Bel 8 2 2024 7

Business Ethics and Leadership, Volume 8, Issue 2, 2024
ISSN (online) – 2520-6311; ISSN (print) – 2520-6761
Cost of Quality Management: Encouraging Business Leaders to

Manage and Invest in Quality Enhancement
Nesrine Hakem, ORCID: https://orcid.org/0009-0000-5829-7247
M.A., National Higher School of Management, Algeria
Mehdi Bouchetara, ORCID: https://orcid.org/0000-0001-9826-8985
Ph.D., Assistant Professor, Class “A”, National Higher School of Management, Algeria
Wissam Belimane, ORCID: https://orcid.org/0000-0003-2302-0031
Ph.D., Assistant Professor, Class “B”, National Higher School of Management, Algeria
Mustapha Amokrane, ORCID: https://orcid.org/0000-0002-8563-9123
Ph.D., Professor, National Higher School of Management, Algeria
Corresponding author: Nesrine Hakem, hakemnesrine6@gmail.com
Type of manuscript: research paper
Abstract: The quality management is a complex set of constant activities aimed at improving the quality of products and
services, regularly evaluating and monitoring it, preventing defects, limiting and reducing malfunctions, and correcting
production defects before and after the sale of goods. Ineffective quality management leads to such problems as product
returns, claims, replacement or repair, loss of customer base, damage to brand reputation, etc. This paper aims to
analyze advanced strategies, methodologies, methods and tools for effective control of quality management costs, ways
and means of their strategic integration into the practice of business quality management, emphasize the importance of
optimizing the cost of quality management in enterprises. The proposals developed in this article are demonstrated on
the example of the woodwork division of MEKKERA (MDM), a subsidiary of the HASNAOUI Group in Algeria. An
approach represented in the article combines qualitative and quantitative methods. Qualitative data collection involved
semi-structured interviews with four company managers, processed using NVIVO software. The purpose of these
interviews was to understand the reasons that led the company to include the evaluation of the Cost of Quality in its
quality objectives for 2023, as well as the perspectives and goals aimed for by the company in this initiative. A
Quantitative analysis relied on secondary data from the company’s database: direct quality costs were calculated using
the P-A-F and Ferrebœuf models, prevention and detection measures’ effectiveness and production process performance
were evaluated; key performance indicators for indirect quality acquisition costs were defined. Findings revealed the
company exceeded set thresholds for internal and external failure costs, necessitating improvements. Ishikawa method
identified causes, and corrective actions were proposed using Failure Mode and Effects Analysis (FMEA).
Keywords: categories of cost of quality, cost of quality, cost of quality management system, cost of quality models,
improvement actions.
JEL Classification: L15, D24, D22.
Received: 13 February 2024 Accepted: 20 April 2024 Published: 03 July 2024
Funding: There is no funding for this research.

