A case study on the improvement effects of quality cost by establishing a quality cost management system

Abstract

Many companies have endeavored to build a quality cost management system in order to be more productive business organization. This study shows the detail procedures of constructing a quality cost management system which is believed to be appropriate for their business system. That is, the method to calculate the quality cost and the linking logic between the quality improvement and its financial impact are explained based on a particular industry case. In this sense, the changes of business performance measures such as market share, customer satisfaction, etc. were analyzed in the longitudinal perspective for the consecutive 4 years (2003~2006). As the quantitative results of this study, the improvement activities based on the quality cost management system resulted in the 32% reduction of quality cost and the 121% increase of business profit, compared 2005 with 2006. In the qualitative perspective, the successive practice of quality cost reduction and the job information sharing in business unit were obtained by providing the best practices and bench-marking cases. Finally, the customer satisfaction has increased so that the customer-friendly management system has been accomplished. With these efforts, the 3.4% increase of the market share and the 3% increase of the customer satisfaction were obtained in 2005. As the future study, the current study can be extended to the concept of COPQ (cost of poor quality) which focuses on the hidden quality cost of the whole business activities. Such extension of analysis will help us understand the wider role of a quality cost management system in the business.