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Article
Publication date: 1 April 2004

P.A. Cauchick Miguel and Silmar Pontel

Measuring quality costs is an essential step for achieving competitiveness because these costs are strongly related to the company's annual revenue. One of the most…

Abstract

Measuring quality costs is an essential step for achieving competitiveness because these costs are strongly related to the company's annual revenue. One of the most important categories of quality costs is that of external failure costs. The consequences of these failures are not only related to the costs incurred to the failure in the field, but also to customer appeasement Within this quality cost category there are the claims against warrant. The warranty, which is a contract between a manufacturer and the consumer, specifies that the manufacturer agrees to repair or replace the failed product within the predetermined warranty period. This paper deals with the assessment of external failures by presenting a case study on warranty costs. The findings demonstrated that warranty costs can be significant and their reduction very important. In the studied case, the assessment of warranty costs has proved to be feasible and effective.

Details

International Journal of Quality & Reliability Management, vol. 21 no. 3
Type: Research Article
ISSN: 0265-671X

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Article
Publication date: 1 October 2006

Suresh Kumar Krishnan

The purpose of this study, with its central thesis placed on excelling at business measures, is to underscore the need for business entities to understand the significant

Abstract

Purpose

The purpose of this study, with its central thesis placed on excelling at business measures, is to underscore the need for business entities to understand the significant implication of hidden failure costs and its impact on their business processes. The study also stresses the need for organizations to systematically break the many norms.

Design/methodology/approach

This study looked at capturing the often‐overlooked component of poor quality cost via a simple function of measurement which requires an effortless yet painstaking way of collecting data pertaining to intangible wastages in the form of time, service charges and material.

Findings

A simple formula is introduced, using three types of indicators that could be used to monitor the level of poor quality costs (PQC), to quantify the total failure costs by accumulating the values of both hidden and visual failure costs.

Originality/value

The study breaks the boundaries of existing methods of understanding and calculating the all‐embracing cost of doing business, hence paving the way to make inroads in business processes improvement, enhanced job‐scope comprehension, agility and performance, further intensification of internal and external customer satisfaction.

Details

Measuring Business Excellence, vol. 10 no. 4
Type: Research Article
ISSN: 1368-3047

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Article
Publication date: 19 November 2018

Evangelos Psomas, Christina Dimitrantzou, Fotis Vouzas and Nancy Bouranta

The purpose of this paper is to focus on the cost of quality (CoQ) of food manufacturing companies. The study aims at empirically validating the conceptual structure of…

Abstract

Purpose

The purpose of this paper is to focus on the cost of quality (CoQ) of food manufacturing companies. The study aims at empirically validating the conceptual structure of the core dimensions of CoQ (prevention, appraisal, internal and external failure cost) and determining their level and relationships. Determining the reasons for not measuring the CoQ as well as the barriers-difficulties and benefits of the CoQ measurement is also an aim of the present study.

Design/methodology/approach

Greek food manufacturing companies were approached through a structured questionnaire and 91 participated in the study. Exploratory and confirmatory factor analysis, descriptive statistics and correlation analysis are applied for data analysis.

Findings

The structure of the core dimensions of CoQ is empirically validated, while all of them range within medium levels and are inter-related. The reasons for companies not measuring the CoQ as well as the barriers-difficulties of companies measuring the CoQ are not significant. On the contrary, significant benefits are derived from the CoQ measurement.

Research limitations/implications

The small sample of the food manufacturing companies operating in one country and the subjective business evidence collected are the main limitations of the present study.

Practical implications

Food companies can be motivated to establish a robust CoQ measurement system, which would reflect the level of the CoQ dimensions. According to the results of the CoQ measurement, a food company can make decisions to increase the prevention and appraisal costs and decrease the internal- and external-failure costs in order to be more competitive in the market.

Originality/value

The paper provides deeper insights into the level and inter-relations of empirically validated CoQ dimensions. Very few studies on the CoQ in food manufacturing companies have been carried out in Greece and the present study makes the picture of the CoQ status in this sector more clear.

