TY - JOUR
T1 - Using opportunity costs to determine the cost of quality
T2 - A case study in a continuous-process industry
AU - Sandoval-Chávez, Diego A.
AU - Beruvides, Mario G.
PY - 1998/12
Y1 - 1998/12
N2 - We investigated the strategic and economic importance of the cost of quality (COQ) in a firm whose productiojn process is continuous. An empirical model was built to express the COQ as a functiori of two main components: traditional prevention-appraisal-failure expenses (PAF model) and opportunity losses. Opportunity losses were broken down into three components: underutilization of installed capacity, inadequate material handling, and poor delivery service. We conducted the six-month study in a company along the U.S.-Mexicm border. Results show that the COQ expressed as revenue loss is mainly explained by the opportunity component. Also, the COQ expressed as profit not earned is explained by the opportunity variable but in a smaller proportion. Each variable was analyzed and specific recommendations were provided.
AB - We investigated the strategic and economic importance of the cost of quality (COQ) in a firm whose productiojn process is continuous. An empirical model was built to express the COQ as a functiori of two main components: traditional prevention-appraisal-failure expenses (PAF model) and opportunity losses. Opportunity losses were broken down into three components: underutilization of installed capacity, inadequate material handling, and poor delivery service. We conducted the six-month study in a company along the U.S.-Mexicm border. Results show that the COQ expressed as revenue loss is mainly explained by the opportunity component. Also, the COQ expressed as profit not earned is explained by the opportunity variable but in a smaller proportion. Each variable was analyzed and specific recommendations were provided.
UR - http://www.scopus.com/inward/record.url?scp=14544270041&partnerID=8YFLogxK
U2 - 10.1080/00137919808903192
DO - 10.1080/00137919808903192
M3 - Article
AN - SCOPUS:14544270041
SN - 0013-791X
VL - 43
SP - 107
EP - 124
JO - Engineering Economist
JF - Engineering Economist
IS - 2
ER -