Publisher: Academic Research and Publishing UG (i.G.) (Germany)
Founder: Academic Research and Publishing UG (i.G.) (Germany)
Cite as: Hakem, N., Bouchetara, M., Belimane, W., & Amokrane, M. (2024). Cost of Quality Management:
Encouraging Business Leaders to Manage and Invest in Quality Enhancement. Business Ethics and
Leadership, 8(2), 92‒106. http://doi.org/10.61093/bel.8(2).92‒106.2024.
Copyright: © 2024 by the author. Licensee: Academic Research and Publishing UG (i.G.) (Germany).
This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution
(CC BY) license (https://creativecommons.org/licenses/by/ 4.0/).
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INTRODUCTION
In a highly competitive business context, quality has become a crucial issue for organizations, enabling
them to survive and sustain their operations successfully. Many companies view quality not only as a
foundational customer value but also as crucial for maintaining a competitive market position. Achieving and
maintaining a high level of quality requires investments in time, resources, and additional costs, known as the
costs of quality. Therefore, understanding and managing these costs are essential for organizations that are
serious about enhancing their performance. Effective management of the costs of quality involves establishing
systems to measure and evaluate quality-related expenditures, thereby optimizing resource allocation and
ensuring overall business performance.
Within the framework of rigorous cost management, it is crucial to adopt a pragmatic approach. Even
a concise analysis can quickly identify improvement opportunities, define unprofitable practices, and generate
benefits (Poncelet, 2013). At the heart of this dynamic lies the central issue of the study: How can Costs of
Quality be effectively managed within a company? This question, the true linchpin of the research, raises
significant strategic challenges, demanding a thoughtful and integrated approach to reconcile quality
imperatives with budgetary constraints.
The primary objective of quality cost analysis is to connect improvement activities with associated costs
and customer expectations. Consequently, this analysis guides actions towards reducing the costs of quality
attainment and increasing the benefits derived from quality improvement. Therefore, a realistic estimation of
quality attainment costs, representing a proper balance between conformity and non-conformity costs, should
be considered a key element of any quality initiative and a major concern for managers. Furthermore, this
analysis will enable managers to make informed decisions on how to allocate resources to effectively and
efficiently improve quality, reducing non-quality costs and maximizing quality benefits (Abouzahir et al.,
2003; Lessomo et al., 2019; Schiffauerova & Thomson, 2006). Indeed, quality costs encompass a complex
array of expenses to prevent defects and rectify quality errors.
Despite their widespread recognition, the relevance of their assessment still struggles to translate into
the daily practice of businesses (Ayach et al., 2019). It is important to emphasize that the cost of quality
management is not limited to mere accounting activity. It should be integrated into the overall management
of an organization's quality and used to improve the quality of products and services offered continuously.
Thorough evaluation, regular measurement, and proper presentation of quality-related costs enable managers
to make informed decisions and design action plans to improve quality while reducing costs of non-quality
(Berland et al., 2013; Lassalle, 2022).
This study aims to develop a comprehensive cost management system to enhance quality management
practices scientifically, demonstrated using an example from MEKKERA Carpentry (MDM). Furthermore, it
seeks to extend beyond issue identification by exploring advanced strategies and methodologies for effective
quality cost management. Concurrently, the objective is to transcend mere acknowledgement of these issues
by exploring avenues and means for efficient quality cost management. The goal is to provide actionable
solutions to reduce non-conformance costs, optimize quality-related costs, and enhance the effectiveness of
the company’s quality strategy. Through the research, the methods and tools available for quality cost
management will be comprehensively understood and strategic integration within business quality
management practices will be analyzed. In this light, this introduction marks the beginning of exploring
modern quality management, aiming to provide a thoughtful perspective on the challenges and opportunities
in this essential area of business management.
LITERATURE REVIEW
Companies continually strive to improve the quality of their products and services while reducing costs
associated with quality defects (Asada et al., 2021). To achieve this objective, they must adopt a strategy that
manages both the costs associated with ensuring a certain level of quality and those associated with non-
quality. Many studies have been conducted on Cost of Quality (COQ) management to develop theories and
models in this field. In general, research on COQ is typically classified into four distinct categories. Firstly,
conceptual articles focus on advancing theoretical models and definitions of COQ. The second category
encompasses industry studies based on smaller samples and exploring different aspects of COQ. The third
category includes numerous case studies, some incorporating short-term time series analyses. Finally, several
simulation exercises examine the dynamics of quality costs using mathematical models (Plewa et al., 2016).
Various researches highlights the importance of managing the cost of quality in enhancing quality
performance and optimizing overall costs in the long term (Biadacz, 2021; Sturm et al., 2019). According to
Velkoska and Tomov (2022), this method helps identify areas where costs of quality are highest. It assists
companies in making informed decisions on how to allocate resources to effectively enhance quality, reduce
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non-quality costs, and maximize quality benefits. However, it is also important to note that despite the growing
recognition of the importance of managing costs of quality (Glogovac & Filipovic, 2018), the utilization of
this practice remains limited. Few companies have a formal system to identify, measure, and manage costs of
quality (Ayach et al., 2019). On the other hand, several studies have focused on developing approaches, such
as that presented by Velkoska et al. (2018), which introduces an algorithm for sequentially measuring the
costs of quality. This approach incorporates proactive management, quality assurance ecology, and integrating
quality and accounting experts. Furthermore, mechanisms and systems have been developed by Lessomo
Evola et al. (2019) and Aneesh and Ajith (2016) to address and reduce costs associated with non-quality.
These studies consider risks related to non-quality and utilize quality tools to identify gaps, define necessary
actions to reduce these costs, and formulate recommendations for achieving quality at the lowest possible cost.
Cost of Quality
The first author to discuss the cost of quality was Joseph Juran in his book “Quality Control Handbook”,
published in 1951. Juran put into practice and validated the hypothesis that “as prevention costs increase, the
costs of rejections and rework decrease” (Poncelet, 2013, as cited in Juran, 1951). According to Poncelet
(2013), the cost of quality (CoQ) refers to the expenses associated with the design, implementation, and
maintenance of an effective quality assurance system within a company. Furthermore, Velkoska and Tomov
(2021) state that quality costs encompass all expenditures to prevent quality problems and costs incurred due
to poor quality. These costs can be perceived as the difference between actual costs and the ideal costs required
to achieve quality.
Types of Cost of Quality
Continuous improvement of product and service quality and the reduction of costs associated with
quality defects are ongoing objectives in companies. It is crucial to understand the different types of costs
related to quality to achieve these goals (Asada et al., 2021). According to studies conducted by Berland et al.
(2013) and Ferrebœuf (2000), two types of Cost of Quality can be distinguished:
a. Direct costs of quality, which can be further divided into two categories:
▪ Controllable Costs (CC): These are voluntary expenses incurred to maintain a certain level of quality. They
can be further categorized as:
➢ Prevention Costs (CP): These expenses are related to implementing measures aimed at preventing
errors and quality defects in the process. In other words, these are costs incurred to limit and reduce
malfunctions. This may include activities such as employee training, development of quality
standards, supplier management, etc.
➢ Detection Costs (CD): These are costs related to inspection, testing, and monitoring the quality of
products or services. This may include purchasing quality control equipment, compliance testing, etc.
▪ Resultant Costs (CR): The following are distinguished:
➢ Internal Failure Costs (DI): These correspond to expenses related to products and services that do not
meet requirements before leaving the company. These costs are incurred when non-conformities are
detected internally, before the product or service is delivered to customers or end-users.
➢ External Failure Costs (DE): These refer to expenses related to products and services that do not meet
requirements after leaving the company. These costs occur when non-conformities are identified by
customers or end-users, resulting in issues such as product returns, claims, replacements, or repairs.
b. Indirect costs: Indirect costs, intangible costs, are expenses that cannot be easily quantified. They include
elements such as loss of customer base, damage to brand reputation, etc. These costs are often difficult
to evaluate accurately because they are not directly measurable in monetary terms, but they can have a
significant impact on a company’s profitability and reputation.
By understanding the different types of quality costs, organizations can implement appropriate
management strategies, specifically focusing on controlling costs (CC) to reduce resulting costs (CR) and
improve their overall performance (Ferrebœuf, 2000).
Cost of Quality Models
Evaluating and measuring Cost of Quality (COQ) helps identify areas for quality improvement, allocate
resources effectively, and make appropriate decisions to enhance overall performance. This is accomplished
using approaches known as Cost of Quality models. Different models have been developed to explain the
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concept of Cost of Quality (COQ). In their study, Schiffauerova and Thomson (2006) provide an overview of
the most discussed models in the literature. They distinguish five COQ models, each classifying costs into
categories. They also highlight the particular attention given to the Prevention-Appraisal-Failure (PAF)
model, widely used in practical applications. This model categorizes COQ into different types of costs, such
as prevention, appraisal, and failure costs (internal and external). Furthermore, the PAF model has been
expanded to include intangible costs and opportunity costs, which represent potential profit losses due to
quality problems that are difficult to quantify.
On the other hand, Crosby distinguishes between the cost of conformance and the cost of non-
conformance. In this perspective, another model similar to Crosby’s is the Process Cost model. This model
focuses on cost systems related to obtaining quality, emphasizing the process rather than the products or
services (Schiffauerova & Thomson, 2006). Additionally, the ABC model, developed by Cooper and Kaplan,
is considered better suited for quality cost measurement systems than traditional accounting. Its use in
determining the COQ provides an interesting alternative (Lawrence & Hannelie, 2019). However, it is
important to note that this model is not specifically designed as a COQ model. It is an alternative approach
that can be used to identify, quantify, and allocate costs related to obtaining quality among products, which
can contribute to better cost control of quality (Douiri et al., 2015).
Table 1 illustrates the COQ models classified into 5 groups as categorized by Schiffauerova and
Thomson (2006):
▪ The P-A-F model (Prevention-Appraisal-Failure)
▪ The Crosby model
▪ The Opportunity or Intangible Cost model
▪ The Process Cost model and the Activity-Based model
▪ The Process Cost model and the ABC (Activity-Based Costing) model
Table 1. Generic Models of Cost of Quality (COQ) and Cost Categories
Generic Model Cost/Activity Categories
P-A-F P-A-F Prevention + Appraisal + Failure
Crosby’s Model Conformance + Non-conformance
Opportunity or Intangible Cost Models Prevention + Appraisal + Failure + Opportunity Conformance +
Non-conformance + Opportunity Tangibles + Intangible Assets
Process Cost Conformance + Non-conformance
ABC Models Value-Added + Non-Value-Added
Source: Schiffauerova and Thomson (2006)
From Table 1, it is clear that different COQ models categorize quality-related costs in varying ways,
reflecting their unique approaches to quality management. The P-A-F model, for instance, focuses on the
traditional breakdown of prevention, appraisal, and failure costs, providing a straightforward framework for
identifying and managing quality costs. Crosby’s model simplifies this further by classifying costs into
conformance and non-conformance categories. This can help organizations quickly identify whether their
expenditures are geared towards maintaining quality standards or addressing failures.
The Opportunity or Intangible Cost models add another dimension, including opportunity costs and
intangible assets. This approach acknowledges that poor quality can lead to missed opportunities and damage
to intangible assets like brand reputation, which are crucial for long-term success. The Process Cost model's
emphasis on conformance and non-conformance aligns closely with Crosby’s model but is often applied in a
more process-oriented context, focusing on the cost implications of meeting or failing to meet process
standards.
Lastly, the ABC models distinguish between value-added and non-value-added activities, encouraging
organizations to optimize their processes by eliminating activities that do not add value to the product or
service. These models provide valuable frameworks for companies to analyze and manage quality-related
costs. By understanding and applying these models, businesses can strategically invest in quality improvement
initiatives that reduce costs and enhance overall performance and customer satisfaction.
METHODOLOGY
The choice of research method depends on various factors, such as reviewing existing literature, as well
as the specific objective of our study. Indeed, a literature review enables to understand previous research
conducted on our topic of interest, the methodologies used, and the results obtained. A mixed approach was
opted to frame and organize the study optimally and ensure a smooth progression through the various stages,
leading to satisfactory results. This approach combines quantitative and qualitative approaches either
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simultaneously or sequentially. It allows for gathering both qualitative and quantitative data on the same theme
and enriches the research findings. Following the same path as the research, the qualitative method will first
be addressed to, and various tools used in this approach will be explained. Then, the quantitative approach
and its methods used are discussed.
Qualitative Approach
Data collection methods
The starting point of the project was primarily based on an in-depth literature analysis, during which a
vast array of raw data from various sources were systematically collected, such as books, articles, websites,
and doctoral theses. In addition, interviews were conducted aimed at precisely delineating the research
approach.
➢ Literary analysis: In this study, a literary analysis was conducted, defined as an approach aimed at
gathering pre-existing data on the subject or issue under investigation (Gaspard, 2018). The objective was to
explore and analyze existing works, theories, concepts, and perspectives that are related to our research
domain.
➢ Interviews: As an empirical starting point, a qualitative study was conducted through semi-
structured interviews to define our approach. The interviews were conducted with four (4) quality managers
from the company involved in the Cost of Quality management project. The purpose of these interviews was
to understand the reasons for including the evaluation of the Cost of Quality, as well as broader perspectives
and goals in this initiative. An interview guide was developed, organized into four distinct parts. Table 2
summarizes the main sections of the interview guide.
Table 2. Structure of the Interview Guide
Interview Guide Number of Questions
Axis 1 Interviewee profiles 1
Axis 2 General context 2
Axis 3 Cost of Quality Management 6
Axis 4 Recommendations 2
Source: Compiled by the authors based on Interview Guide
Qualitative data analysis

