The relationship between quality and quality cost for a manufacturing company

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.

The value of quality improvements

“…Carr and Ponomeon (1994;in Omachonu et al, 2004) suggest that internal failure is the most expensive and prevention is the least expensive quality cost component. Omachonu et al (2004) suggest that prevention activities have a direct and positive influence on the profit margin and the company should not exclusively invest in appraisal because it may lead to unacceptable costs and may affect the company's reputation. The failure costs are usually much higher than prevention and appraisal costs, and failure costs have a negative correlation with the level of quality.…”

“…It is the cost resulting from products not conforming to customer requirements (Millar, 1999) or cost associated with defects that are found after the products are shipped to the customers (Angell and Chandra, 2001;Omachonu, 2004).…”

“…It is the result of quality failures or defective goods found within the company before shipment to customers (Millar, 1999;Angell and Chandra, 2001;Omachonu, 2004).…”

“…department based quality cost analysis method, team-based quality cost analysis, and a process cost model have been described in Dale and Plunkett (1999). Carr and Ponomeon (1994;in Omachonu et al, 2004) suggest that internal failure is the most expensive and prevention is the least expensive quality cost component. Omachonu et al (2004) suggest that prevention activities have a direct and positive influence on the profit margin and the company should not exclusively invest in appraisal because it may lead to unacceptable costs and may affect the company's reputation.…”

“…cost of verification and control performed at any stage of the quality loop (BS 6143: part 2) whenever there exists a chance for poor quality (Angell and Chandra, 2001) incurred before shipment of the product (Omachonu, 2004).…”