Since the 1980s, companies have taken a larger interest in quality and it´s economic impact within the company. Having the knowledge that it´s not quality that costs money, but it´s rather the lack of quality. The work immerses itself in the field of cost of poor quality and the development of key performance indicators.

The thesis is performed at Bufab Holding in Värnamo. Bufab Holding is a trading company which mainly buys and sells C-parts. C-parts include fasteners, other small metal-, rubber- or plastic parts such as wires, springs and electronic fasteners.

The aim of this thesis was to make a survey of the cost of poor quality and to find key performance indicators (KPI) for cost of poor quality that can be continuously monitored. This work can serve as a basis for other companies within the Bufab group if the company believes that the content of the report can be used. With this aim two issues was created. What is the cost of poor quality that are linked to Bufabs complaints today, and where do they occur? Which key performance indicators can be created, which continuously can be monitored?

The work began with a literature study to gain a deeper understanding of the cost of poor quality and the creation of KPI´s. The literature led the writers of this thesis into the methods that were used. Through the data collection, document gathering and given interviews an understanding of the company´s current economic situation. On this basis the company´s claims and processes where analysed with the help of "Seven quality tools". With the help of the piece cost model cost barriers was prepared and the cost of poor quality was calculated. Furthermore KPI´s was created through Lars Sörqvists description of ratio.

The cost carriers differed depending on whether it was Bufab who caused the error, if it was a wrong product quality claim or if it was the supplier who caused the error. The cost of poor quality totaled of 4,7 Mkr. The pareto chart shows that the cause wrong product quality caused the highest costs. The costs of poor quality that where calculated mostly consisted of different labor costs. One of the KPI´s was based on labor cost and the other was based on total costs. Furthermore KPI´s where made of the number of complaints with the base of total number of order lines that have been sent.

The company can then use this result to show how good quality the company have when new contracts are negotiated. If the methodology and results are promising, this thesis can be a working model for more companies within the Bufab group.

Not all visible costs of poor quality was calculated in this thesis due a lack of time. The thesis also lacks entirely an assessment of the hidden costs of poor quality.