Processing qualitative data is a pivotal step in any qualitative research, as it enables in-depth analysis
of the phenomena or behaviors under study to derive meaningful conclusions. Qualitative data processing can
be carried out manually or with the assistance of specialized software. Computer programs like Nvivo are
extremely valuable tools for qualitative data processing.
This tool is indeed utilized for the analysis of the interviews. This software is specifically designed to
support qualitative and mixed research methods by facilitating the collection, organization, and content
analysis of diverse data sources such as interviews, focus group discussions, audio and video recordings, social
media, and web pages, among others.
Quantitative Approach
Data collection methods
Quantitative research relies on the analysis of numerical data, which can be derived either from an
empirical survey conducted by the researcher (primary data) or from an existing database (secondary data)
(Judicaël et al., 2021). For this study, existing data was used and extracted from the GEDISO database of the
company, which is a specific computer system for the HASANAOUI Group dedicated to overall business
management.
The company’s data are analysed to apply Ferrebœuf’s model and make it relevant to the company’s
context. However, some data were unavailable. To address this issue, new procedures were proposed and
implemented to retrieve them, such as using awareness briefing records.
Treatment of quantitative data
In a quantitative study, processing quantitative data involves creating an appropriate electronic database
to manage various types of data such as multiple responses, numerical data, and visual analog scale data. This
approach entails the use of statistical techniques to understand the relationships between variables. Statistical
software such as R, SPSS, and STATA are commonly employed for quantitative data analysis (Alison & Riris
Andono, 2018).
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In this study, given that the data are secondary data, the collected data are directly organized and
processed to use them in the chosen model. Excel software is used to facilitate the calculation of mathematical
formulas in their model. This allowed to analyze the data efficiently and present the results in a clear and
concise manner.
Empirical Study
Due to the crucial importance of managing the costs associated with obtaining quality and their impact
on overall business performance improvement, this approach was demonstrated using data from MDM. A
quality cost management system was implemented using the algorithm proposed by Velkoska et al. (2018).
The system is based on the cost of quality calculation model developed by Ferrebœuf (2000). This model
details the various costs of each category and provides corresponding mathematical formulas for their
calculation. It aligns with the Prevention-Appraisal-Failure (PAF) model guidelines, recognized for its
effectiveness in quality cost management. The use of this model provides a clear and precise view of quality-
related costs, thereby facilitating decision-making and the implementation of appropriate improvement
measures. Table 3 represents the stages of practical application of our study adapted from Velkoska et al.
(2018) algorithm and the methods used at each stage.
Table 3. Implementation Process of the Quality Cost Management System
Phases of the Velkoska et al. (2018)
Methods adopted to perform each phase
algorithm
Phase 1 Framing the cost measurement Semi-structured interview: Framing the study based on the
system objectives and expectations of the company's top executives.
Phase 2 Cost measurement protocol Adaptation of Ferrebœuf's model (2000) and designing a
model suitable for the company's context. Calculating the
Cost of Quality according to the mathematical formulas
proposed by Ferrebœuf (2000) using Excel software.
Phase 3 Making decisions and Ishikawa: Identifying potential causes of unfavorable costs
implementing actions due to failures through the Ishikawa diagram method using
MINITAB 17 software.
FMEA: Identifying the consequences of failures and
evaluating their criticality to prioritize them. Subsequently,
corrective measures were proposed to prevent these failures
Source: Compiled by the authors based on algorithm of Velkoska et al. (2017)
The implementation process outlined in Table 3 demonstrates a structured approach to managing

