(i) PAFF (Prevention, Appraisal, Internal Failure, External Failure)
This is a classic approach to cost-saving. The essential objective is to limit the costs of
risks that have the potential to cause failure and jeopardize the business (Slack, N et al., 2013).
This technique can be used in all business units, divisions, departments, and functions. The
prevention phase involves the costs of any action taken to investigate, prevent, or reduce defects
and failures, quality circles, maintenance of equipment, or training of staff. In the appraisal
phase, it aims to identify and eliminate risks that are unacceptable and unacceptable failures that
may threaten the project (Drury, 2015). Methods used include risk analysis, quality system audits
(e.g., Porter's Five Forces), failed projects reviews, etc. It is the costs of establishing existing
quality such as Inspection of goods inwards, Finished Product testing, Cost of running the
Quality Control system (Drury, 2015).
Internal failure also called Failure within Production refers to faulty products in
production caused by defective material or damaged machinery, among other causes (Slack, N et
al., 2013). This can be due to using inappropriate materials, equipment, or practices, faulty
programming or flawed design; defects in materials or components; poor documentation; a delay
or failure due to resource constraints, Scrapping of defective output, Reworking (and replacing)
defective output and Capacity and resources wasted (Drury, 2015). The external failure phase is
the cost of bad quality recognized after delivery to the customer. This can be caused by inherent
deficiencies in suppliers, vendors, subcontractors, accountants, consultants, Loss of goodwill,
Replacement parts and delivery, and Product Liability costs (Drury, 2015).
Advantages:
a. It extends the life of products
b. It reduces costs of bad quality to customers and the organization
c. It improves profitability by reducing losses resulting from defective or non-conformant
materials and parts.
d. Reduces cost of Bad quality to suppliers, vendors, subcontractors, accountants, consultants,
loss of goodwill, Replacement parts and delivery, and Product Liability costs (Drury, 2015).
Disadvantages:
a. Increases cost of forming quality systems for quality control
b. Hard to implement and maintain (Slack, N et al., 2013).
c. Not applicable in certain industries e.g., manufacturing.
d. It does not apply to companies with poor cash flow management, or where it is difficult to
control costs in that way (Drury, 2015).
(ii) Quality Function Deployment (QFD)
Quality Function Deployment (QFD) is a structured approach to defining customer needs
or requirements and translating them into specific plans to produce products to meet those needs
(Hauser et al., 2010). The “voice of the customer” is the term to describe these stated and
unstated customer needs or requirements. The QFD approach seeks to identify and integrate all
aspects of the product, from key features to the quality of components, packaging, labeling, and
documentation. This can lead to significant cost reduction as to how it is implemented is to
identify any discrete elements or parts within a product that have inherent defects. Therefore, by
identifying these defects or faulty parts they can be eliminated from manufacture and rework
costs eliminated; excessive waste avoided; time to market increased; and customers are happier
with their products (Garibay, Gutiérrez & Figueroa, 2010). The outcome of QFD is a set of plans
which will result in the new product offering being achieved with requirements kept in line with
current or anticipated customer needs and requirements.
Advantages of Quality Function Deployment (QFD):
a. It provides a systematic and structured method for the prioritization and detailed design of a
new product or service (Garibay, Gutiérrez & Figueroa, 2010).
b. QFD is a customer-driven approach to product/service development. It enables organizations
to focus on what their customers want and need, not just what they say they want (Garibay,
Gutiérrez & Figueroa, 2010). This leads to a more effective approach to new product
development by focusing on value (i.e., the satisfaction of the stated customer needs), instead of
cost.
c. QFD has been successfully applied in a wide range of industries including automotive,
aerospace, computer hardware, electronic components, construction equipment design, and more
(Jaiswal, 2012)
d. Because it focuses on customer-based approaches it can be applied in any industry that is
driven by its customers (i.e., not driven by suppliers), and can be used with non-technical groups
in a company (Bolar, Tesfamariam & Sadiq, 2017).
e. It helps to improve the quality and service levels of existing products as well as providing
greater flexibility to meet future requirements (Jaiswal, 2012)
Disadvantages of Quality Function Deployment (QFD):
a. QFD focuses on inherent defects, which may not be a significant part of the overall cost of
goods; hence, they are often ignored in traditional design methods
b. QFD emphasizes that because it focuses on customer-based approaches it can only be used
with non-technical groups in a company (e.g. marketing, sales, finance, operations). Some
organizations believe that QFD should only be conducted with relevant technical groups for
project success
c. Because it is a home-grown system developed in-house by a small number of companies it can
be difficult to get standard definitions of terms and symbols used in QFD
d. QFD requires a lot of time and effort towards the initial design to ensure it is correct – these
are not necessarily ‘one-hit wonders’ in terms of this time requirement; however, once the
quality plans have been set up they will be used repeatedly
Recommendations
For HG-Ai to reduce costs, it should have all the systems in place to control both costs
and quality. In this way, it can ensure that the products meet certain standards and ensure that
they are of good quality. The systems used include Quality Control, inspection, and testing, Total
Quality Management (TQM), ISO 9000 series, which is the International Standard on Quality
Management Systems. In addition to this, HG-Ai should implement a Continuous Improvement
Process and be willing to change and adapt to remain competitive.
