THE INFLUENCE OF CONTINUOUS IMPROVEMENT ON COST OF POOR QUALITY AND OPERATIONAL PERFORMANCE IN TURBINE GENERATOR MANUFACTURING INDUSTRY

Abstract

Cost of poor quality (COPQ) has always had a negative image in the discussion of quality. This image, however, we contest, as GE has been using it as a tool for continuous improvement. COPQ can play a crucial role, as a lesson learned, in increasing continuous improvement effort in a company, consequently improving operational performance. This paper investigates the underlying role of COPQ, its effect on CI and the mediating role of CI in the relationship between COPQ and operational performance. A quantitative research approach utilizing a structured questionnaire gathered data from 375 personnel at GE. The collected data was analyzed using partial least squares structural equation modeling. This study demonstrates that Cost of Poor Quality (COPQ) significantly drives organizations to adopt Continuous Improvement (CI) initiatives, such as Lean and Six Sigma, to reduce inefficiencies and quality-related costs. CI serves as a mediator between COPQ and Operational Performance (OP), mitigating the adverse effects of poor quality and fostering a culture of continuous improvement. The findings highlight that reducing COPQ through CI strategies leads to enhanced operational performance, optimizing efficiency, productivity, and product quality. This study is one of the first to examine the impact of COPQ practices on continuous improvement and organizational performance within the selected turbine generator manufacturer in the context of global region. As such, it makes a valuable contribution to the literature by addressing calls to address competitiveness challenges in today's complex business environments. The results emphasize the necessity of a holistic approach to quality management, integrating COPQ considerations into CI strategies to optimize organizational performance. By elucidating these interactions, this research contributes to the broader discourse on quality management and CI, offering valuable insights for academia and industry. Simultaneously, the study's findings provide a foundation for future research and practical applications in diverse organizational contexts, reinforcing the need for proactive quality management strategies to enhance operational excellence.