership. So at the customer perspective level, the organization must be able to decide which of these they should be concentrating on. Once this is agreed by managers, it will then be possible for the organization to formulate a list of performance measure- ments that, upon meeting the requirements, will enable the organization to achieve its customer perspective objectives. 808 B. L. Tan et al.
  • 8. The next phase is to identify a list of key business processes that can enable the organization to achieve the objectives set from both the ļ¬nancial and customer perspectives. In short, these will be the business processes that the organization will ļ¬nd vital in excelling at, as these processes are critical in allowing the organiza- tion to achieve its vision. Finally, senior managers are required to identify any innovation and growth objectives for the organization. These objectives will ulti- mately provide the blueprint in the creation of an infra- structure for the organization to create long-term improvements and growth. While objectives in ļ¬nancial, Step 7 Completing QFD eMatrix II: Prioritising e-business applications Step 4 Identification of critical business processes. Absolute imp Relative imp Prioritising Step 6 - Proposed e-business applications Step 8 Identification of critical e-business applicatons Absolute imp Relative imp Rrioritising Action Processes Requirements How? What? Step 3 Completing QFD eMatrix I: Prioritising business process Applications Processes Step 5 Critical Processes Identified from Step 4 e-business applications Impor- tance ( see above) Impor- tance Step 2 Balanced Scorecard Identify internal and external needs Step 1 Value Chain Analysis Identify business process Figure 4. Proposed planning framework prototype. Application of QFD for e-Business planning 809
  • 9. customer and business process perspectives can be both current and for the future, there are likely to be gaps (e.g. technology and employee skills) that act as barriers to meeting these objectives. Therefore, objectives identiļ¬ed from the innovation and growth perspectives will most likely seek to narrow these gaps. The present authors developed a BSC for a Chinese printing business, which can be seen in ļ¬gure 5. The levels of perspectives are shown clearly from top to bot- tom in the order of how the BSC is formulated. This list can then be inputted as the ā€˜whatsā€™ for QFD e-Matrix 1 (see ļ¬gure 4). 6.2. Step 2: Using VCA to develop ā€˜howā€™ in QFD e-Matrix I To most SMEs, managerial decisions have always been functionally-oriented and tend to reļ¬‚ect the background of the restricted number of individuals on the manage- ment team. The VCA process model was thus brought into the framework with the intention of identifying the basic, generic business processes that all businesses should possess. The VCA helps to provide an overview of the business processes, thus limiting the inļ¬‚uences of func- tionally-oriented managerial styles in the development of ā€˜howsā€™. Using the VCA, senior managers have a clear view of those key business processes that add value to the diļ¬€er- ent products and services an organization provides. The VCA further allows senior managers to analyse processes at diļ¬€erent key stages and levels. From the identiļ¬ed key business processes, managers are able to formulate a comprehensive list of ā€˜howsā€™ to be inputted into QFD e-Matrix I. 6.3. Step 3: Completing QFD e-Matrix I The list of identiļ¬ed internal and external needs are inputted as the ā€˜whatsā€™ in the QFD e-Matrix I. Surveys and/or expert advice are consulted at this point to list the importance and criticality of the ā€˜whatsā€™. Usually, custo- mers have to be consulted to determine which among the ā€˜needsā€™ are the ones they truly desire, or to provide any ā€˜needsā€™ missing from the list. Of course, managers must take note that the needs that are truly desirable may not be verbally explicit from customers and so have to use some judgements to ascertain any implicit customer needs. The importance ratings of these needs can range from 1 to 10. The list of identiļ¬ed business processes is also inputted as the ā€˜howsā€™ in the same e-Matrix (QFD e-Matrix I). Financial perspective Customer perspective Customer intimacy Vision: One-stop solution medium-sized printer providing friendly, reliable and cost-effective printing and design services Sales growth Product profitability Costs growth High retention On-time delivery Complaints Resource planning Preferred supplier- survey Sustained product quality Product cycle time Process reliability Innovation and growth perspectives Business process perspectives Training investments New account opened New product introductions Staff satisfaction- survey Figure 5. United Printing balanced scorecard. 810 B. L. Tan et al.
