Open AccessThe opportunity costs of poor quality
Author(s) -
Freiesleben Johannes
Publication year - 2005
Publication title -
the quality assurance journal
Language(s) - English
Resource type - Journals
eISSN - 1099-1786
pISSN - 1087-8378
DOI - 10.1002/qaj.309
Subject(s) - quality (philosophy) , quality costs , attractiveness , perspective (graphical) , opportunity cost , quality management , business , risk analysis (engineering) , marketing , set (abstract data type) , cost–benefit analysis , operations management , economics , environmental economics , computer science , cost control , microeconomics , political science , psychology , philosophy , epistemology , artificial intelligence , psychoanalysis , law , programming language , service (business)
Cost discussions abound in the literature on quality improvement, yet the focus was rarely set on opportunity costs, a rather important economic concept. Only a few articles demonstrate how companies incur these costs when dealing with quality problems. We want to develop a simple ‘opportunity costs perspective’ to classify costs of poor quality and to show how these have an impact on the bottom line. Applying this perspective might help in explaining why quality improvement and prevention are in most cases profitable investments. It also highlights the fact that traditional accounting for the costs of poor quality might miss important points for deciding on the attractiveness of quality improvement projects. Copyright © 2005 John Wiley & Sons, Ltd.