quality costs at MDM. In Phase 1, semi-structured interviews with top executives ensured that the cost
measurement system was aligned with the company’s strategic objectives. This step was crucial for gaining
executive buy-in and setting a clear direction for the project. Phase 2 involved adapting the Ferrebœuf model
to the specific context of MDM. By calculating the Cost of Quality using Excel software, the company was
able to obtain a detailed breakdown of quality-related costs.
This quantitative analysis provided a solid foundation for identifying areas where cost savings could be
achieved and where investments in quality improvement were most needed. In Phase 3, the Ishikawa method
was employed to identify potential causes of unfavorable costs. This cause-and-effect analysis, facilitated by
MINITAB 17 software, helped pinpoint.
RESULTS
Qualitative Results
After transcribing the interviews, an analysis of the responses was conducted using NVIVO software.
This analysis aims to synthesize the answers and extract conclusions to be used in the study. To facilitate the
analysis, the questions were grouped into themes, which were classified into two parts:
➢ The first part of the interview aimed to understand the quality approach within the company by
addressing two aspects:
Quality for the company
Figure 1 presents a word cloud reflecting the quality within the company based on the statements of the
interviewed individuals. Quality is essential in this company, as it is directly linked to customer satisfaction,
brand image, and the reputation of the group to which it belongs. The quality objectives of the company are
defined in its quality policy and can be measured through indicators such as product certification, traceability,
reduction of non-conformities, and decrease in complaints.
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Figure 1. Word Cloud Representing the Relevance of Quality for the Company That Was Created
Using NVIVO Software, Based on the Results of Semi-Structured Interviews with Managers of a
Woodwork Company
Source: Compiled by the authors based on the interview responses
Quality-related failures within the company

