184-189

Technical Journal of Engineering and Applied Sciences Available online at www.tjeas.com

2015 TJEAS Journal-2015-5-S/184-189 ISSN 2051-0853 2015 TJEAS

Application of Analytical Hierarchy Process (AHP) in productivity of costs of Quality

Amir Soleiman Nezhad*1, Akbar Zavari Rezaei2 1. Departmant of Management Management, college of Management, Urmia Branch, Islamic Azad University,

Urmia, Iran 2. Assistant Professor of Accounting and Finance at University of Orumieh

Corresponding Author email: [email protected]

ABSTRACT: Cost of Quality is an important strategy to control costs and maintain the quality of the product. The present study aims to understand the importance of prevention costs, using the indices hierarchical process and determining ways to increase cost efficiency and quality. The study, using actual data from Tobacco Company of Orumieh, is an applied research and to analyze the data, the software EXCEL-Expert Choice is used. To emphasize the importance of prevention measures and evaluate the quality of costs by library studies and research field, we identify the factors involved in the efficiency of quality costs (4 criteria). Then we proceeded to build a hierarchy. Finally, after the implementation of techniques and offering solutions, cost efficiency was apparent. For example, in the prevention and evaluation of quality costs by implementing a hierarchical technique about 1680 million rials was established in productivity costs for the first half year of 2015. Keywords: cost of quality, analytical hierarchy, efficiency of costs

INTRODUCTION

Quality costing method is process-based costing method that conceptually is looking to measure and

create a balance between cost of prevention and quality assurance costs against cost of poor quality and waste. Applying these costs by making better use of resources and investment in preventive measures greatly reduces the costs [1].To check the total cost of quality all the hidden costs of all company should be extracted this act requires financial and human resources and spending time [2]. Classification of costs of quality

The most common classification of management accounting literature, divides the cost of the quality in the four classes. This classification is known as PAF [3] which is mentioned as follows: Internal failure costs

The costs within the organization are created due to non-compliance and defective parts and products at each stage of the design and production. External failure costs

Costs that arise after the product is received by the customer and before applying the product by the customer are not identified and undiscovered. Costs of prevention

All costs associated with identifying, preventing or reducing the risk of non-compliance or defect. Evaluation costs

Costs of measures to ensure quality requirements, which are certification and quality control at all stages of design, purchase and production. The analytic hierarchy process (AHP)

In the science of decision making which the selection of a strategy of prioritizing strategies and solutions is raised, for a few years, the decision-making methods with multiple parameters MADM have found a place.Among them AHP is used in management science more than other methods [4]. AHP can be

Tech J Engin & App Sci., 5 (S): 184-189, 2015

185

used in decision-making practice when faced with a choice of computing and decision criteria. The basis of this method of decision making lies in paired comparisons [5].

In this method, first of all, we must standardize the data for each location. After this stage we arrange the form of indicators, to form the matrix, the index must be weighted. Proces of AHP model and begins with identifying decision-making and the elements and prioritizing them. Identifying the cost of waste of products

According to information obtained from the production, we draw the the cost of internal failure in terms of product type by Pareto chart. According to the chart1, the highest costs are related to the product SS and tin (88%). So our decision is a measure of the efficiency of costs, are results of this graph.

chart 1.Pareto chartcost ofwasteproducttype

Identification of criteria and sub criteria in AHP

In this study, those factors involved in quality cost efficiency and by grouping all of their factors and indicators, four were determined which include: Labor productivity, technological characteristics, quality and product quality management activities, these factors will be discussed below: Labor productivity

Labor productivity is known as maximum use of human resources in order to move in the direction of the organization's goals with minimal time and cost.In the factors affecting productivity scientists have identified different factors as effective factors. [6] In this study, labor productivity indicators such as the work ethic, non-discrimination and compliance with organizational justice, motivate staff, courage and seriousness of experts is considered.Courage and seriousness of in product management is among factors of control of product team management, which leads to success of operating procedures of the different programs [7]. Gary cokins considers little course in cost implementation team as one of the problems in the way projects costing [8]. Technological features

The practical application and knowledge technology is to help humans effort Technological changes in the industry given the growth and innovation is a changeable matter [9].

Technology can be considered important from the following aspects in the process of cost efficiency: Technology in accordance with the production requirements, life of machinery, limited production and the inadequacy of the domestic market, the cost of repairing works, too much stops [10]. In this study we emphasize on the index that have a large impact on the cost of quality. According to field research, technology in accordance with the requirements of production is important as new devices have less costly repairs. Product quality management

The purpose of the management of product quality, is to reduce cost of services to help increase the profitability. Important goals such as profitability, minimize costs, increase product quality, in manufacturing companies are somehow associated with cost management [11]. For product quality management we consider 4 Indicator: Supervision or production operations, additional costs due to irregularities, implement of SPC and the critical defects.


