Cost Analysis of Poor Quality Using a Software Simulation

• Main Authors: Jana Fabianová, Jaroslava Janeková, Daniela Onofrejová
• Format: Article
• Language: English
• Published: Academy of Economic Studies of Bucharest 2017-02-01
• Series: Amfiteatru Economic
• Subjects: poor quality cost analysis; Monte Carlo simulation
• Online Access: http://www.amfiteatrueconomic.ro/temp/Article_2601.pdf

The issues of quality, cost of poor quality and factors affecting quality are crucial to maintaining a competitiveness regarding to business activities. Use of software applications and computer simulation enables more effective quality management. Simulation tools offer incorporating the variability of more variables in experiments and evaluating their common impact on the final output. The article presents a case study focused on the possibility of using computer simulation Monte Carlo in the field of quality management. Two approaches for determining the cost of poor quality are introduced here. One from retrospective scope of view, where the cost of poor quality and production process are calculated based on historical data. The second approach uses the probabilistic characteristics of the input variables by means of simulation, and reflects as a perspective view of the costs of poor quality. Simulation output in the form of a tornado and sensitivity charts complement the risk analysis.