Research on the trade-off relationship within quality costs: A case study

Abstract

In today's global competition, the significant cost saving potential on the quality costs is attracting more and more firms. The quality costs can be classified into control costs (prevention and appraisal costs) and failure costs (internal and external failure costs). As a universally accepted principle, the increase of the control costs will result in the decrease of the failure costs and vice versa. This relationship is called the trade-off relationship within quality costs. Thereof, the proportions of quality costs are vital for balancing the quality cost and there is a balanced point (a set of proportions) that can make a firm obtain the lowest level of the sum of quality costs. Based on a real case study, this paper concentrates on the statistic analysis of the trade-off relationship between quality costs and the quantitative calculation of the balanced point. The statistic analysis reveals that the trade-off relationships within quality costs will not show up except when time delays are taken into account. With these time delays, the related total quality cost (RTQC) can be derived and utilised to compute the balanced point of the quality costs. The case study demonstrates that the findings and approach can provide a useful assistance in the quality cost saving and management improvement.

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