Contents lists available at ScienceDirect Int. J. Production Economics journal homepage: www.elsevier.com/locate/ijpe Cost of quality: Evaluating cost-quality trade-offs for inspection strategies of manufacturing processes Muhammad Arsalan Farooq a, ⁎ , Randolph Kirchain a , Henriqueta Novoa b , Antonio Araujo b a Materials Systems Laboratory, Massachusetts Institute of Technology, Cambridge 02139, USA b Faculty of Engineering University of Porto, Porto 4200-464, Portugal ARTICLE INFO Keywords: Systems engineering Manufacturing systems Inspection strategies Cost Quality and non-conformance ABSTRACT Cost-quality trade-offs are required when manufacturing industries seek to minimize cost and maximize product quality or reliability. We report a challenging cost-quality tradeoff problem for a consumer goods industry where both cost and quality are modeled together. First we present a 10-step systems engineering methodology for quality improvement of manufacturing systems and comprehensively discuss the cost of quality step. The methodology investigates in detail inspection strategies of the manufacturing systems by exploring four alternative strategies. Key elements in this investigation consists of modeling the appraisal costs that involve costs to detect a non-conformed unit through inspection or testing, and failure costs that involve costs of rework, scrap, warranty claims and loss of goodwill and sales. Among the main findings of the research is that optimum inspection strategy can be achieved by modeling the cost savings from each strategy and plotting against non-conforming rates shipped to the customer and additional external failure premium. 1. Introduction Producing quality and reliable products at a realistic cost has always been a fundamental objective for manufacturers. In recent years, customer expectations for quality at low cost have only intensified. As manufacturers strive to achieve these goals they eventually reach a point where tradeoffs must be made between increasing quality and lowering costs. To guide these tradeoff decisions, the Cost of Quality (CoQ) approach has been developed. This approach models the quality of a system through the costs incurred in providing that quality. As such, the cost of quality can be identified, measured and improved and should be considered an important metric for any manufacturing industry (Sower et al., 2007). CoQ is better explained as the cost incurred in the design, implementation, operation and maintenance of an organization's quality management system (Youngdahl, 1997). In other words, the cost committed to continuous improvement processes, cost of system, production and service failures, and non-value added activities and wastage in all its various forms (Pursglove and Dale, 1995). Juran was one of the first authors who developed the concept of quality costing, expressing simply that “all the costs would disappear if no defects were produced” (Juran, 1951). Feigenbaum extended Juran´s concept and studied the quality cost categorization of Prevention-Appraisal-Failure (P-A-F) model (Feigenbaum, 1956). Crosby split the CoQ into conformance costs and non-conformance costs (Crossby, 1979). Schiffauerova & Thomson made a comprehen- sive survey on the CoQ models comprising four generic models, as presented in 1 (Schiffauerova and Thomson, 2006). The main contribution of the paper is the evaluation of inspection strategies using the CoQ approach, which to this point has not been applied in detail for a broad range of applications. Also, as part of the evaluation approach, an innovative attempt is made to find a global optimum by developing an intermediate scenario between single and double acceptance sampling strategies. Furthermore, the two key elements that played an important role in establishing the overall evaluation (external failure premium and conformance rates) are explicitly considered in the CoQ model. The remainder of this paper is organized as follows. The next section discusses the classical P-A-F model that is the most widely used. Then, the 10-step systems engineering methodology for quality improvement of manufacturing systems is presented and step 8 of this methodology i.e. cost of quality is discussed in detail. This is followed by an introduction to the case study of aerosol can manufacturing industry study where the cost of quality analysis is applied. The development of the scenarios and results are discussed in the conclud- ing section where results are compared among the scenarios and future work is presented. http://dx.doi.org/10.1016/j.ijpe.2017.03.019 Received 22 November 2016; Received in revised form 21 March 2017; Accepted 22 March 2017 ⁎ Corresponding author. E-mail address: mfarooq@mit.edu (M.A. Farooq). International Journal of Production Economics 188 (2017) 156–166 Available online 07 April 2017 0925-5273/ © 2017 Elsevier B.V. All rights reserved. MARK