An Empirical Investigation of the Relationship between Quality and Productivity

Abstract

The traditional theory of quality and productivity hypothesizes an inverse relationship between quality and productivity whereas a more contemporary theory hypothesizes that quality and productivity are directly related. A production simulation game was conducted to examine this relationship. The research results confirmed the contemporary theory that quality and productivity are directly related. The results indicated that as defects, scrap, and rework (negative quality) decrease, productivity increases. Thus, as quality increases, productivity increases. This study also found that there are strong relationships between total productivity and partial productivity indexes, materials productivity, labor productivity, and capital productivity, in descending order. Cost analysis implied that materials cost constitutes a higher percentage of total cost than labor cost for productive companies.

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