186

Quality Measures Considering the quality of in the design stage and preventing quality issues, is much less costly than

corrective action in the final stages of the production process and products [12]. In this study, for quality measures, indicators of,Prevention measures, assessment procedures, the rework, lack of implementation of the external cost of failure is determined. hierarchical structure

At this point the problem is defined and the aim of the decision is traced in a hierarchy of factors and elements of decisions. AHP, involves the decision analysis of several indicators of the Hierarchy Levels [13]. For this purpose we will use a decision tree that consists of four levels: The first level includes general purpose of decion making. The second level are general criteria that the decion si amde based on them.(4 Standards) in the third level there are sub-criteria, for each criterion there are 4 sub-criteria. And in the last level of decision options (contains 2 products) that are investiageted.These steps are traced in Figure 1.

Figure 1. Hierarchy structure prioritizing productivity indicators of quality costs

Paired comparisons

In order to survey the opinions of experts by questionnaire prepared, experts do comparisons between criteria and sub-criteria of decision-making and set their scores towards each other. This comparison is based on the 9 quantity table. Preference for an option or factor compared to the factoritself is equal to one.

In this study, using the software Expert Choice, all comments of decision makers in the matrix comparison is used, in this case for group decision making we have used geometric mean for comparison matrix elements. The opinion or decision makers are taken into account it group calculations when inconsistency of views of any decision maker is less than /1, these measures have been calculated by the software and the incompatibility rate criteria is /05. Table 1 shows the matrix of pairwise comparison of criteria.

Table 1. Matrix relativepreference forgeneralstandards

Calculate the incompatibility rate (credit of data)

Incompatibility rate is a device that measures the compatibility and shows the extent to which the priorities of comparisons can be trusted, if the rate of compatibility is 0/1 or less it indicates the compatibility of the comparisons [14]. In this study, incompatibility rate of criteria and sub-criteria was calculated using Expert


187

Choice software. These rates are all less than 0/1 In the following charts the incompatibility rate with criteria and sub-criteria matrix of the relative importance (relative weight) were calculated using the software. The final have been weight was calculated using the ideal measures. Calculating the rate of incompatibility of overall criteria with their relative weights

According to the chart2, the incompatibility rate of total criteria was /05 and measures of labor productivity, quality of management, product quality and technological characteristics have the highest relative weight which shows the importance of these measures in the cost efficiency.

chart 2. Incompatibilityofgeneralcriteriaandtheir relative weights

Calculating the incompatibility rate of sub-criteria of human labor and their related weight

Based on the chart 3, incompatibility rate of sub-criteria of human labor is /08 and the index of non-discrimination and justice organization, motivation of staff consciousness, courage and enthusiasm of experts have the highest weight.

chart3 . The incompatibility rate of sub-criteria of human labour

Calculating the incompatibility rate of sub-criteria of Quality management and their related weight

According to chart 4 incompatibility rate of sub-criteria of Quality management is less than 0/06 and index of monitoring and supervision of operations, implementation of SPC, critical flaws in the product and additional costs due to irregularities, have the highest weight.

chart 4. The incompatibility rate of sub-criteria of Quality management

Calculating the incompatibility rate of sub-criteria of technology characteristics and their related weight

According to chart 5 incompatibility rate of sub-criteria of technology characteristics is 0/02 then and index of technology consistent with need to produce the highest weight.

chart 5. The incompatibility rate of sub-criteria of technology characteristics


188

Calculating the incompatibility rate of sub-criteria of quality measures and their related weight According to the chart6, the incompatibility rate of quality measures is 0/05 and prevention measures

and the lack of external failure costs have the highest weight.

chart 6. The incompatibility rate of sub-criteria of quality measures

The final weight of options and the incompatibility rate hierarchical structure

According to chart 7, incompatibility rate of whole structure is /07 and SH option has the priority to make decisions in efficiency of costs. One of the main criteria to decide on this research is using the results of this graph.

chart7. The incompatibility rate of final options and their relative weight

Sensitivity analysis of performance

In this chart (8) it was seen that SH and SS options have been drawn for 4 criteria of efficiency costs, that SH with 76.6% has a large difference with SS that is 23/4%.

chart 8.sensitivity analysis of performance of options compared to the general criteria

Discussion of the findings of the Analytic Hierarchy Process

According to results of hierarchical techniques, SH product with highest weight (76%) has a much important in quality, cost efficiency of company. In practice, the production of this type of product is less expensive to follow (see Figure 1).

