The Antecedents of Defective Products and it's Effect on Company Profit: A Study of Indonesian Small and Medium Size Enterprises
12 Pages Posted: 4 Aug 2006
Date Written: October 31, 2006
Abstract
Defective products sometimes are delivered from production process. This product must be repaired or sold with lower price. But the worst thing will happen if the customers receive the defective products; it will cause customer's dissatisfaction. Spoilage goods is an internal failure cost, which is cost incurred when a nonconforming product is detected before it is shipped to customer. For small and medium size enterprises in Indonesia, which the profit is also relatively small; spoilage or defective products could cause a lot of financial loss and have a significant effect on their profitability. Defective products can be caused by many things and should be corrected to avoid any further spoilage. This paper evaluates the antecedent of defective products, for example mans, materials, machines and methods, and also examines its impact on the profit of small and medium size enterprises.
Keywords: defective product/spoilage, profit, small and medium size enterprise
JEL Classification: M40, M49
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