  • 10. The ā€˜whatsā€™ and ā€˜howsā€™ in QFD e-Matrix I will then undergo an interrelationship analysis (obtained from the survey and/or expert advice) to determine the business processes that are the most important and relevant in meeting the needs and demands ranked most highly by customers. The QFD/CAPTURETM software is being used in this project to capture and analyse the relationships between the ā€˜whatsā€™ and the ā€˜howsā€™. The interrelationship of the needs and business processes are then calculated using the correlation matrix function of the QFD/CAPTURETM software. The correlation between the ā€˜howsā€™ will also be taken into account, as there might be complementar- ity as well as tradeoļ¬€s for each of the diļ¬€erent business processes selected. The scoring of each factor of ā€˜whatsā€™ is ļ¬rst entered into QFD e-Matrix I, followed by the scorings of the relation- ships between each of the ā€˜whatsā€™ and the ā€˜howsā€™. The relationship scoring deļ¬ned as ā€˜9ā€™ means a strong rela- tion, ā€˜3ā€™ means an average relation and ā€˜1ā€™ represents a weak relation. No entry means there is no relationship between the ā€˜whatā€™ and ā€˜howā€™. The software will then be able to calculate and display a list of prioritized business processes for the organization to look into for the purpose of e-Business application planning. 6.4. Step 4: Identiļ¬cation of critical business processes from QFD e-Matrix I The product from this round of rigorous calculation is a list that prioritizes those key business processes that should be the critical areas of focus. This list highlights the business processes that will enable the organization to satisfy these highly vital external and/or internal needs identiļ¬ed. 6.5. Step 5: Inputting critical business processes to QFD e-Matrix IIā€™s ā€˜whatā€™ The next step in the framework is to integrate the list of prioritized business processes (product from QFD e-Matrix I) by inputting it as the list of ā€˜whatsā€™ in QFD e-Matrix II. The rationale behind this is to transform the identiļ¬ed critical business processes into ā€˜whatsā€™, in order for us to measure the relationships of these processes with available or proposed e-Business applications. This also allows for the identiļ¬cation of e-Business applications that can help to streamline and enhance the eļ¬€ectiveness and eļ¬ƒciency of the business processes in order to meet both internal and external needs. 6.6. Step 6: List of e-Business applications to QFD e-Matrix IIā€™s ā€˜howā€™ The list of e-Business applications to be inputted as ā€˜howsā€™ in QFD e-Matrix II could either be those already available in the company or new applications as pro- posed by managers. Further e-Business resources can be obtained from vendors or in-house, including researching information online. The list of e-Business applications should not limit creativity as putting these applications through the analysis of relationships in the e-Matrix will provide the managers with a clearer picture by prioritiz- ing these e-Business applications in relation to the list of critical business processes. 6.7. Step 7: Completing QFD e-Matrix II The next step in the planning framework is to calculate the interrelationships of the prioritized business process (ā€˜whatsā€™) and e-Business applications (ā€˜howsā€™) in QFD e-Matrix II. This calculation is again carried out with the use of the QFD/CAPTURETM software, to prioritize the ranking of the e-Business applications in terms of the strengths of relationships with the key business processes. The scoring for these relationships is, as before in QFD e-Matrix I, obtained via survey and/or expert advice. The scoring will again be 9 for a strong relationship, 3 for average and 1 for weak between the business process and the e-Business applications. A zero or blank entry equates to no relationship between the process and application. 6.8. Step 8: Identiļ¬cation of critical e-Business applications from QFD e-Matrix II The product from this round of e-Matrix analysis pro- vides managers with a prioritized list of e-Business appli- cations upon which to take action. This list is based on the e-Business applicationsā€™ ability and criticality in meeting the needs identiļ¬ed (both lists of needs from QFD e-Matrix I and QFD e-Matrix II). These e-Business applications allow the organization to explore which key business processes need to be improved in order to meet both internal and external critical demands. The purpose of this paper is to establish the use of the planning framework as a feasible step-by-step methodology in e-Business planning. The framework is thus being further discussed below, by using results of a recently concluded pilot study carried out before more case study research is begun. The pilot study will there- fore also serve as the feasibility study of employing QFD, Application of QFD for e-Business planning 811
