Managing the costs of quality in a Czech manufacturing company

Abstract

One approach to increasing the quality of products and services in companies is the application of a management system of quality costs. This tool is applied to improve the economic results in the company and is considered also as a tool that identifies key areas where the company should direct investment into quality improvement programs. The following article focuses on markets for optical equipment, using action research. The chosen Czech company’s management approach included the implementation of cost management, with the aim of reducting costs of prevention and costs of appraisal and failure. This approach is known as the PAF model. The implementation of the PAF model revealed the true cost structure of quality costs and their real evaluations over time, in this case the period of 2010 – 2014; it also identified key areas for improvement.The greatest potential for improvement was hidden in a category of internal failure costs. In this category the annual costs amount to an average of 7,174 % of sales during the period. In the last part of the article, the costs of quality were analyzed against the sales of company (including material losses). Ultimately, the hypotheses in sections 4.3.1 and 4.3.2 were validated and based on these analyses the current state of the process was assessed and recommendations to streamline were presented.