Project Prioritization in Portfolio Management using Quality Function Deployment

Abstract

Quality Function Deployment (QFD) is a system’s design method which focuses on the needs of the client. QFD assists the development team during the design stage of a system, a process, a product or a service, by translating the requirements set by the customer into engineering specifications.

QFD has its origins in Japan, where it was developed in mid-1960s under the umbrella of Total Quality Management (TQM) to enhance/support product quality design. It was not before mid-1980s when the technique was appreciated, became popular and started being applied extensively by companies in the Western world. The application of QFD is based on the development of a series of interrelated matrices with most widely used the ‘House of Quality’, which enables the prioritization of the engineering characteristics.(Image)

Nowadays QFD is a recognized power tool and its use has been expanded into other disciplines/areas as well. For instance, there are many cases where QFD is applied in construction project management for identifying customer requirements during the design phase. Moreover, QFD is used to support strategic as well as operational decision within a company.

Another interesting application of QFD is to prioritize the projects in the portfolio management of a company. Prioritizing the projects can be a challenge for a company, as people that are related to some projects and will benefit from their execution, tend to consider their projects more important and advantageous than the others. In order to avoid this kind of internal conflicts within a company, the QFD technique can be adapted and applied so that the projects will be prioritized regarding their contributed benefit to internal and external customers.

As aforementioned, in order to apply QFD in portfolio management and develop a matrix similar to the ‘House of Quality’ which will determine the prioritization of the projects, the method should be adapted.

The five steps needed for the application of the adapted QFD technique are:

1. Formation of group of internal stakeholders.
2. Gathering of the projects, determination of benefits the projects provide to internal and external customers and use of Analytic Hierarchy Process (AHP) to prioritize benefits.
3. Determination of complexity criteria and characteristics and use of AHP to quantify the relative degree of complexity.
4. Development of adapted ‘House of Quality’ matrix and project prioritization.
5. Development of Benefits vs. Complexity matrix to assign people to projects.

The application example that is presented in this article describes the successful use of the QFD method in the Information Technology (IT) department of National City Corporation (NCC) in Cleveland, Ohio, to manage project priorities and project management resources.

Background

Quality Function Deployment (QFD) is a structured process-oriented system’s design method which focuses on the needs of the client. QFD is the most complete and convincing technique that assists the development team during the design stage of a system, a process, a product or a service by translating the requirements set by the customer into engineering language and subsequently into design specifications (4). Although it is mainly used during the design stage, QFD can assist the whole system development process, as can be used in defining marketing strategies, planning, product design and engineering, prototype evaluation, development of production processes, production and sales (3).

QFD has its origins in Japan, where it was developed in mid-1960s under the umbrella of Total Quality Management (TQM) to support product quality design (5). It was not before mid-1980s when the technique was appreciated, became popular and started being applied extensively by companies in the Western world (1). The transformation of customer’s requirements into design and quality assurance targets that were used later during the production stage, assured that the final product would meet the expectations of both the customer and the final user (4).

As QFD focuses on satisfying customer’s requirements and ensures a good and convenient communication between the customer and the design team, there is a possibility of trade-offs between what the customer needs and what engineering characteristics are affordable for the company to develop (6). Moreover, by targeting on meeting customer’s needs, the re-design or product/process modification time is decreased, which subsequently leads to cost reduction. As is claimed, the right implementation of QFD in a company can reduce engineering changes by 30-50%, design cycles by 30-50%, start-up costs by 20-60% and warranty by 20-50% (4).

However, QFD is not a method that can be applied easily. The application of QFD is based on the development of a series of interrelated matrices, which is a complex and time-consuming process. The most widely used matrix is the ‘House of Quality’, a matrix that enables the prioritization of the engineering characteristics by prioritizing customer’s needs (Image). QFD correlation matrices can be also used for ranking competitors’ products by means of technical and customer benchmarking (6). Information about the customer requirements that need to be satisfied can be gathered by the marketing department through surveys, interviews, trade shows and journals, customer complaints, etc. (3).

It is essential that QFD is implemented in the initial stages of product or service development to assure that all the design changes are done before production has started and before prototyping (4). The further analysis of the QFD results can be the basis of other tools and methodologies used during the design phase, such as Failure Mode and Effects Analysis (FMEA) or Cost-Worth Analysis (CWA) (7).

Other Applications

Although when developed, QFD was a method used in product design, nowadays there are many extensions and adaptations of QFD which make it an important management technique applicable in various fields and functions within a company for optimization of internal processes. For instance, apart from defining customer needs, QFD can be used in a company for decision-making, developing priorities, formulating annual policies manufacturing strategies, etc.

Since QFD is a popular and powerful method, it has been applied in all different types of industries, from automobiles and electronics manufacturers to government, healthcare, research and even education.

In some cases it is also combined with other approaches or methods. Combinations of QFD with Analytic Hierarchy Process (AHP) were used for robot selection, rapid tooling process selection, improvement of education quality in academic institutions or identification of suitable teaching techniques (3).

Another field where QFD has started to be applied successfully and more extensively is the construction industry. Implementing QFD during a construction project has proven to accelerate the design process, as the identification of the client’s requirements saves time of possible future re-designs. This results in an easier decision-making process in the next phases of the project (8).

Application in Portfolio Management

A useful implementation of QFD in Portfolio Management is for the prioritization of a company’s existing projects and later on the assignment of each project to the most relevant persons. Without being structured and standardized across the different departments of a company, the prioritization of the projects can be a challenging and inefficient process. The challenges that occur during the prioritization are usually a result of the different individual priorities of the company’s internal stakeholders related to each project.

It has been noticed that managers of different departments within a company tend to assign key employees to projects without considering the work overload of the employees. This has as a consequence the prioritization of the projects from the employees assigned to the projects, that are more likely to set as a priority a project that is more beneficial for them than the whole company. In other words, the employees prefer working on a project that will enhance their personal skills rather than working on a project which creates value for their department and subsequently for the company (2).