  • 11. BSC and VCA to assist SME managers in e-Business planning. This planning framework was ļ¬rst presented as a prototype at MIM 2002 Conference (Tan and Tang 2002) and utilized a dataset from the case study on Marshall Industries, US (Olofson, 1999). For the purpose of further examining the feasibility of using the planning framework, we will now illustrate the use of the planning framework within a case companyā€”a Chinese printing company. 7. Case study illustration: Guangzhou United Printing Co. Ltd Guangzhou United Printing Co. Ltd (United Printing) was established in 1992 as a Sino-foreign cooperative, with a vision to be a ā€˜One-stop solution medium-sized printer providing friendly, reliable and cost-eļ¬€ective printing and design servicesā€™. The company deals mainly with the printing and manufacturing needs of both domestic and foreign cus- tomers, both public and private. United Printing pro- duces a wide variety of products including colour trademarks, picture brochures, manuals, packing bags, paper boxes, wall calendars and envelopes. United Printing also provides services in printing design, copy and plate-making, paper compression moulding, paper mounting and cartons, etc. The company is relatively ā€˜low techā€™ and labour inten- sive in its operations. There are currently no established training policies within the company. The main investor in United Printing, HK Luensun Printing Co. Ltd on the other hand, is famous for its state-of-the-art equipment and technology. 7.1. Generating the BSC of United Printing (ā€˜whatsā€™) The ļ¬rst step of the planning framework is to establish the companyā€™s BSC for the purpose of generating a list of ā€˜whatsā€™ for QFD e-Matrix I. The vision of United Printing was clearly stated, providing a clear starting point to the establishment of a BSC for the company. As was identiļ¬ed from the vision, United Printing will, from the ļ¬nancial perspective, seek to measure sales growth, product proļ¬tability and costs growth. Furthermore, to achieve its vision as a friendly, reliable and cost-eļ¬€ective supplier, United Printing will have to strive for high customer retention rate, high rate of on- time delivery, low number of complaints and should, in surveys, be identiļ¬ed as the most preferred supplier. These targets coincided with objectives that Kaplan and Norton (2000) identiļ¬ed in a company seeking to excel in customer intimacy on the customer perspective level of the BSC. In order to distinguish the business processes that are critical to achieving United Printingā€™s vision to excel, the authors had to ļ¬rst identify the main business processes in United Printing. These business processes included its inbound logistics, operations, sales/market- ing, outbound logistics and support services. From these business processes, it was clear that there are four objec- tives that must be included in the companyā€™s BSC. They are: (1). resource planning; (2). product cycle time; (3). sustained product quality; and (4). process reliability. It is important for the business to provide for sustained growth and ongoing innovation, as United Printing will need to meet its long-term objectives. It will also have to identify how to bridge gaps in technology, employee skills, etc. United Printing will therefore have to measure its performance in training investments, new product introductions, new accounts opened and its staļ¬€ satisfac- tion through a survey. The BSC created in United Printingā€™s context can be seen in ļ¬gure 5. The list of ā€˜whatsā€™ generated from the BSC for QFD e-Matrix I are listed in table 2. Expert advice was sought from a senior manager with extensive printing experience, to assist in the rank- ing of these initial ā€˜whatsā€™. The ā€˜whatsā€™ deemed most important were awarded the highest points, and the lower scored were given to those which were felt to be of lesser importance. It was acknowledged that in relation to United Printing, the highest scoring (9.5 out of 10) ā€˜whatsā€™ would be to (i) sustain a high customer retention rate; (ii) providing on-time delivery; and (iii) being the preferred supplier of its customers. It must be empha- sized that diļ¬€erent company visions and diļ¬€erent managers inļ¬‚uence the ratings of the ā€˜whatsā€™. This is due to the fact that diļ¬€erent managers place diļ¬€erent levels of emphasis, on diļ¬€erent areas of the business, which will result in diļ¬€erent ratings. 