Does Higher Quality Mean Higher Cost?

Abstract

The conventional wisdom of managers in the US dictates that improving product quality will increase the cost of making the product which will either increase the price or reduce the profits. Shows that improving the quality of a product or service will not necessarily increase its manufacturing cost. Obtains information on fundamental theories and case histories from business literature and uses evidence to support the hypothesis from the case histories of several US companies which have achieved higher quality with lower quality costs and improved profitability. Examples from the literature include the case histories of companies such as Florida Power & Light, Globe Metallurgical, Motorola, and Westinghouse Commercial Nuclear Fuel Division. These examples indicate increases in return on assets, improved customer satisfaction, increased market share, and increased revenues and profits. Suggests that a company which can achieve successfully both higher quality and lower cost will have improved productivity, lower manufacturing costs, better quality, greater customer satisfaction, a higher market share and greater profitability.

Citation

Johnson, R.D. and Kleiner, B.H. (1993), "Does Higher Quality Mean Higher Cost?", International Journal of Quality & Reliability Management, Vol. 10 No. 4. https://doi.org/10.1108/02656719310038658