Background of the Problem
In the contemporary business world, organizations are continuously facing numerous challenges that negatively affect the profitability, growth, and attainment of their strategically stipulated goals. High levels of competition, technological advancement, rapidly changing preferences of the target market, and the need to provide high-quality and affordable products are some of the challenges that organizations face. Initially, organizations assumed that high quality aligned with high costs of production, which resulted in more top-priced goods that only a few could afford. However, the rest of the target market opted for the substitutes of the products in question, which were low quality, but affordable. To address this issue, organizations sought ways to cut production costs, to retain the high quality, and to avail the products to the target market at affordable prices. Unfortunately, some organizations ended up introducing another problem: Cost of Poor Quality (COPQ). COPQ is defined as costs that could be avoided if a business' products and processes were perfect (Abbas, Ahmed, Salman, & Ashraf, 2015; Ahern, Leavy, & Byrne, 2014; Besner & Hobbs, 2012; Svejvig & Andersen, 2015; Arumugam, 2016). These costs emanated from the substitute of the raw materials that were utilized in the production process, as organizations seek to cut their production costs to provide products at affordable prices.
Furthermore, the case of COPQ was made worse by many organizations having limited information on their problems and how to measure the COPQ. The notion, according to Abbas et al., (2015); Al-Kadeem, Backar, Eldardiry, & Haddad, (2017); Xiong, Zhao, Yuan, & Luo, (2017); Badi & Pryke, (2016), is that for COPQ to be controlled, it needs to be measured. Without quantification, the decision-making process would be complicated, as the decision-makers would lack the necessary information concerning the problem. This necessitates the need to devise ways through which COPQ would be measured in monetary terms, as well as the gap between the quality department and the decision-makers. As a result, the management team would be eliminated. COPQ became the economic common denominator through which management would continuously engage in active communication with the quality department and other departments that generated quality products and the adoption of quality processes.
Essentially, COPQ set the ground for the introduction of continuous improvement initiatives. According to Planview (2018); Brown & Eisenhardt (1995); Yun, Choi, Oliveira, Mulva, & Kang, (2016); Burnes (2014); Detert (2000), continuous improvement is also known as Kaizen and is “a method for identifying opportunities for streamlining work and reducing waste.” The elements that enhanced the awareness and popularity of continuous improvement in businesses were Lean, Kaizen, and Agile. Currently, firms across the globe utilize constant improvement initiatives to identify opportunities through which they can do several things: enhance their levels of quality, cut operational and production costs, gain competitive advantages, and enhance the attainment of their stipulated strategic goals. Innately, continuous improvement helps firms to identify and set aside the necessary factors that allow them to implement improvements on an ongoing basis. Total quality management was one of the first structured approaches that were adopted by organizations to enhance the implementation of continuous improvement initiatives; this was later developed through Lean Manufacturing, Lean Six Sigma, and Six Sigma. However, organizations needed to have a clear mindset of the identified elements and the implementation process to enhance continuous improvement, as a number had reported consistently high rates of failure (increased COPQ). Abbas et al. (2015); Easton & Rosenzweig (2012); Galli & Hernandez-Lopez (2018) assert that in a situation where a high amount of COPQ takes place, the firm loses most of its capital, which affects its performance, decreases its earnings, and negatively affects the overall reputation, image, and brand of the firm. As a result, some organizations end up cutting their labor force to cut down their operations costs, which creates a high turnover of employees, as they are no longer guaranteed their security or tenure with the firm.