System dynamics approach to analysing the cost factors effects on cost of quality

Purpose – The purpose of this paper is to propose a model for analysing the influence of costs of quality. Design/methodology/approach – A model is designed by using a causal loop diagram and is analysed through a system dynamics approach. The model simulation is prepared by Vensim software. Findings – Prevention and appraisal costs are the two effective cost factors. The model represented in this paper reveals that prevention costs have the most effect on total cost of quality and especially external failure costs. Hence, in order to achieve the customer expected quality level, prevention and appraisal costs should be considered. Research limitations/implications – Calculating and measuring non‐conformance costs is very difficult in organizations and some errors and mistakes may happen. Practical implications – A system dynamics approach can analyse and measure the amount of prevention cost effects on cost of quality in different organizations. Originality/value – The proposed methodology demonstrates the use of an innovative approach in developing a cost of quality concept and constructing a practical framework for system dynamics in a real case.