In discussing the general criteria as criteria for labor productivity with the highest weight, indicates that lot of attention should be paid to it in the company. It is hoped that officials with knowledge in this field will be of great help to the organization.

The other criteria is quality measures, this factor also has a large impact on corporate profitability and has a great relationship with productivity of human resources. In practice staff with sufficient knowledge, along with the motivation and courage when appropriate, prevents the production of defective products. For the


189

criteria for product quality management, monitoring and implementation of SPC play a fundamental role in reducing the production of defective products. Implementation of quality measures of quality management standards for defective product can now greatly reduces the cost of quality. For example, an informed and motivated employee of quality control in the production of tobacco has an important role in reducing defective products. About technology also, existence of up-to-date devices reduces the high costs of quality. In practice, the product SH with this type of device alone costs 11% less rails (Figure 1). The process of improvement of quality costs

After using Analytical Hierarchy Process with solutions in the manufacturing companies, the stages of minimization of costs appear. For example by doing quality and product quality management for 6 months of 2015 according to the calculations, 640 million riyals savings are obtained (including price for each intermediate product). This step is part of the process to prevent the cost of quality.

In the stage of assessment of costs of quality could keep moisture and weight of the product close to standard level, based on estimates the defective products will be reduced by 11% and for the first 6 months of this year, about 790 million rials saving, for the SH and SS is created (including the price per kilogram of tobacco). Finally, during the same time in the implementation of statistical process control methods, 250 million rials in the efficiency of internal failure cost savings is achieved (Including the price of the each final product).These results are shown in Table 2.

Table2. productivity ofquality costs Productivitycostsofprevention methods 640million rials Productivitycostsofevaluation methods 790million rials Productivitycostsdue tostatistical process controlmethods

250million rials

Total 1680million rials

CONCLUSION

Productivity of quality costs specialty internal failure costs for manufacturing firms must be a priority. In

this study, those factors involved in improving the costs of quality were designed by the hierarchy in 4 criteria along with the sub-criteria. The results show that the efficiency of human resources, quality of management, product quality and technological features has an important role in improving costs. Also the selection of the right product makes a significant impact in this area, so that by using hierarchical techniques and solutions in various stages of quality costs a total of 1680 million riyals saving is achieved in the first half of the year. It is obvious that the continuation of the company's quality cost efficiency depends on the proper enforcement and compliance of criteria and sub criteria of proposed measures. Managers also need to have a special look at costs of quality.

REFERENCES

Ali Delbari, AlirezaDavoodi, 2012, application (AHP) in the rating assessment indicators tourist attractions, Journal of Operations Research

and its Applications, Volume IX, Issue II, summer, page 57-79. Amin Rezapour, 1999, to evaluate and measure the cost of quality, master's thesis, University of Science and Technology, Fall . Fereydun Verdi Nejad, 2010, reviews the strategies of differentiation and least cost and their impact on organizational structure, site Verdi

race. Hassan Ghodsi Poor, 2006, Frayndthlyl hierarchical, Tehran: Amir Kabir University. Maryam Ostadzadeh, 2008, factors contributing to the increase or decrease in labor productivity, site Rahkarmdyryt,

September.www.mgtsolution Mehdi Dadashi, 2014, cost of quality failure costs Bruni, industry news website, Feb Page 3-1. MJ Asgharpour, 2000, multi-criteria decision-making, Eighth Edition, Tehran University Press.

Mohamad Mehdi Mostafavi, 2011, Factors ergonomic work environment on the implementation of a quality management system, site management solution, Nov. Www.mgtsolution.com

MohamadRoshan, 2013, cost management in competitive conditions, why and how, Forums, page 4, June.

Mohammad Yousufi, 2012, costing, quality, Blog Latest News, July http://magazine.faraed.com. MR Mehrgan, 2014, advanced operational research, Pnjm.thran print publications of academic publishing. Saeed Ketabi, Ansari , 2005, choosing the right marketing mix using AHP, the Faculty of Economic and Administrative Sciences, University

of Isfahan, Issue I, Page 92-79. SarmadSaeedi S, Ali Reza Mamaghani, 2011, identifying and ranking the key factors Jdyddrgrvh product MvsrdrtvshSaipa with the

approach of AHP, Journal of Industrial Management, Issue 20, Spring, pages 167 to 194.

Talebnia G., Ali Khozein, M Dankub, 2012, priority review Mvsrdrpyadh factors of implementation of activity-based costing system using hierarchical process, accounting and auditing Research, Volume 4, Number 13 Page 95-78.

184-189

Documents

Transcript of 184-189