Management Information System for Effective Decision Making on Total Cost of Quality

Abstract

Manufacturing organizations are continuously affected by chronic waste and hidden quality costs resulting in increased Total Cost of Quality and reduced Profitability. However the existing systems only focus on sporadic waste and visible quality costs and fail to capture the real picture of total cost of quality. Therefore severities of issues are often unidentified by organizations and no preventive actions are triggered for continuous improvement. This research focuses on developing a reliable Quality Costing System for knitted fabric manufacturing organizations in which all dimensions of prevention, appraisal, internal and external failure costs are encompassed and enables the achievement of organization’s quality objectives and long term success through proper identification, monitoring, analysis, and reporting of quality costs and thereby facilitate management decision making to manage “Total Cost of Quality”. The comprehensive literature survey depicts the nature of chronic and sporadic waste, distinguishes between visible and hidden costs, categorization of cost elements, analysis of quality costs, real impact of quality costs on organizational performance and the strategy for managing total cost of quality. Initially a detailed process study was conducted to identify all the cost elements, categorize their impact and to define the method of quantifying such cost elements. Collected quality cost data was analyzed and the impact of cost of quality on organizational performance was identified. Finally a Microsoft excel based system was developed to produce useful management information which includes cost distributions, trend analysis of cost categories and key cost elements, highest cost elements and monthly cost of quality report.