International Journal of Innovative Technology and Exploring Engineering (IJITEE)

ISSN: 2278-3075, Volume-2, Issue-2, January 2013

Cost of Quality as a Driver for Continuous

Improvement - Case Study Company X
Davison Zimwara, Lameck Mugwagwa, Daniel Maringa, Albert Mnkandla, Lindleen Mugwagwa, Tendai Talent Ngwarati

Abstract In the manufacturing, metal casting industry is one of

the oldest basic principal and most important industries. The
casting process is hindered by the occurrence of various defects.
High casting reject levels and customer returns have a
considerable adverse effect on productivity, delivery performance,
customer satisfaction and employee morale. In addition excessive
rejection reduces yield, wastes valuable raw materials and
involves management time in problem solving. All foundry
processes generate a certain level of rejection that is closely
related to the type of casting, the processes used and the
equipment available. This paper seeks to establish the extent to
which cost of quality can impact on continuous improvement of
the products and the relationship with the customers of the
organization. To determine the cost of quality (COQ) at casting
company X, the researchers used existing company records,
publications and historical evidence of the company. The
researchers utilized techniques such as, bar charts and tables in
presenting and interpreting data. The above techniques have the
ability to provide methods for collecting, presenting, and analysis
and meaningfully interpret data. The research findings estimated
the COQ to be 6.6% of sales revenue.
Index Terms Cost of quality; casting; continuous improvement

I.

INTRODUCTION

The growth of interest in product and services quality as a

key contributor to competitiveness and marketability has
stimulated organizational concern for economic effects of
quality costs. Companies are now beginning to amass and
use quality cost data mainly scrap, reworks and warranty
claims. Cost of quality provides a means to gauge the return
on quality by reducing business cost. In general cost of
quality also known as the poor quality costs is defined as the
sum of costs incurred to prevent non conformances from
happening and the cost incurred when non conformance in
products and services occurs. This paper will focus

Manuscript Received on January 2012

Davison Zimwara, Dept. Industrial and Manufacturing Engineering,
National University of Science and Technology, Bulawayo, ZIMBABWE.
Lameck Mugwagwa, Dept. Industrial and Manufacturing Engineering,
National University of Science and Technology,Bulawayo, ZIMBABWE.
Daniel Maringa, MSc student, Dept. Industrial and Manufacturing
Engineering, National University of Science and Technology, Bulawayo,
ZIMBABWE.
Albert Mnkandla, MSc student, Dept. Industrial and Manufacturing
Engineering, National University of Science and Technology, Bulawayo,
ZIMBABWE.
Lindleen Mugwagwa, MSc student, Dept. Industrial and
Manufacturing Engineering, National University of Science and
Technology, Bulawayo, ZIMBABWE.
Tendai Talent Ngwarati, MSc student, Dept. Industrial and
Manufacturing Engineering, National University of Science and
Technology, Bulawayo, ZIMBABWE.

primarily on the COQ literature and its applicability at

casting company X as a management eye opener.
Most of the foundries have no precise knowledge of the
main causes of rejection because they fail to maintain a
satisfactory quality control system. There is a need for an
organized system of collecting information on the process
parameters relating to the potential casting defects. Also,
there is a need for developing a database of solutions for
eliminating undesirable casting artifacts. Internal and
external failure costs contribute to over 70% of the total
quality costs in foundries. Quality costs in a foundry can
vary between 5% and 25% of the total sales volume. Any
attempt to reduce these costs is an immense benefit to metal
casting companies. Any reduction in the scrap and rework
also positively influences the environmental impact of our
industry.

II.

RELATED LITERATURE

A.
Metal molding process
Metal moulding is an old production method that has been
practiced time immemorial. It utilizes molten metal which is
poured into prepared molds and is left to solidify and take
the shape of the mould. After cooling the runners and risers
are removed. The casting is then cleaned and in some cases
machining takes place to give the required surface finish. In
the event that the product becomes a reject it is recycled
back to furnace to be reprocessed consuming more energy
and labor hours. It is as the product passes through any of
the mentioned stages that defects are produced.
B.
Cost of Quality historical background
Quality cost was expanded by introducing numerous
quality-oriented staff departments [1], [2]. Studies from
previous research revealed that quality costs where (10 30)
percent of sales or 25 to 40 percent of operating costs, these
were as a result of poor quality products. This data used to
justify quality improvement proposals and to track the cost
data over time. The widely accepted Feigenbaums PAF
Model classifies cost of quality into three categories
Prevention cost, Appraisal cost and Failure cost [3]. Failure
cost is further divided into external and internal failure cost.
As stated by [3], the PAF model is the most commonly used
COQ model in the United States and Great Britain. The
American Society for Quality (ASQ) adopted the
classification of COQ by four categories (where failure cost
is divided into external and internal failure costs), based on
PAF model [4]. Cost of quality is the deviation of actual
costs of a company from the ideal one [5], that is, defined as
costs of non conformance [6]. Quality costs are a tool that
displays trends for management to act on. It is important to

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Cost of Quality as a Driver for Continuous Improvement - Case Study Company X

carry out quality cost analysis in an organization and this
information can be used by management to identify quality
costs, prioritize quality cost reduction activities and measure
the success of such activities.

