The importance of quality costs and benefits is sometimes not fully recognized by industrial managers, Quality costs money. Industrial managers recognize this and tend to be afraid of spending on quality. But, quality also earns money. Industrial managers may need to be convinced of this fact. Unfortunately, existing publications on the subject do not encourage investment for higher quality. Most of the models about quality improvement costs and even about the cost of achieving the desired level of quality fail to incorporate the benefits of improved quality. This paper describes a model of purchase quality costs and benefits. The purchase quality costs elements are drawn from various standard sources such as the British Standards and American Society of Quality Control (ASQC) publications on purchase quality. The benefits from investing for purchase quality are taken from recently published case studies and reports as well as from our own experiences. The elements of quality related activities of a purchase department are -review of purchase order, capability survey of suppliers and purchase planning. The contribution of each element, starting from estimation of loses due to inadequate purchase quality through to prevention of poor quality are isolated and linked dynamically so that costs and benefits are demonstrated through time. The purchase quality costs and benefits model is developed using the system dynamics modelling approach, and simulated using a computer software package, 'Professional DYNAMO Plus'. The simulated results demonstrate the extent to which prevention investment in purchasing is justified by future earning. It is felt that the model can be a significant addition to course material for training programmes of purchase managers. It allows the user to explore the consequence of different levels, type and timing of investment on profit performance and the delays before profits are increased. It is hoped that the model will serve as useful tool for decision-makers, encouraging them to invest in improvement-related activities.

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Date created

• 1995

Type

• Document

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• Processing documentation available at: https://wiki.albany.edu/display/SCA/Processing+Ingested+Digital+Files

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• Creative Commons BY-NC-ND Attribution-NonCommercial-NoDerivs 4.0 International

  
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ITEM CONTEXT

Part of

12420ec6bd5f758d2b4dea59aabd75a9

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Part of

23d738ba88f8333bc39725f9cb5bd0b8

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Part of

b83f2ce2912343b559f967dd985da515

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Collection

System Dynamic Society Records

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Collecting area

• This collection is part of the University Archives