The Cost of Poor Quality in Cartonboard Deliveries
Takala, Matti Maurinpoika (2015)
Takala, Matti Maurinpoika
2015
Tuotantotalouden koulutusohjelma
Talouden ja rakentamisen tiedekunta - Faculty of Business and Built Environment
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Hyväksymispäivämäärä
2015-12-09
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:tty-201511171719
https://urn.fi/URN:NBN:fi:tty-201511171719
Tiivistelmä
Cost of poor quality is widely not measured in companies, even if there are many hidden failure costs affecting profitability of companies. The idea for this master thesis has risen up from case company’s need for find out, how cost of poor quality is actually occurred and accumulated in deliveries. In literature quality costs are commonly categorized in prevention-, appraisal- and failure costs in so called PAF -model. Currently case company has measured only credited feedback costs, which have been allocated directly to production units. Therefore the objective was to provide more comprehensive view of quality costs in deliveries for support managerial work. How poor quality occurs, how much it costs and how it affects to customers satisfaction? With these questions it was researched, how CoPQ should be measured and what it offers for managerial work.
The research design was a single case study and it was limited to cover deliveries from one mill to one market area in one year observation period. Data for the study was collected through interviews, but even more from internal ERP-database. Based on interviews operations of delivery chain were modelled, when all volumes, sales and costs were collected from ERP-database. Poor quality activities and costs caused were categorized in internal and external failure costs, and allocated to each responsible cost object. Also lost profit was estimated as a lost opportunity. Prevention and appraisal costs were left outside of this research, since they should be more likely understood as quality investments.
As expected, poor quality cost measured with new CoPQ model were much higher than before, when also hidden costs became visible. Because costs were allocated to each responsible parts of delivery chain, mill wasn’t anymore the only one who collected all costs. This is underlining the fact that comprehensively all parts are responsible for quality. CoPQ model provides support for managerial work through two models: CoPQ model itself can be used for evaluating quality and spotting targets for improvement, when cost structure model for delivery chain helps develop knowledge of delivery operations. Overall poor quality and its costs seems to be like domino blocks which are falling more blocks further this chain reaction proceed with bigger mess and consequences. Thus prevention of quality faults before they even exist should be the primary importance, and if they still exist, then it’s extremely important to fix them as soon as possible.
The research design was a single case study and it was limited to cover deliveries from one mill to one market area in one year observation period. Data for the study was collected through interviews, but even more from internal ERP-database. Based on interviews operations of delivery chain were modelled, when all volumes, sales and costs were collected from ERP-database. Poor quality activities and costs caused were categorized in internal and external failure costs, and allocated to each responsible cost object. Also lost profit was estimated as a lost opportunity. Prevention and appraisal costs were left outside of this research, since they should be more likely understood as quality investments.
As expected, poor quality cost measured with new CoPQ model were much higher than before, when also hidden costs became visible. Because costs were allocated to each responsible parts of delivery chain, mill wasn’t anymore the only one who collected all costs. This is underlining the fact that comprehensively all parts are responsible for quality. CoPQ model provides support for managerial work through two models: CoPQ model itself can be used for evaluating quality and spotting targets for improvement, when cost structure model for delivery chain helps develop knowledge of delivery operations. Overall poor quality and its costs seems to be like domino blocks which are falling more blocks further this chain reaction proceed with bigger mess and consequences. Thus prevention of quality faults before they even exist should be the primary importance, and if they still exist, then it’s extremely important to fix them as soon as possible.