Figure 2: Quality costs categories

Figure 1: Casting process flow chart adapted from company
X

There are many ways that have been proposed by various

researchers on how to measure Cost of Quality. Through the
years the COQ models have been developed and many
authors agree on the following classes of COQ models;
P-A-F model
Crosbys model
Opportunity cost models
Process cost models

ABC models

C.

Components of Cost of Quality

Prevention costs: These are costs incurred by an
organization when they try to investigate, prevent or reduce
the risks of non conformity. These costs are planned and are
associated with the design, implementation and maintenance
of a total quality management system.
Appraisal costs: These are costs associated with evaluation
and verification of purchased goods, services, and processes
by an organization to ensure that they are within specified
requirements. Examples of these costs include production
trial test costs, test and measurement costs.

Step 1

Project initialization and preparation

Step 2

Assessment of current business performance

Step 3

Project organization and assignments

Step 4

Identification of major costs of conformance and

costs of non conformance items

Step 5

needs
Step 6

Collect ,compile and process cost of quality data

Step 7

Analyze cost of quality to identify opportunities

for improvements

Step 8

Step 9

Establish continuous improvement of the cost of

quality performance

Step

Conduct quality audits regularly and initiate

10

document changes in response to improvements

made in various processes

E.

General benefits of implementing COQ [7]

External failure costs: These are costs an organization

incurs after delivering to the customer non conforming
products Examples of these costs includes equipment
failure, downtime and warranty.

I - Steps in implementing COQ Activities [7]

Organize and implement quality improvement and

cost reduction programs

Internal failure costs: These are costs that arise from

failure of products to conform to customer requirements.
These can be categorized into costs of scrap, rework, retest,
re-inspection, modification, downtime, overtime, corrective
action and redesign costs.

D.
Stages in the cost of quality implementation
The steps to the implementation of COQ are shown in table1

Identification and provision of additional training

Can be used to quantify qualitative improvements

Can be used to determine problem areas and action
priorities
Can be used for investment appraisal purposes and
to asses overall effectiveness of the quality
programmes

COQ reporting has the potential of bringing numerous

benefits to the organizations but the organizations must also

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International Journal of Innovative Technology and Exploring Engineering (IJITEE)

ISSN: 2278-3075, Volume-2, Issue-2, January 2013
be aware of difficulties encountered during the
implementation period so that they are better prepared to
overcome the obstacles.
The major purpose of a cost of quality system is to reduce
costs through identifying improvement opportunities[8].
According to [8], quality costs programmes fail because:
Some organisations use the COQ information as a
scorekeeping tool rather than as a driver for
continual improvement
Preoccupation with perfection in determining the
COQ figures
Underestimation of the depth and extend of
commitment required to be made to prevention
F.
Cost of Quality metrics
COQ measurement systems have a mixture of global and
detailed metrics [9]. Some examples of detailed metrics are
given in Table II. Global quality metrics measure global
performance; some examples are also given in Table II.
II. Cost of Quality metrics [9]
Detailed metrics
Global metrics
Cost of assets
Return on quality
Cost of labour
Quality rate
Cost of defects per
Process quality
100 pieces
Cost of quality
Cost of late
deliveries
Time between
service calls
Number of
complaints received

III.

METHODOLOGY

Primary data was collected by direct observation during

plant operation visits and during working hours; and through
personal interviews with managers, superintendents,
supervisors and general workers. The gathered information
was used to quantify the quality cost in tabular format.
Secondary data from existing records, publication and
historical evidence of the company from the company
library and recordings was collected. The researchers
utilized techniques such as bar charts and tables in
presenting and interpreting data. The above techniques have
the ability to provide methods for collecting, presenting and
analysis and meaningfully interpret data.
The following steps were used in identifying the costs of
quality at company X:
Phase 1: Identification of non conformance costs
These were categorized into internal and external failure.
Table III shows what was considered in this section

III: Failure Cost

Internal failure

External failure

Rework
Scrap
Downtime
Obsolescence
Defect/failure analysis
Re-inspection
/
retesting
Downgrading

Complaints
Warranty claim

Phase 2: Quantification of Cost of Quality

Records from Production, Operation, Accounting records
were used in the gathering of information of quality costs at
the company.
IV.