7.2. Generating the key business processes of United Printing with the VCA (ā€˜howsā€™) Once the ā€˜whatsā€™ for QFD e-Matrix I were identiļ¬ed, the next step was the identiļ¬cation of ā€˜howsā€™ for QFD e-Matrix I, which will be developed from VCA. Using VCA, the present authors were able to categorize the business processes of United Printing into ļ¬ve main categories under the banners of ā€˜Logisticsā€™, ā€˜Operationsā€™, ā€˜Marketing and Salesā€™, ā€˜Servicesā€™ and ā€˜Supportingā€™. Within each category, the key critical value-adding business processes are further identiļ¬ed. A complete list of the key business processes is shown in the ā€˜QFD e-Matrix I, ā€˜ā€˜howsā€™ā€™ column in table 2. 812 B. L. Tan et al.
  • 12. 7.3. Completing QFD e-Matrix I The list of ā€˜whatsā€™ and ā€˜howsā€™ as generated in the previous steps, was now entered into the QFD e-Matrix I. Expert insight was again sought at this step to assist the researchers in determining the strengths of the relationships between the ā€˜whatsā€™ and ā€˜howsā€™. Once these ratings were keyed in to the QFD/CAPTURETM software, the software automatically prioritized the key business processes (ā€˜howsā€™) in order of importance, according to the capability of the process to meet the requirements of the ā€˜whatsā€™ (that were already rated in importance). Therefore, the more relevant the business process was in meeting the requirements of the higher ranked ā€˜whatsā€™, the higher was the business process of the list of priority. 7.4. Results of QFD e-Matrix I The top three critical business processes from this ļ¬rst round of prioritization can be seen in table 3. It is clear that these three business processes are critical in meeting the requirements of the top three ranked ā€˜whatsā€™ identiļ¬ed earlier. Figure 6 shows United Printingā€™s QFD e-Matrix I. 7.5. Establishing the ā€˜whatsā€™ in QFD e-Matrix II The ā€˜whatsā€™ inputted into the QFD e-Matrix II were a straight transfer from the results of QFD e-Matrix I. The important point to note is that the prioritized scorings of the business processes from QFD e-Matrix I were entered as the rating scores for the business processes (as the business processes are now serving the function of ā€˜whatsā€™ in QFD e-Matrix II). Table 2. List of factors inputted into the eMatrices. QFD e-Matrix I ā€˜whatsā€™ QFD e-Matrix I ā€˜howsā€™ QFD e-Matrix II ā€˜howsā€™ Financial Logistics Logistics (inbound/outbound) (inbound/outbound) Sales growth Inventory management Auto-replenishment system Product proļ¬tability Delivery Computerized logistic management Costs growth Order tracking Customer Operations Operations High retention Scheduling Graphic design On-time delivery Design Online veriļ¬cation of design Complaints Typesetting Online design customization Preferred supplierā€“surveys Printing Advance machinery Binding/folding Content management service (website) Packaging for delivery Business process Marketing and Sales Marketing and Sales Resource planning Advertising Online quotation Product cycle time Quotation News bulletin board Sustained product quality Accounting E-Newsletter Process reliability Online ordering Online transaction E-Auction Innovation and growth Service Service Training investments After-sales services E-Catalogue New product introductions Customer complaints Online sourcing New account opened Staļ¬€ satisfactionā€“survey Supporting Supporting Purchasing ERP (enterprise resources planning) Training and education CRM (customer relationship management) Employee performance measurementā€“bonus Online customer surveyā€“feedback form E-Learning Table 3. Top three business processes (results from QFD e-Matrix I). Scoring 264.8 214.6 212.6 Percentage 10.7% 8.7% 8.6% Business processes Scheduling Delivery After-sales services Application of QFD for e-Business planning 813
  • 13. Figure 6. United Printing QFD e-Matrix I. 814 B. L. Tan et al.