Details

International Journal of Productivity and Performance Management, vol. 67 no. 9
Type: Research Article
ISSN: 1741-0401

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Article
Publication date: 1 August 1994

Geanie W. Margavio, Ross L. Fink and Thomas M. Margavio

Quality improvement decisions are the catalyst for substantialtechnological improvements being made in the manufacturing sector. Thenew technology, however, has developed…

Abstract

Quality improvement decisions are the catalyst for substantial technological improvements being made in the manufacturing sector. The new technology, however, has developed faster than techniques for evaluating capital investments in such improvements. This is largely because the benefits of quality improvement technology are difficult to quantify. The Taguchi loss function is incorporated into a net present value capital budgeting technique to provide an estimate of these benefits. Describes the loss function in relation to key quality costs: appraisal and prevention costs, and internal and external failure costs. External failure cost savings are generated by reducing variability in the manufacturing process. These savings are then compared with the cost of the quality improving technology. Results indicate that these savings can be substantial, depending on the achieved reduction in the process variability, the cost of capital, and on the estimate of the cost of processing a customer’s return of the product.

Details

International Journal of Quality & Reliability Management, vol. 11 no. 6
Type: Research Article
ISSN: 0265-671X

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Article
Publication date: 29 April 2021

Niveen Mohammed Ghunaim and Ayham A.M. Jaaron

Due to the ever-increasing competitive and complex business environments, food manufacturing companies have to maintain high-quality products while simultaneously…

Abstract

Purpose

Due to the ever-increasing competitive and complex business environments, food manufacturing companies have to maintain high-quality products while simultaneously minimizing customers' costs. Cost of quality (COQ) plays a crucial role in enhancing companies' efficiency and reducing expenditures that can contribute to companies' competitive performance. This paper investigates the underlying relationship between the level of COQ practices adoption (prevention, appraisal, internal and external failure costs) and organizational performance in Palestinian food manufacturing companies (PFMCs).

Design/methodology/approach

A quantitative research methodology using a structured questionnaire collected data from 119 PFMCs. Partial least squares structural equation modeling was used to analyze collected data.

Findings

Results indicated that COQ adoption has a significant positive effect on the organizational performance of PFMCs. Besides, prevention, external and internal failure costs were all associated with a positive impact on organizational performance of PFMCs, whereas appraisal cost did not affect organizational performance.

Originality/value

This study is considered one of the first studies to investigate COQ practices' effect on organizational performance in food manufacturing companies in a developing country context. Thus, it adds significant value to the literature responding to calls to tackle competitiveness issues in current complex business environments.

Details

The TQM Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1754-2731

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Article
Publication date: 4 September 2017

Jeff Guinot, John W. Sinn, M. Affan Badar and Jeffrey M. Ulmer

The purpose of this paper is to investigate the possibility of including the cost consequence of failure in the a priori risk assessment methodology known as failure mode…

Abstract

Purpose

The purpose of this paper is to investigate the possibility of including the cost consequence of failure in the a priori risk assessment methodology known as failure mode and effect analysis (FMEA).

Design/methodology/approach

A model of the standard costs that are incurred when an electronic control module in an automotive application fails in service was developed. These costs were related to the Design FMEA ranking of the level of severity of the failure mode and the probability of its occurrence. Monte Carlo simulations were conducted to establish the average costs expected for each level of severity at each level of occurrence. The results were aggregated using fuzzy utility sets into a nine-point ordinal scale of cost consequence. The criterion validity of this scale was assessed with warranty cost data derived from a case study.

Findings

It was found that the model slightly underestimated the warranty costs that accrued, but the fit could be improved with adjustments dictated by actual usage conditions.

Research limitations/implications

Cost data used in the simulations were derived from government and academic surveys, analyses, and estimates of the manufacturing cost structure; and nominal costs for various quality issues experienced by Tier 2 automotive electronics supplier. Specificity is lacking. The sample size and the type of the failure modes used to validate the model are constrained by the number and type of products which have had demonstrable performance concerns over the past three years, with cost data available to the authors. The power of the validation is limited. The validation is considered a screening assessment.

Practical implications

This work relates the characterization of risk with its potential cost and develops a scaling instrument to allow the incorporation of cost consequence into an FMEA.

Originality/value

A ranking scale was developed that related severity and occurrence rank scores to a cost consequence rank that keys to a cost of quality figure (given as percent of sales) that would accompany a realization of the failure mode.