RESULTS

Results of the research are presented in the next section

A.

Problems Identified
The problems can be classified into the following
categories:
Core making; Poor surface finish and Completely
damaged core
Moulding; Misalignment of cope and drag box
Melting and pouring; Short pouring, Slag and sand
inclusion
The process was analysed by considering each step in the
casting process. This was done to identify all the wastes in
the shop floor. This helped to determine value adding and
non value adding activities carried out in the casting process
at the case study company. The non value adding activities
are removed so as to reduce time wasting and also to meet
customer demand on time. There are also some processes
essential in the casting process which do not value to the
final product but have to be carried out and these are called
required non value added activities.
B.
Prevention costs
Table IV summarises the results of prevention cost. Fig. 3
summarises the preventive cost for the period under review.
As can be seen preventive costs are low indicating the
system at company X is not proactive.
C.
Appraisal Activities
The findings of appraisal costs are summarized in Table V.
These findings are also illustrated in graphical format in Fig.
4. As can be seen appraisal costs are not significant which
illustrates again the system has a feedback system that is not
effective, resulting in poor preventive methods to avert
failure.
D.
Internal Failure Costs
The major cost elements are as detailed in Table VI.Fig. 5
gives the summary of internal failure costs. As can be seen
internal failure costs are huge indicating that the system at
company X is not yet mature. Measures need to be put in
place to minimize the failure rate hence the COQ.
E.
External Failure Costs
Table VII and Fig. 6 illustrate the quantum of external
failures. This shows that the system at the case study
company needs a proactive approach so that external
failures are brought to a minimum.

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Cost of Quality as a Driver for Continuous Improvement - Case Study Company X

IV: Preventive Costs

Element

Description

A1a
A1b

Quality engineering (Translating product design or customer quality requirements into manufacturing quality
controls of materials and process)
Process Engineering (Cost of implementing and maintaining quality plans and procedures)

A2

Design and development of quality measurement and control equipment

A3

Quality planning by functions other than Quality control department

A4

Calibration and maintenance of production equipment used to evaluate quality

A5

Maintenance and Calibration of test and inspection equipment

A6

Supplier Assurance

A7

Quality training

A8

Administration, Audit, and improvement

Fig 3: Preventive Costs

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International Journal of Innovative Technology and Exploring Engineering (IJITEE)

ISSN: 2278-3075, Volume-2, Issue-2, January 2013
V: Appraisal Cost
Element
Description
B1

Laboratory acceptance testing (purchased production materials)

B2

Inspection and testing (quality control department)

B3

In process inspection (Non quality control personnel)

B4

Setup for testing and inspection

B5

Inspection and test materials (Materials consumed or destroyed in the control of quality)

B6

Product Quality audits

B7

Review of test and inspection data

B8

Field Performance testing (on site visits)

B9

Internal testing and release

B10

Evaluation of Site material

B11

Data processing inspection and test reports

Fig 4: Appraisal Costs

VI: Internal Failure Cost
Element
Description
C1

Scrap costs: Labour, consumables and other costs that cannot be recovered.

C2

Re-work and Repair: Gears and steel casting.

C3

Trouble shooting (defect failure analysis) to determine cause: Done by Production / Laboratory

C4

Re-inspection and retesting of reworks: Conducted by the production senior personnel

C5

Scrap and Reworks: Fault of supplier, downtime

C6

Modifications, permits and concessions: Redesign of running systems and modifications

C7

Downgrading: Downgrading of grinding media

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Cost of Quality as a Driver for Continuous Improvement - Case Study Company X

Fig. 5: Internal quality costs

VII: External Failure Costs
Element
Description
D1

Complaints administration

D2

Product liability

D3

Handling and accounting costs of products rejected or recalled

D4

Returned Material repairs

D5

Warranty replacement

Figure 6: External failure cost

VIII: Summary of COQ by categories
Cost category

as collected

% of COQ

% of Turnover

Prevention

14,500.00

9%

0.6%

Appraisal

14,382.00

9%

0.6%

Internal Failure

105,179.98

63%

4.2%

External Failure

32,293.11

19%

1.3%

100%

6.6%

TOTAL

166,355.09

F.
Summary of COQ costs
Table VIII summarizes the observed costs by category.
From the table, 63% of COQ is attributed to internal failure
and 4.2% of sales revenue. From the table the COQ is
estimated to be 6.6% of sales revenue, which is in the range

5% to 25% [10]. As can be seen from the graph the three

elements C2, C1 and D5 constitute the bulk of the COQ.
G.
COQ cost elements
Table IX and Fig. 7 show the major three cost drivers of
COQ namely scrap rework and warranty costs.

