Modification and Confirmation of PAF Model Based On Quality Costs Theory
Indra Indra, Gatot Yudoko, Nur Budi Mulyono

School of Business and Management
Institut Teknologi Bandung

Abstract

To achieve a sustainable competitive advantage, one of company must do is to implement an appropriate quality cost management strategy. Given the increasing business and management complexity, the quality cost model applied in companies needs to be ascertained whether it can still be in accordance with the current quality cost condition. The company, where one of the authors works, could not achieve its quality costs target. The authors then used the PAF (Prevention-Appraisal-Failure Costs) model to explain this phenomenon, but it turned out that there was a nonconformity between the PAF model and empirical data. The model said that increasing in costs of appraisal plus prevention will decrease total quality costs. Empirical data showed that the increase cannot always reduce the total quality costs. The research aims to solve company problems evaluate the suitability and even modify this PAF model. This paper is part of the research which only discussed this problem until the conceptual model. The full research which will use pragmatism philosophy, abductive approach, and action research strategy. From the literature review, the authors found a journal that prevention costs could reduce appraisal costs. The authors have a hypothesis that appraisal costs are a dependent variable. In the proposed PAF model, the authors split ^costs of appraisal plus prevention^ into prevention costs (independent variable) and appraisal costs (dependent variable). With the concept of this proposed PAF model, to reduce total quality costs we must only focus on prevention activities, appraisal activities are only temporary actions.

Keywords: Quality costs, PAF model, prevention costs, appraisal costs, failure costs

Topic: Business and Economic