Poor Quality Cost Estimation : Loss Estimation Due to Poor Quality Product

Abstract

Generally every customer‘s objective is to have defect free product/service at a reasonable cost and almost every company‘s objective is to remain competitive, satisfy its customers and maximize its profits by producing at a minimum cost.. It can only be achieved by producing efficiently using TQM and keeping the Poor Quality Cost Estimation (PQCE) to minimum level. Built- in quality in products and services is now a prerequisite to remain competitive and thus no longer a differentiator in today‘s cut throat competitive business climate. The PQCE can substantially increase the cost of production/service including inflicting loss to reputation, good will and business. PQCE is inversely proportional to profits. Conventionally it includes appraisal, prevention and failure costs (internal & external). PQCE remains hidden and cannot be determined or identified from current accounting practices and therefore mostly remains unattended. It is a new concept in the developing countries especially for public sector due to which most of the business persons/managers do not realize the adverse effects of PQCE on their investments and returns. Most of the research so far carried out has mainly focused on the Poor Quality Cost Estimation in private sector born by the client, contractor and customer. The project had a direct link with the public inconvenience because; it disrupted the traffic and created environmental problems along with other issues pertaining to COPC during the construction phase. PQCE is required to be identified measured and eliminated from all phases and processes of construction projects that is from project inception, defining objectives, planning, designing, procurements, execution, controlling and monitoring etc along with minimum disturbance to environment and general public. Results of this research would help the public sector organizations to reduce the PQCE in their future construction projects especially keeping in view the indirect PQCE due to public inconvenience.