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International Journal of Innovative Technology and Exploring Engineering (IJITEE)

ISSN: 2278-3075, Volume-2, Issue-2, January 2013

Figure 7: COQ Cost elements

IX COQ drivers
COST ELEMENT

COST ( US$)

% OF TURNOVER

Scrap (C1)

31,360.81

1%

Rework (C2)

56,499.27

2%

Warranty cost (D5)

20,296.11

1%

108,156.19

4%

TOTAL

the expectation of the customer relating to the

product.

V. RECOMMENDATIONS

For the company to continuously satisfy customers

it is important to keep up to date information on
customers complaints for it to be easy to make
continuous improvements in the quality of
products.
Quality responsibility must be clearly defined to all
employees.
Employees must be involved in quality planning to
help reduce the number of defects in the
department.
There must be a quality plan for suppliers to
safeguard the quality of incoming raw materials.
All employees must be trained in quality concepts.
There is need to first map customers specifications
into technical specification and listening to the
voice of customers before production starts.
The company may implement ISO9001- 2008 as
part of its Total Quality Management (TQM)
system to benefit from reduced P-A-F since
continuous improvement is at the heart of (TQM).
The concept of value engineering must be
understood so as to realise what the product is and

VI.

CONCLUSION

The application of the cost of quality approach in the

foundry industry environment provides a systematic,
structured approach to the quality problem and identification
of correction that focuses on unfavourable variances in
operational performances. The approach presented and
applied in this study, capitalizes on the system orientation of
business organization, continuous quality improvement
techniques, proactive managerial actions, to achieve product
efficiency, customer satisfaction, and strategic effectiveness.
There are many undiscovered opportunities to convert
quality and process improvements into bottom-line benefits.
However, the details of the assessment of missed quality
objectives and means for quantifying and implementing
corrective actions were previously missing. The research
presented here provides a significant step toward
overcoming these difficulties by providing a systematic
practical approach to addressing the cost of quality. For an
organization to realize the operational, strategic and
customer-related benefits of the approach proposed here, it
must meet the following requirements and undertake the
required changes: (a) Organisational structure-related
requirements and changes, (b) Technical requirements and
changes, and (c) Informational requirements and changes.

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Cost of Quality as a Driver for Continuous Improvement - Case Study Company X

REFERENCES
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York, NY, 1951
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[4] V. Sower, M. Savoie and S. Renick,An Introduction to Quality
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NJ.1999
[5] J. Campanellaand F. Corcon, Principles of Quality Costs, 2nd ed.,
ASQ Quality Press, Milwaukee,1990
[6] P. Crosby, Quality is Free, McGraw-Hill, New York, NY, 1983
[7] J.T.S San,Applying Cost of Quality to Total Quality Management,
Pakistan Institute of Quality Control ( ICQI'2000)
[8] D. Montgomery, Introduction to Statistical Quality Control, Wiley,
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Tendai Talent Ngwarati, MSc student, Dept. Industrial and

Manufacturing Engineering, National University of Science and
Technology, Bulawayo, ZIMBABWE
tngwarati@gmail.com

Albert Mnkandla, MSc student, Dept. Industrial and Manufacturing

Engineering, National University of Science and Technology, Bulawayo,
ZIMBABWE
ankhabo@gmail.com.

Lindleen
Davison Zimwara, PhD Candidate, Lecturer Department of Industrial and
Manufacturing Engineering, National University of Science and
Technology(NUST);Research
fields,
Environmental
Conscious
Manufacturing, Quality systems, Renewable energy, World Class
Manufacturing
Strategies,
Emails
davison.zimwara@nust.ac.zw,
davison.zimwara@gmail.com
Cell-+263772900922

Mugwagwa,

MSc

student,

Manufacturing Engineering, National

Technology, Bulawayo, ZIMBABWE
lindimutseiwa@gmail.com

Daniel Maringa, MSc student, Dept. Industrial and Manufacturing

Engineering, National University of Science and Technology, Bulawayo,
ZIMBABWE
danymaringa@gmail.com

Lameck Mugwagwa, Full-time Lecturer, NUST who holds MEng in

Manufacturing Engineering and Operations Management (NUST) and
BTech (Hons) in Production Engineering (CUT), Zimbabwe. Research
interests are in Manufacturing Processes Optimization and Material Science
using Artificial Intelligence, Neural Networks.
mgwagwal@gmail.com

139

Dept. Industrial
University of Science

and
and