Cost of quality as a scoreboard to evaluate sawmills’ success in achieving quality objectives and better performance

Abstract

The concept of “cost of quality” emerged in the 1950s but is relatively new or absent in developing countries like Tanzania. Developed countries have benefited from the advantages of using this concept to gain competitive edge above others. Traditionally, the reporting of qualityrelated costs had been limited to inspection and testing while all other costs like scrap and rework, customer complaints and returns, product recalls and others were accumulated in overhead accounts. Such systems are too aggregated and too distorted to be relevant for managers’ planning and quality control decisions. They provide little help for reducing costs and improving both quality and productivity. Experience from the sawmill industry in Tanzania indicates that most sawmills report quality related costs in a traditional way. A change is inevitable if sawmills are to meet quality objectives and
improve performances. This study is an effort towards initiating such a system in the sawmill industry in Tanzania. The study observed that there was no cost of quality reporting system at the study mill and costs of quality at the mill were rising. Annually, on average, there was a cost  increase of 10, 21 and 10 % on prevention, appraisal and internal failures, respectively. The production department was found to be the main source (78%) of quality costs. The activities in the department that were found
to contribute more to quality problems included downgrading of lumber due to poor quality(27%), maintenance of saws (18%), reworking/resawing (12%), process control (10%), and test and inspection (12%). These areas could serve as a starting point for a quality improvement programme.

Keywords: Sawmill, cost of quality, quality and profits