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: sosoleyman@yahoo.com
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

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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, nondiscrimination 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.

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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
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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 nondiscrimination 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

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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
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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
Productivitycostsofevaluation methods
Productivitycostsdue tostatistical process
controlmethods
Total

640million rials
790million rials
250million rials
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.
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