Costs of Quality: Exploratory Analysis of Hidden Elements and Prioritization using Analytic Hierarchy Process

Document Type : Research Paper

Authors

1 Indira Gandhi National Open University, New Delhi, India

2 N S S Engineering College, Kerala, India

Abstract

Cost of Quality analysis is emerged as an effective tool for the industrial managers for pinpointing the deficiencies in the system as well as for identifying the improvement areas by highlighting the cost reduction opportunities. However , this analysis will be fully effective only if it is further extended to identify the cost incurred in ensuring quality in all areas of the supply chain including the hidden costs and costs of missed out opportunities. Most of the hidden elements of quality costs are difficult to track and not accounted by the traditional accounting tools. An exploratory analysis is made in this research to identify the hidden elements of quality costs in manufacturing industry. Further, the identified cost elements are classified into various groups for better analysis and, finally, prioritized to identify the vital few among them. Analytic Hierarchy Process (AHP) technique which is one of the most popular Multi Criteria Decision Method (MCDM) and Pareto analysis were used in this study for prioritizing the hidden quality cost elements based on their degree of impact on overall cost of quality. By this analysis, the key cost elements which are to be addressed to reduce the overall cost of quality are identified.

Keywords

Main Subjects

References

Akyol, D. E., Tuncel, G., & Bayhan, G. M. (2005). A Comparative Analysis of Activity-Based Costing and Traditional Costing. World Academy of Science, Engineering and Technology, Vol. 3, pp. 44-47.
Aruldoss, M., Lakshmi, T. M., & Venkatesan, V. P. (2013). A survey on multi criteria decision making methods and its applications. American Journal of Information Systems, Vol. 1(1), pp. 31-43.
Arvaiova, M., Aspinwall, E. M., & Walker, D. S. (2009). An Initial Survey on the Use of Costs of Quality Programmes in Telecommunications. The TQM Journal, Vol. 21(1), pp. 59-71.
Bhatt, R., Macwan, J. E. M., Bhatt, D., & Patel, V. (2010). Analytic Hierarchy Process Approach for Criteria Ranking of Sustainable Building Assessment: A Case Study. World Applied Sciences Journal, Vol. 8(7), pp. 881-888.
Cheah, S. J., Shahbudin, A. S. M., & Taib, F. M. (2011). Tracking Hidden Quality Costs in a Manufacturing Company: An Action Research. International Journal of Quality & Reliability Management, Vol. 28(4), pp. 405-425.
Cosmin, D. O. B. R. I. N., & Ana-Maria, S. T. A. N. C. I. U. C. (2013). Quality Cost System: An Excellent Tool in the Overall Management Business. Revista Economica, Vol. 65(6), pp. 37-45.
Forman, E., & Peniwati, K. (1998). Aggregating Individual Judgments and Priorities with the Analytic Hierarchy Process. European journal of operational research, Vol. 108(1), pp. 165-169.
Gidey, E., Beshah, B., & Kitaw, D. (2014). Review on the Evolving Relationship Between Quality and Productivity. International Journal for Quality Research, Vol. 8(1).
Hwang, C. L., and K, Yoon (1981). Multiple Attribute Decision Making: Methods and Applications, Springer-Verlag, New York, NY.
Jafari, A., & Rodchua, S. (2014). Survey research on quality costs and problems in the construction environment. Total Quality Management & Business Excellence, Vol. 25(3-4), pp. 222-234.
Krishnan, S. K., Agus, A., & Husain, N. (2000). Cost of Quality: the Hidden Costs. Total Quality Management, Vol. 11(4-6), pp. 844-848.
Macharis, C., Springael, J., De Brucker, K., & Verbeke, A. (2004). PROMETHEE and AHP: The design of operational synergies in multicriteria analysis.: Strengthening PROMETHEE with ideas of AHP. European Journal of Operational Research, Vol. 153(2), pp. 307-317.
