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

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

• cost of quality
• hidden quality costs
• opportunity costs
• ahp
• pareto analysis