Content area
Full Text
1. Introduction
Quality has become one of the core factors for almost all manufacturing and service companies that aim to win sufficient orders. Therefore, improving quality is considered to be one of the important strategies to attain customer loyalty in today's complex global competitive environment. Studies concluded that any serious endeavour to improve quality will lead to an increase of cost of the product or service since improving quality has its own costs. As a result, measuring the cost of quality is important because it provides information about the financial consequences of adopting quality improvement programs. [22] Feigenbaum (1991) categorized the model into two major areas: costs of control (costs of conformance) and costs of failure of controls (costs of non-conformance), which since then used by numerous research studies ([60] Sumanth and Arora, 1992; [6] Burgess, 1996; [50] Purgslove and Dale, 1995).
Cost of quality is usually best understood in terms of the sum of costs of conformance and the costs of non-conformance, which was introduced by [17] Crosby (1979). From the voluminous literature, one may categories the cost of quality models into five generic models: P-A-F model, Crosby model, opportunity or intangible cost model, process cost model and activity based costing (ABC) model.
Traditional cost accounting approaches typically used by manufacturing and service companies to quantify the cost of quality has been reported in the literature to have serious limitations when dealing with the components of intangible costs ([57] Son, 1991; [11] Chiadamrong, 2003; [56] Sharma, 2007). As manufacturers continue to improve their factories, they discover that existing cost measures have to be updated and no matter how sophisticated and reliable these economic evaluation measures may be, problems still remain unreliable if cost of quality information is not obtained as inputs for these economic evaluations ([11] Chiadamrong, 2003).
This paper acknowledges the problem faced by traditional cost-accounting systems that attempt to quantify the cost of quality and thus proposes an enhanced model for quantifying the cost of quality. The model reported in this paper is based on the model proposed by [11] Chiadamrong (2003). However, our model includes important modifications and extensions to the original model. Moreover, a simulation model was developed to investigate the impact of certain quality level plans on the cost...