Quality Costs and Enterprise Size in the Manufacturing Industry

Companies can lose money because they fail to use significant opportunities to improve their costs of quality. Most cost accounting data are not revealed to the public and are rarely exchanged among businesses, and there is no known study testing the effect of organization size, i.e., small and medium enterprises (SMEs) and large organizations, on quality costs. The study identified important factors and measures contributing to a successful quality cost program implementation and developed an empirically based model for quality costs in the manufacturing environment. The American Society for Quality (ASQ) helped in announcement of the online questionnaire to manufacturing and quality professionals. ANOVA One-Way and Seven Quality Tools were used in data analysis and interpretation. The survey results indicated that the total quality costs were an average 2.5-5% of sales revenues or 7- 10% of manufacturing expenses. The failure costs were about 70-80% of quality costs; SMEs had a high percentage of internal failure costs and large organizations had a high percentage of external failure costs.