Cost of Quality for Saudi Plastic Factory Company

IEEM 663 - Process Re-engineering

Written by:
Mohammed Alghamdi 2201863
Saeed Alqarni 2201861

Instructed by:
Dr. Ahmad Moreb
 Cost of Quality Report for Saudi Plastic Factory Company

Prevention Costs

Organizations use the cost of quality methods to determine how various organization
resources are used to prevent poor quality in products produced and impacts of internal and
external factors. However, Saudi Plastic Factory utilizes prevention costs to avoid and prevent
quality issues. The company's preventive costs are associated with product designs, maintenance,
and implementation of quality management systems. Quality assurance plays a role in
maintaining quality systems within Saudi Plastic Factory and, more importantly, training
employees and other stakeholders on the cost of the quality production process within Saudi
Plastic Factory. According to Mordor Intelligence Report, in 2020, the Saudi Arabian plastic
packaging market was $8.89 billion and was projected to be $11.93 by 2016 with a CAGR of
5.6%.

Appraisal costs

Appraisal costs at Saudi Plastic Factory assess, measure, and monitor all quality related
activities associated with customers' and suppliers' evaluation of the materials purchased,
processed, and the products and services that conform to specifications. SPF uses appraisal costs
to enhance quality by enhancing the updated management system and equipping the quality
assurance for proper monitoring. The company involves R&D in the development of solutions
and adapting to the customers' technical demands (Saudi Plastic Factory Co.). Therefore, SPF
enhances appraisal costs through a verification process where they check all the incoming
processes, materials, products, and services with the required specifications avoiding losses
resulting in poor quality. Saudi Plastic Factory uses these costs of indication and testing all the
incoming materials and processes to enhance the quality, reducing the losses. Therefore,
appraisal costs are essential in enhancing the quality of production.

Failure costs

Most firms strive to enhance good qualities in the production by adding the internal and
external factors of the company through the cost of quality. Failure costs are also part of the total
cost of quality divided into internal and external failure costs. Saudi Plastic Factory has utilized

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these costs to prevent failures of operations within the company. For instance, the company
incurs internal failure costs while remedying the effects on the products before delivering them
to the customer. The employees and quality management team regularly examine the products
produced to identify the defects and correct them before delivering to customers, which improves
the brand image and maintains its customers. SPF incurs costs on scrap where they produce
defective products which cannot be recorded, used, or sold. They also inquire on failure analysis
to establish the causes of internal failures on products production, which helps in the direction of
defective material through ratification and rework.

Cost of Quality No. of Years Figure 1: PAF chart

After analysis of prevention, appraisal, and failure costs, the findings indicate that
prevention costs were the highest by approximately 40% of that quality costs, followed by failure
costs which was 35%, and lastly, the appraisal costs, which was 25%. However, after utilizing
the failure analysis with consistent identification of defects and correction, the SPF reported a
15% decrease in internal and external failure, an 18% decrease in prevention costs, and a 10%
the revenue generated by the company is high with increased profit-making, it is a better
company in dealing with plastic products. The company integrates the cost of quality with the
management performance evaluation to enhance the quality and profitability of the company
eliminating the costs of poor quality that may result in product defects and loss of customers as it
could damage the consumer relationships, the brand image, financial costs, and operations costs.