Figure 2 presents a word cloud representing defects and failures in terms of quality within the company,
based on their frequency in the responses. It can be observed that the company faces five main failures: a high
rate of rejects, a high rate of rejections, production process interruptions, delivery delays, and customer
complaints. Other obstacles have also been identified, such as non-compliant raw materials, low involvement
of process drivers, delays in the implementation of corrective actions, and immaturity of the quality culture.
Figure 2. Word Cloud of Quality Defects and Failures Within the Company That Was Created
Woodwork Company
➢ In the second part of the interviews dedicated to the management of the cost of quality, the aspects
and questions of this part were grouped into three key themes:
Current state of the cost of quality management within the company
The respondents' answers reveal an inconsistent management of costs related to quality within the
company. As shown in Figure 3, according to the interviewees, only costs associated with non-quality, such
as scrap, complaints, and failures, are considered. However, these costs are evaluated solely in terms of
quantity and are not accurately measured in terms of costs. Furthermore, they are included in the budget
forecast.
Figure 3. Word Cloud of the Current State of the Cost of Quality Management Within the
Company That Was Created Using NVIVO Software, Based on the Results of Semi-structured
Interviews with Managers of a Woodwork Company
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Implementation of Cost of Quality management within the company

This section addresses two questions aimed at framing the implementation of Cost of Quality
management: the reasons for emphasizing Cost of Quality management and the expectations following its
implementation. The decision to prioritize Cost of Quality management was made to enhance the company's
competitiveness, minimize costs associated with failures, improve customer satisfaction, and ensure overall
company performance. Based on the responses obtained (shown in Figure 4), the expectations following this
implementation are to focus efforts on weaknesses, minimize product costs, improve customer satisfaction, increase
productivity, strengthen the brand image, and enhance product quality to ensure customer satisfaction.
Figure 4. Word Cloud of Cost of Quality Management Within the Company That Was Created
Woodwork Company
Recommendations for employee involvement and improving the management of the Cost of Quality
According to the interviewees, training and awareness sessions are key to employee engagement as
demonstrated in Figure 5. Additionally, setting goals and key performance indicators for each stage of the
process is also essential for improving the management of the Cost of Quality.
Figure 5. Word Cloud of Recommendations for Employee Involvement and Improving the
Management of the Cost of Quality That Was Created Using NVIVO Software, Based on the Results
of Semi-Structured Interviews with Managers of a Woodwork Company
Quantitative Results
➢ Firstly, Ferrebœuf’s model (2000) is segmented into 5 processes (Quality, Production,
Maintenance, Commercial) using specific parameters for each process to enhance visibility and traceability.
➢ For prevention and detection costs, as well as external failures, Ferrebœuf’s model (2000) is
followed adapted to the company's context. Subsequently, the corresponding costs for these categories are
calculated.
➢ Next, a specific model for internal failure costs (CDI) was developed. It tailored to the
company's context. MDM has production lines, and each line is equipped with specific machines. The cost
for each machine is calculated to produce a part and then estimated the costs of rework (modified products
due to detected non-conformities) and scrap (non-conforming products that cannot be salvaged). This allowed
to assess the costs of internal failures within the company.
Figure 6 below presents the detailed model for calculating the costs of internal failures at MDM.
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Cost of each
Machine = (Hourly cost per minute (S))* (Production time per minute (T)) + Raw
material cost (MP)
Rejection Cost
= Cost of producing a part + Cost of modifications made
Scrap Cost
= Production cost of a part of the machine concerned * Quantity of scrap
Figure 6. Model for Calculating the Costs of Internal Failures at MDM

