Determining the cost of poor quality and its impact on productivity and profitability

Abstract

Purpose – The purpose of this paper is to examine how effectively the cost appraisal system proposed measures the cost of poor quality (COPQ) in a construction project. The paper first formulates how COPQ can be measured and later clarifies the relationship between COPQ, labor productivity, and profitability. Design/methodology/approach – In order to measure COPQ, the researchers prepared data entry forms for recording COPQ items on a daily basis and formulated the cost contribution of lost material, lost man-hours, lost machinery hours, and lost overhead on the overall COPQ for the project. The proposed method was then applied in a case study. Findings – The results showed that, for the 60-days study period, COPQ decreased by about 24 percent while labor productivity and profitability increased by about 17 and 11 percent, respectively, after the implementation of COPQ measuring system. This study further supports the use of the COPQ system in construction projects as a mechanism to facilitate continuous improvement. Originality/value – COPQ is a major cost that is often ignored in construction projects due to the difficulty of measuring it. This paper presents a COPQ measuring and recording system capable of identifying COPQ. The implementation of the system is shown to increase productivity and profitability as demonstrated by the project used for the case study.

Labor Productivity Assessment Using Activity Analysis on Semi High-Rise Building Projects in Pakistan

“…Labor productivity is a dynamic entity, affected by many elements, and associated with performance of time, cost and quality [12,13]. Owing to its substantial impact on overall project success, there is a strong need to assess the performance of labor in order to address the productivity issues.…”

Impact of Construction Productivity Attributes Over Construction Project Performance in Indian Construction Projects

“…(Iyer and Jha, 2005;Dixit et al, 2017a;Kisi et al, 2017) Rework, Poor supervisor competency and Incomplete drawings (Gosling et al, 2007;Mojahed and Aghazadeh, 2008;Tam et al, 2007) Decision making, planning and logistics, supply chain management, labor availability, budget and cash flow management, improper construction method, frequent changes in design, supervision delay, the sequence of activities, overcrowding a job location and scope of activities. (Hiyassat et al, 2016;Kisi et al, 2017;Moselhi and Khan, 2012;Mahmood et al, 2014;Dixit et al, 2017a) Availability of material, the experience of labor, skill set and training, communication, the financial position of the client (Loosemore, 2014;Mahamid, 2013;Moselhi and Khan, 2012) Table 2 Summary of attributes / variables identified by previous researchers in the field of construction productivity the literature review (to be specific from the paper "Construction Productivity and Construction Project Performance in Indian Construction Projects" ) and the factors have been analyzed and explained in detail in this paper. This paper is the extended version of the previous paper and the statistical test applied to the paper are: correlation between the factors has been calculated and the factors have been analyzed, and the reliability analysis table for all the factors has been prepared to check the applicability of factor analysis, and one sample t-test is performed using SPSS 23 to check the hypothesis testing.…”

Factor analysis of quality assurance practices in small and medium-sized road-construction projects: A South African perspective

“…In South Africa, project managers and project consultants are responsible for the overall construction success related to delivering infrastructure projects within the approved costs and time as well as the necessary quality and supervision. For any built-environment project to improve its competitive abilities in the construction industry, it should be able to determine the cost of poor quality and its impact on productivity and profitability (Mahmood, Ahmed, Panthi & Kureshi, 2010). Therefore, SMEs cannot view quality as an expensive process, an expensive product, or time consuming, but rather as quality assurance that can improve their competitive capabilities in the marketplace (Mofokeng & Thwala, 2012: 713;Kruger, Ramphal & Maritz, 2014).…”

“…The timely completion of road-construction projects is considered one of the key factors referring to project achievement as well as quality and safety (Aziz et al, 2016). In line with this, a cost-effective policy, competence and profitability are the main determinants of construction-project planning, covering activities needed to deliver quality in the work to meet the project requirements (Mahmood et al, 2010). Costs of restructuring the process must be controlled in order to eradicate the causes of poor quality and related preventive activities.…”