The quality function deployment (QFD) theory has been developed for application in product design procedures, leading to designs that reflect customer requirements better. Moreover, QFD application to product design can achieve better communication between disciplines in a company such as marketing, design and production and it can lead to shorter design time and less engineering changes after start of production [1,2].In development and management of annual policy, clear communication and customer orientation is also fundamental for success. Therefore, one might consider the possibility to apply QFD techniques, not in their conventional field, i.e. product design procedures, but to policy formulation and management procedures: if QFD can improve product design procedures towards more customer orientation and clearer communication, perhaps QFD application can do the same to policy formulation or even policy management. In addition, one might benefit from other advantages by doing so, like shorter design time and better integration between disciplines, in this case lower management and higher management, or cross-functional management. Sullivan[3] describes this approach in conceptual terms and he expects valuable progress by such application. However, Sullivan[3] does not offer practical reference in his publication.In this article we will demonstrate how the QFD techniques can be applied to procedures that are used to formulate annual policy. To do so, we will first summarize the QFD theory to get some fundamental insight and then we will explain in which cases customer orientation is necessary for policy management. After this, we will outline a conceptual procedure to formulate annual policy based on QFD techniques. We will complete this article with our conclusions on the subject.To provide practical reference to the concept described here, we will refer to an MSc graduation project at the Philips EBEI-IC company in Taiwan (Deming prize, 1991), in which one of the authors was involved. This study dealt with such application of QFD techniques to the formulation of annual policy. Other policy management aspects besides formulation, such as control and realization of targets were not covered because of time restrictions.At the end of each section in this article, we will mention the findings of this study as far as they are related to that section.
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