Cost of Quality Based Modeling Approach for Product Manufacturing Across the Globe

Abstract

Low cost, improved quality, and higher competition have pushed organizations to re-consider their quality costs to meet customer requirements. To date, cost of quality models have mainly focused individual product manufacturing players and tangible quality costs. However, cost of quality based cost measurement approach across supplier, manufacturer, and retailer lacks. This paper propose an integrated model that includes the cost of quality incorporating supplier (S), manufacturer (M), and customer (C). Major hidden quality costs that affect the cost and quality of a product are also integrated in the proposed SMC model. Mathematical equations are developed for activities to measure cost of quality (CoQ) across the chain using a CoQ based monitoring and evaluation mechanism. Impact of imperfection at different stages of product manufacturing is highlighted and measured with a case study. Quality costs are classified based on the Prevention-Appraisal-Failure model, and an activity-based costing approach is used for value added activities. A more holistic approach would help organizations to measure their weak areas for improvement, realize their impact on product quality, and satisfy their customers’ needs.