Source: Compiled by the authors based on data collected during the internship at MDM
The detailed model in Figure 6 illustrates how we calculated the costs associated with internal failures
across the production lines of MDM. By breaking down the costs into key components such as machine hourly
rate, production time, raw material costs, rework, and scrap, the company could accurately quantify the
financial impact of quality issues and non-conformities. MDM could make more informed decisions to
enhance operational efficiency and profitability with this granular understanding of internal failure expenses.
Calculation of Cost of Quality
After analyzing the data and adapting the model, the calculation of costs in accordance with Ferrebœuf’s
(2000) mathematical formulas was performed as shown in Table 4.
Table 4. Costs of MDM Quality (the Costs are Measured in DA, the Monetary Unit of Algeria)
Costs of each category per month Total costs per month
CP CD CDI CDE CP+CD+CDI+CDE
January 3 544 400,88 9 452 897,97 4154915,29 366969,9977 17 208 685,72
February 2 778 895,41 9 452 897,97 3368740,87 104619,2582 17 372 029,46
March 2 197 343,49 9 452 897,97 2251969,97 93689,41602 12 909 694,73
Category total for 8 520 639,79 28 358 693,90 10327824,75 283251,478 47 90 409,91
3 months
Note: CP: Prevention costs; CD: detection costs; CDI: internal failure costs; CDE: external failure costs; DA: dinar
These costs are calculated to assess the effectiveness of prevention and detection measures by
computing the non-quality cost rate and determining the production process performance in terms of quality,
by calculating the percentage of internal failure costs relative to production costs.
Evaluation of Performance in Terms of Quality
Evaluation of the effectiveness of prevention and detection measures
Once the costs have been calculated and obtained, the effectiveness of prevention and detection
measures is evaluated by calculating the rate of cost of non-quality. This rate is determined by comparing the
costs of prevention and detection to the costs of internal and external failures. This evaluation provides a
quantifiable measure of the effectiveness of the measures implemented to prevent quality problems and detect
failures. As part of this evaluation, the company has established a tolerance threshold of 25% for the cost of
non-quality rate. This threshold represents the acceptable level of financial losses related to the non-quality
of products or services provided by the company. The results obtained from the calculation of this rate are
represented in Figure 7:
35% 33%
23%
JANUARY FEBRUARY MARCH
Figure 7. Cost of Non-Quality Rate

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According to Figure 7 depicting the rates of costs related to non-quality, these costs exceeded the
threshold set by the company during the months of January and February, reaching 35% and 33% respectively.
However, a significant improvement was observed in March, with a non-quality rate of 23%.
Evaluation of the effectiveness of prevention and detection measures
To evaluate the performance of the production process in terms of quality, another indicator is used.
This is the percentage of internal failure costs compared to the total production costs. This ratio helps identify
the proportion of costs related to internal failures in relation to the total costs incurred in production. The
company has set a performance objective by establishing a threshold of 5% for this ratio. This threshold
represents the desired level of financial losses specifically related to internal failures in the production process.
Figure 8 illustrates the results obtained the calculation of this rate.
7%
3% 3%
JANUARY FEBRUARY MARCH
Figure 8. Internal Failure Rate

In January, the company exceeded the threshold by 7%. However, a significant improvement in
February and March is observed, with rates of only 3%, which represents a clear decrease compared to the
previous month.
Results of the Analysis of Internal and External Failures of the MDM
To achieve the objectives and ensure that these rates remain below the established threshold, additional
efforts will be necessary. To this end, an analysis of causes using the Ishikawa method for the five failures
identified during the interviews. A corrective action plan was proposed to address these issues and the results
are outlined in Appendix A. Table 5 introduces the Severity (S) and Frequency (F) scale, which measures the
impact and occurrence rates of specific events or factors.
Table 5. Severity (S) and Frequency (F) Scale
Severity Frequency
(4) Very Severe 4=Frequent
(3) Serious 3=Probable
(2) Moderate 2=Rare
(1) No Effect 1=Improbable
Source: Internal documents of GSH, 2017 (Hasnaoui Group of Companies)
Table 6. Criticality Matrix