Details

International Journal of Quality & Reliability Management, vol. 34 no. 8
Type: Research Article
ISSN: 0265-671X

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Article
Publication date: 1 August 1998

Angel R. Martinez Lorente, Alejandrino Gallego Rodriguez and Louise Rawlins

Quality costs have been discussed widely in the literature. This discussion has not always agreed and it is possible to identify two basic schools of thought; one asserts…

Abstract

Quality costs have been discussed widely in the literature. This discussion has not always agreed and it is possible to identify two basic schools of thought; one asserts the existence of a minimal level of quality cost for a given level of prevention and appraisal activities, and the other asserts that through prevention quality improvement is constant. This paper summarises these positions and outlines a behaviour model of quality costs that unifies and clarifies them. The behaviour model is based on the consideration of the cumulative effects of prevention. Ceteris paribus, continuous prevention activities should permit quality improvements whilst at the same time reducing the costs necessary to obtain them. The behaviour model introduces the effect of external quality requirements in an attempt to explain how, over time, quality improvement efforts do not necessarily result in decreased quality costs as customers’ quality requirements rise over the same period.

Details

International Journal of Operations & Production Management, vol. 18 no. 8
Type: Research Article
ISSN: 0144-3577

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Article
Publication date: 1 April 2004

Vincent K. Omachonu, Sakesun Suthummanon and Norman G. Einspruch

This paper examines the components of quality cost (internal failure, external failure, appraisal cost, and prevention cost) in the context of two key manufacturing…

Abstract

This paper examines the components of quality cost (internal failure, external failure, appraisal cost, and prevention cost) in the context of two key manufacturing inputs, materials and machines; the concept is also explained for the company as a whole. The purpose of this research is to analyze the variables that impact quality in a manufacturing environment. There are three major findings in this research. First, there is an inverse relationship between appraisal cost plus prevention cost and failure cost. Second, the relationship between appraisal cost plus prevention cost and quality is positive. Finally, failure cost is negatively correlated with quality. This analysis also revealed a strong relationship between appraisal cost plus prevention cost and quality for material input, machine input, and the company. The results indicate that as the appraisal cost plus the prevention cost increases, quality improves and failure cost decreases.

Details

International Journal of Quality & Reliability Management, vol. 21 no. 3
Type: Research Article
ISSN: 0265-671X

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Abstract

Details

International Journal of Operations & Production Management, vol. 21 no. 1/2
Type: Research Article
ISSN: 0144-3577

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Article
Publication date: 13 February 2007

Victor E. Sower, Ross Quarles and Eric Broussard

The purposes of this study are to examine the relationship between the distribution of quality costs and the level of maturity of an organization's quality system, to…

Abstract

Purpose

The purposes of this study are to examine the relationship between the distribution of quality costs and the level of maturity of an organization's quality system, to assess the extent to which effective COQ systems and maturing quality systems affect organization performance, and to determine why some organizations do not utilize COQ systems.

Design/methodology/approach

A survey instrument was developed to determine the distribution of total quality cost among the four ASQ categories. The instrument also assesses the maturity of the organization's quality system using the ANSI/ISO/ASQ Q9004‐2000 performance maturity level classification system. Correlation analysis was used to examine the relationships between quality costs and quality system maturity.

Findings

External failure costs were found to decline as a percentage of total cost of quality (COQ) as an organization's quality system matures. Total COQ was found to increase as an organization moved from a very low level of quality system maturity to a higher level. Sales and profit growth were not significantly correlated with the presence of a quality cost system or with the level of maturity of the quality system. Lack of management support was found to be the most common reason why organizations do not systematically track quality costs.

Research limitations/implications

Additional research is needed to determine the relationship between the presence of a COQ system and its effective integration with the quality system and organizational outcomes. Future research is needed to expand the study beyond the boundaries of the USA. Future research involving longitudinal studies would be beneficial in more accurately assessing the nature of the changes in COQ distribution over time.

Practical implications

The findings of this study suggest that organizations planning to implement a COQ system should ensure that management supports the program and is prepared for a short‐term increase in total COQ. These findings also support the often‐suggested expectation that in the long run the COQ system will lead to a significant reduction in external failure costs.

Originality/value

Systematic measurement of COQ is underutilized in practice. This study systematically examines why this is the case. In addition the study provides information that can be useful in justifying implementation of COQ measurement systems.

Details

International Journal of Quality & Reliability Management, vol. 24 no. 2
Type: Research Article
ISSN: 0265-671X

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