Measuring Quality Cost Effects On Productivity Using Data Envelope Analysis

Abstract

Quality has become more important than ever in the production of goods and services. Money spent on quality must ultimately contribute to increased productivity within the firm. Quantifying the benefits of quality costs with respect to increased productivity is an elusive proposition. This paper describes the use of a linear programming technique called data envelopment analysis (DEA) to measure the effects of appraisal and prevention costs on productivity. DEA provide3s additional information to the normal profit driven performance measures and can be used to determine strategies to help improve the efficiency of money spent on quality.