Exploratory Evidence on the Behavior of Quality Costs

Abstract

This study examines the time series behavior of quality costs reported by 49 manufacturing units of 21 companies. Analyses using both pooled annual data and plant-specific quarterly data indicate that the majority of units in the sample achieved ongoing reductions in nonconformance costs while maintaining or reducing reported prevention and appraisal costs. These findings are consistent with recent quality-based learning and continuous improvement models which suggest that, once an effective quality program is established, companies can reduce nonconformance costs over time with little or no subsequent increase in conformance expenditures.