A Markov chain analysis of cost of quality in the supply chain of integrated aluminium manufacturing company

Abstract

Cost of quality (CoQ) expresses the quality performance of an organisation in the monetary language for the senior management. In the global economy, there is increased focus on CoQ due to ubiquitous competition. The purpose of studying CoQ in supply chain using Markov chain analysis is to predict probability of a certain state of its categories in the future for identifying the soft targets to which we can apply our improvement efforts. Such future state probabilities can be used for providing guidance on CoQ in supply chain with appropriate base sensitive to fluctuations in business activity. We have used data of CoQ in supply chain of an integrated aluminium manufacturing company with base as sales. The present study tries to evaluate the past ten years CoQ trends in the supply chain with respect to sales of the case company and analyse the results of Markov chain analysis for use in stochastic processes making optimistic predictions on categories of CoQ in supply chain to raise, fall, or remain stable. This methodology of applying Markov chain can be a ready reference for practitioners to develop competitive advantage when seeking improvement through simulated policies.