Criticality Classification
>=10 Critical
<=9 Major
<=6 Minor
<4 Not significant
Source: Internal documents of GSH, 2017
Table 6 presents the Criticality Matrix, which evaluates and prioritizes various elements based on their
importance and impact. The FMEA method was applied to assess the criticality of the failures and determine
their consequences, using the company’s matrix evaluation (see Table 5 and Table 6).
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CONCLUSIONS
Quality and costs are closely intertwined, making the management of quality-related expenses an
essential element of any organizational quality approach aimed at enhancing performance. This study
underscores the importance of managing costs associated with quality and its profound implications for
enhancing company performance. Over time, management of Costs of Quality (COQ) has become essential
in many companies, functioning as an integrated system for information, control, and decision-making across
a broad range of tasks. Initially focused on operational management, COQ is now integral to strategic decision-
making and is reflected in management accounting practices.
The effectiveness of implementing a COQ management program was demonstrated by Alglawe et al.
(2017), resulting in a 23% reduction in costs of quality for the organization. However, it is regrettable that the
ISO 9000 series of standards has not yet integrated this practice into its guidelines, as emphasized by Ayach
et al. (2019). Incorporating this measurement would significantly enhance awareness of quality-related
practices and support their implementation within organizations.
This study employed a mixed-methods approach, combining qualitative and quantitative analysis to
comprehensively examine the subject matter. In the qualitative phase, we conducted interviews to frame the
research, align it with the company’s objectives and expectations, and identify its failures. The results were
analyzed using NVivo software, grouping interview responses into themes. The first part of the interview
examines the importance of quality within the company, indicating that the company places crucial importance
on quality to ensure customer satisfaction, enhance the brand image, and improve the group's reputation. The
second part focuses on the company’s quality failures, highlighting main defects and failures such as high
rejection and scrap rates, production stoppages, delivery delays, and customer complaints, which can
significantly impact customer satisfaction, productivity, and reputation. The third part assesses the current
state of quality-related cost management, revealing inconsistencies. The cost of quality management is
implemented, emphasizing reasons for this approach, significant expenses related to quality, and associated
expectations. Recommendations to promote employee engagement and improve the cost of quality
management are provided, emphasizing the importance of training, awareness sessions, and defining goals
and key performance indicators.
Quantitative study results highlight a significant improvement in performance. The costs associated
with internal and external failures were compared to investments in preventing and detecting quality problems.
This ratio analysis shows a clear improvement, indicating a significant reduction in costs related to failures
compared to investments made to prevent and detect these problems. This improvement reflects better control
of production processes, evidenced by reduced internal failure rates and decreased quality incidents,
demonstrating the company’s commitment to continuous improvement of its quality performance.
This study highlights the importance of managing costs of quality and their impact on company
performance. Elucidating the relationship between quality and costs equips organizations with tools for
informed decision-making and performance enhancement. Given that quality-related expenses constitute a
significant portion of a company’s revenue, conducting financial analysis in quality improvement initiatives
is imperative to quantify failure costs, identify quality-related issues, and enhance overall performance.
In summary, integrating cost management principles into all aspects of quality improvement initiatives
is crucial. Recognizing the link between quality and costs and proactively managing these expenditures
enables organizations to achieve sustained competitive advantage and foster a culture of continuous
improvement. Therefore, embracing the measurement of Costs of Quality as a cornerstone of quality
management programs is imperative for organizations striving for excellence.
Moving forward, several avenues for further research in managing costs of quality and its implications
for organizational performance remain. Future studies could delve deeper into specific methodologies and
frameworks utilized by companies to implement cost of quality management programs successfully.
Understanding best practices and strategies across various industries could provide valuable insights for
optimizing quality-related expenses.
Moreover, exploring the long-term effects of implementing cost-of-quality management programs on
various aspects of organizational performance, such as profitability, customer satisfaction, and employee
morale, can offer a comprehensive understanding of the overall impact. A longitudinal approach would enable
researchers to assess the sustainability and scalability of such initiatives over time. Additionally, research is
needed to integrate cost management principles into existing quality management frameworks, such as the
ISO 9000 series of standards. Investigating the feasibility and challenges of incorporating cost of quality
measurement into these established guidelines would facilitate broader adoption and standardization across
industries. Considering the evolving nature of industries and the increasing emphasis on sustainability and
102
social responsibility, future research could explore the intersection of cost of quality management with
environmental and ethical considerations. Understanding how organizations can balance quality-related
expenses with broader societal concerns is pertinent in today’s dynamic business landscape. Further research
in this area has the potential to enrich our understanding of the relationship between quality and costs,
providing practical insights for organizations seeking to enhance their performance and competitiveness in an
ever-changing market environment.
Author Contributions
Conceptualization: C. B., L. N., N. H., M. A.; methodology: N. H.; project administration: N. H.;
software: N. H., W. B.; validation: N. H., M. B., W. B.; formal analysis: N. H.; investigation: C. B.; resources:
N. H.; data curation: C. B., L. N.; writing-original draft preparation: N. H., C. B., L. N., M. A.; writing-review
and editing: N. H., M. B., W. B., M. A., L. N.; visualization: M. B., C. B.; supervision: M. B., W. B., M. A.;
funding acquisition: N. H.
Conflicts of Interest
The authors declare no conflict of interest.
Data Availability Statement
Not applicable.
Informed Consent Statement
Not applicable.
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104
Appendix A
Table A1. Combined FMEA (Failure Mode and Effects Analysis) Method with Ishikawa Method
Causes: classified according to the Ishikawa method Criticality Action plan
Consequences
Environment
Management
Equipment
Manpower
Failure
Materials
Methods
C
S
F
-Lack of -Poor quality of -Non- -Incorrect -Cleanliness -Insufficient -Higher 4 3 12 -Setting up
Training raw materials compliance machine and hygiene of communication production standardized
-Lack of -Inadequate with production settings - the work -Non- costs due to procedures and
Experience storage and practices Obsolete or environment compliance wasted operating modes
-Workload handling of raw -Inefficient defective -Uncomfortable with quality resources to ensure process
Non- materials measurement production work specifications (raw standardization.
compliance and inspection equipment environment -Non- materials, -Implementing a
with work methods -Defective compliance labor, etc.). regular training
procedures -Inadequate machines and with quality -Decreased and awareness
-Lack of working equipment Poor specifications yields and program for
adequate method - machine -Lack of productivity. workers and
supervision Insufficient installation standardized -Loss of supervisors to
-Lack of control -Insufficient or procedures for profitability. acquire the
technical sampling during inadequate implementation -Raw necessary
skills to production machine processes material technical skills to
Delivery Delay
perform the -Insufficient or maintenance shortages. perform their
Critical
job correctly inadequate -Incorrect -Delays in work correctly.
-Poor attitude quality control machine delivering -Enhancing
towards work -Failure to calibration finished operators'
follow good products to awareness of
production customers. machine and
practices -Extra costs equipment
-Measurement of non- preservation.
or testing errors quality in -Implementing
-Poor terms of strict production
production rework, procedures to
planning repairs, prevent human
-Inappropriate replacements, errors and
use of tools and modifications machine
equipment , etc. adjustment issues.
-Establishing an
effective
communication
system to avoid
process errors.
-Personnel Unavailability Lack of task -Old machines -High security -Poor -Loss of 3 3 9 -Identify the skills
absenteeism. of Raw planning or -Equipment risks management revenue due and training needs
-Lack of Materials coordination. failure -Serious and inadequate to production of the staff and
motivation or -Inadequate occupational organization of interruption. develop a training
participation. maintenance or accidents processes -Extra costs plan to enhance
repair -Poor associated their skills.
-Ineffective communication with -Strengthen
preventive corrective coordination and
maintenance maintenance. communication
-Delays in between
delivering production,
finished quality control,
products to and maintenance.
customers. -Regularly assess
Customer Complaints
and update the