Millet, I., & Wedley, W. C. (2002). Modelling risk and uncertainty with the analytic hierarchy process. Journal of Multi‐Criteria Decision Analysis, Vol. 11(2), pp. 97-107.
Mohandas,V.P. & Sankaranarayanan, S. R.(2008). Cost of Quality Analysis: Driving Bottom-line Performance. International Journal of Strategic Cost Management, Vol. 3(2), pp. 1-8.
Omar, M. K., & Murgan, S. (2014). An Improved Model for the Cost of Quality. International Journal of Quality & Reliability Management, Vol. 31(4), pp. 395-418.
Ramanathan, R. (2001). A note on the use of the analytic hierarchy process for environmental impact assessment. Journal of environmental management,63(1), 27-35. Saaty, T. L. (1980). The Analytic Hierarchy Process: Planning, Priority Setting, Resources Allocation. New York: McGraw.
Sandoval-Chávez, D. A., & Beruvides, M. G. (1998). Using Opportunity Costs to Determine the Cost of Quality: A Case Study in a Continuous-Process Industry. The Engineering Economist, Vol. 43(2), pp. 107-124.
Schiffauerova, A., & Thomson, V. (2006). Managing Cost of Quality: Insight into Industry Practice. The TQM Magazine, Vol. 18(5), pp. 542-550.
Sellés, M. E., Rubio, J. A., & Mullor, J. R. (2008). Development of a Quantification Proposal for Hidden Quality Costs: Applied to the Construction Sector. Journal of Construction Engineering and Management, Vol. 134(10), pp. 749-757.
Shanshan, S. (2013). Modeling and Analysis of Relationship between Quality Cost and Sales Revenue using System Dynamics.
Snieska, V., Daunoriene, A., & Zekeviciene, A. (2013). Hidden Costs in the Evaluation of Quality Failure Costs. Engineering Economics, Vol. 24(3), pp. 176-186.
Sörqvist, L. (1997). Effective Methods for Measuring the Cost of Poor Quality. Measuring Business Excellence, Vol. 1(2), pp. 50-53.
Suthummanon, S., & Sirivongpaisal, N. (2011). Investigation of the Relationship between Quality and Cost of Quality in a Wholesale Company. ASEAN Engineering Journal, Vol. 1(1).
Teeravaraprug, J. (2004). Quantification of Tangible and Intangible Quality Costs. In Proceedings of the Fifth Asia Pacific Industrial Engineering and Management Systems Conference (pp. 1-7).
Tye, L. H., Halim, H. A., & Ramayah, T. (2011). An Exploratory Study on Cost of Quality Implementation in Malaysia: The Case of Penang Manufacturing Firms. Total Quality Management & Business Excellence, Vol. 22(12), pp. 1299-1315.
Vaidya, O. S., & Kumar, S. (2006). Analytic Hierarchy Process: An Overview of Applications. European Journal of operational research, Vol. 169(1), pp. 1-29.
Velasquez and Hester. (2013), An Analysis of Multi-Criteria Decision Making Methods IJOR, Vol. 10(2), pp. 56-66.
Wang, M. T., Wang, S. S. C., Wang, S. W. C., & Wang, A. S. M. (2010). An Introduction of COQ Models and Their Applications. In Proceedings of the 2010 International Conference on Engineering, Project, and Production Management (Vol. 14).
Yang, C. C. (2008). Improving the Definition and Quantification of Quality Costs. Total Quality Management, Vol. 19(3), pp. 175-191.
Zimwara, D., Mugwagwa, L., Maringa, D., Mnkandla, A., Mugwagwa, L., & Ngwarati, T. T. (2013). Cost of Quality as a Driver for Continuous Improvement-Case Study–Company X. International Journal of Innovative Technology and Exploring Engineering, Vol. 2(2), pp. 132-139.
Zulnaidi, Y. (2010). Quality Management as an Effective Strategy of Cost Savings. African Journal of Business Management, Vol. 4(9), pp. 1844-1855.
International Journal of Supply and Operations Management
Volume 1, Issue 4 - Serial Number 4
February 2015
Pages 489-506

Files

Share

How to cite

Statistics