An excellent article by Donald Wheeler on the economic cost of quality, “What Is the Zone of Economic Production?” gave me pause to consider the strategic implications of reducing the costs associated with poor quality. As Wheeler pointed out in his article, there is an economic zone of production in which firms should strive to operate. His insights highlighted the key reason why firms should strive to improve quality and reduce the incidence of scrap and rework: Poor quality consumes resources and increases costs.

Although there can be no dispute about a firm reducing or eliminating the costs associated with poor quality, the question arises whether cost reduction per se can be used by a firm to create a competitive advantage. To answer this question, I draw the distinction between cost reduction and cost advantage.

Competitive advantage is obtained when a firm achieves the highest rates of profitability in its industry.

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