tools and
techniques used to
Major
ensure they are

adequate and up to
date.
-Improve the
regular preventive
maintenance
program to
prevent equipment
failures.
-Implement the
Total Productive
Maintenance
(TPM) approach.
-Ensure the
availability of raw
materials by
improving
inventory
management.
105
Table A1 (cont.). Combined FMEA (Failure Mode and Effects Analysis) Method with Ishikawa Method
Causes: classified according to the Ishikawa method Criticality Action plan
Consequences
Environment
Management
Equipment
Manpower
Failure
Materials
Methods
C
S
F
-Processing -Unavailability -Commands -Defective -Poor -Customer 3 3 9 -Ensure
errors for of Raw outside the equipment planning dissatisfaction compliance with
orders Materials schedule -Unresolved -Ineffective -Loss of the production
-Frequent -Quality issues -Poorly maintenance resource customers and schedule by
absences with raw monitored issues management damage to avoiding placing
materials that production -Outdated or -Lack of customer orders outside the
delay the program unsuitable communicati loyalty program,
production -Coordination machines that on between -Risk of especially if it
process. problems cannot keep up different contractual could lead to
among the with production parts of the penalties obstacles.
different parties demand production -Payment -Regularly carry
involved in the -Frequent process delays out inspections
delivery process breakdowns of -Absence of and preventive
-Gaps in order machines used effective maintenance to
Delivery Delay
tracking and in the leadership prevent equipment
Major
management production -Changes to breakdowns.
systems process production -Expand the
-Unavailability schedules portfolio of
of trucks transport
suppliers.
-Establish
effective resource
planning and
management to
avoid delays
caused by
improper resource
allocation.
-Implement an
employee
motivation
system.
-Lack of -Products or -Delivery delay -Poor choice of Poor customer -The -Decrease in 3 2 6 -Request regular
involvement services do not -Errors in order truck care company's turnover and feedback from
from meet customer delivery -Inadequate policies and profitability. customers to
operators and requirements. (delivery of handling practices do -Deterioration improve
quality -Damaged incomplete (supplier docks, not meet of the communication.
control products. orders) customer customer company's -Conduct market
agents docks) expectations. reputation and research to better
-Order -Poor renown. understand
processing management -Distrust from customer needs
error of customer other clients and expectations.
-Poor relationships. and partners. -Perform product
behavior of -The -Increased testing to ensure
installers company difficulty in compliance with
lacks a clear acquiring new quality and safety
strategy to clients. standards.
improve the -Loss of the -Optimize the
Customer Complaints
customer customer. delivery and

experience or logistics process
Mineur
maintain a to reduce waiting

Minor
positive times.
image with -Communicate
customers. with customers
about any
potential delivery
delays.
-Take into account
customer feedback
to improve
policies and
practices.
-Offer refunds or
exchanges for
unsatisfactory
products or
services.
-Streamline the
production
process to reduce
waiting times.
106

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Business Ethics and Leadership, Volume 8, Issue 2, 2024

ISSN (online) – 2520-6311; ISSN (print) – 2520-6761

Cost of Quality Management: Encouraging Business Leaders to

Received: 13 February 2024 Accepted: 20 April 2024 Published: 03 July 2024

Funding: There is no funding for this research.

Qualitative data analysis

The implementation process outlined in Table 3 demonstrates a structured approach to managing

Quality-related failures within the company

Implementation of Cost of Quality management within the company

Figure 6. Model for Calculating the Costs of Internal Failures at MDM

JANUARY FEBRUARY MARCH

Figure 7. Cost of Non-Quality Rate

JANUARY FEBRUARY MARCH

Figure 8. Internal Failure Rate

Table 6. Criticality Matrix

Source: Internal documents of GSH, 2017

perform the -Insufficient or maintenance shortages. perform their

and update the

ensure they are

tracking and in the leadership prevent equipment

customer customer. delivery and

maintain a to reduce waiting

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