Cost of Quality: Using opportunity costs to determine the cost of quality in a continuous production environment

An empirical model was used expressing the COQ as a function of two main components: prevention-appraisal-failure expenses (PAF model) and opportunity losses. Opportunity losses were broken down into three components: under-utilisation of installed capacity, inadequate material handling, and poor delivery service. A six-month study was conducted. Results showed that the COQ, expressed as revenue loss, was mainly due to opportunity losses. Each variable was analysed and specific recommendations (...

BPIR Categories

14.3.2 Implement an improvement approach/method/technique
5.4.3 Install product