  • 14. Figure 7. United Printing QFD e-Matrix II. Application of QFD for e-Business planning 815
  • 15. 7.6. Establishing the list of e-Business applications (ā€˜howsā€™ in QFD e-Matrix II) For the purpose of further illustrating the planning framework, the list of potential e-Business applications was generated through: (1) the understanding of key processes required to undergo change for the organization to embrace e-Business; (2) the researchersā€™ knowledge and interpretation of e-Business applications in the printing industry; and (3) from the case study itself, as there could be suggestions on the e-Business applications the organization were considering bringing aboard. This list of e-Business applications (ā€˜howsā€™ in QFD e- Matrix II) can be seen in table 2. 7.7. Completing QFD e-Matrix II At this step, the researchers need to establish a deļ¬ni- tion of what the ratings of strengths will mean in the case of United Printing, so as to be applied in QFD e-Matrix II. A score of ā€˜9ā€™ was determined to be critical and should be implemented immediately, ā€˜3ā€™ as in moderately critical and should ideally be implemented within the next 12 months, while ā€˜1ā€™ would signify that the e-Business application is not important but should merely be kept under consideration and future review. 7.8. Identiļ¬cation of critical e-Business applications from e-Matrix II The ratings were entered in the software and the rela- tionships between the business processes and the potential e-Business applications were calculated and displayed as a prioritized list. Table 4 shows the three most critical and feasible potential e-Business applications identiļ¬ed by the planning framework in the context of United Printingā€™s case study. The QFD e-Matrix II for United Printing can also be seen in ļ¬gure 7. 8. Future work Once we have attained the list of potential e-Business applications that is prioritized according to feasibility and criticality, the next step is to look at the key business processes vital to the successful implementation of potential e-Business applications. Once we had identiļ¬ed and veriļ¬ed the list of key business processes, we would be able to plan out the road map for the implementation of e-Business applications. This road map would allow SME managers to look at the business processes in a more linear way, thereby making it possible to formulate strategies that facilitate and encourage change using a customized, context-speciļ¬c, step-by-step approach. The next stage of research will be a set of case studies to provide for further development, testing and reļ¬nement of the planning framework. A key concern is to ensure that the framework matches and addresses the realities of the real business world. To ensure consistency and a common sectoral context, the printing industry has been selected for this study and access has already been obtained from two more printing SMEs. 9. Conclusion This paper has presented a feasible application of BSC to assist the generation of input for QFD ā€˜whatsā€™. The BSC helps to create a business overview when planning objectives for the organization. VCA can be deployed in aiding the generation of ā€˜howsā€™ and ensuring that all key business processes that add values are considered. QFD can be extended to establish a series of matrices to provide a clear, step-by-step planning framework for SMEs entering the e-Business arena, by providing a methodology for converting both internal and external needs into a feasible e-Business plan. The key to accurate ratings for the interrelationship matrix is to identify what the scores actually mean in the matrix. E-Business planning can then be built on a multi-stage QFD e- Matrix system, linking the internal and external needs of the organization to the business processes, through an e-Business initiatives prioritization and feasibility study. Table 4. Top three critical e-Business applications (results from QFD e-Matrix II). Scoring 266.6 199.6 157.3 Percentage 14.5% 10.9% 8.6% e-Business applications Advance machinery e-Learning Auto replenishments 816 B. L. Tan et al.
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