Tracking hidden quality costs in a manufacturing company: an action research

Purpose The purpose of this paper is to present a report on the implementation of a quality cost program in a continuous‐process manufacturing company, with particular emphasis on the unearthing of hidden quality costs, as well as gaining a closer understanding of the resistance against implementation. Design/methodology/approach Using an action research approach, the researchers participated – directly and indirectly – in the implementation of quality costing at the case company. The research process comprises iterative cycles of gathering data through documentary reviews, observations of company operations, discussions with operatives, analyzing data, undertaking actions and evaluating results. Following Sandoval‐Chavez and Beruvides, the poor quality cost analysis includes an additional category to the conventional prevention‐appraisal‐failure model to reflect the cost of lost opportunities. Findings The study unearthed a significant portion of hidden quality costs which may be termed an “opportunity loss”. The findings indicate that the company's total quality costs actually far exceed its current profit margin, and that the company could improve its competitive position if it focused on the elimination of these quality costs. Research limitations/implications This paper focuses on uncovering hidden quality costs. However, the measuring of quality costs only serves to identify opportunities for improvement. It is follow‐up corrective actions that will lead to organizational effectiveness. The research findings support the contention that tracking of poor quality costs is an important step in the quality management process. Originality/value This paper presents a proactive way of tracking hidden quality costs.