Facing the Challenges of the Future: Excellence in Business and Commodity Science editor D. Plesea, Olaru M., Dinu V., Bucharest Academy of Economic Studies, Bucharest, 2010, Vol. 1, ss.168-173
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PART II
COSTS OF QUALITY IN QUALITY MANAGEMENT SYSTEMS IN POLISH FOOD ENTERPRISES
Urszula Balon*, Grażyna Morkis** *Cracow Univesity of Economics, Poland
[email protected] **National Research Institute of Agricultural and Food Economics in Warsaw
[email protected]
Summary. Quality costs analyzing is a very efficient tool of management that brings a lot of profits to a food industry enterprise. The implementation of quality costs calculation lets to expose the internal costs of discordance as well as evaluate the functioning of quality management system's efficiency in the enterprise. In Polish food enterprises, accounting system for the costs of quality has been implemented in 44% of the respondents, while 28% declared that they want to introduce it. A vast majority of the companies being investigated (70%) observed the relation (whether negative or positive) between introduction of the quality management systems and the costs incurred. Key words: costs of quality (COQ), prevention costs, appraisal costs, failure costs, the cost of conformance, the costs of non-conformance
Introduction There are two types of systems of quality assurance and management that aim at improving health safety and quality of products in food enterprises. These are: • obligatory systems: Good Hygienic Practices (GHP), Good Management Practices (GMP), Hazard Analysis and Critical Control Point (HACCP), • non-obligatory (voluntary) systems: i.e. ISO 9001 (quality management system based on ISO 9001), ISO 22000 (food safety management system), integrated management system with BRC (British Retail Consortium) and IFS (International Food Standard) standards. It can be observed that the increasing number of food enterprises in Poland implement the non-obligatory systems.
The costs of quality in quality management system The concept of costs of quality (COQ) has not been precisely defined neither by practitioners, nor by theoreticians in the field of quality management. The main differences between the existing definitions refer to the content, range and areas of the costs. Very often they are wrongly considered as costs of quality control and functioning of quality departments in an enterprise.
169 Quality and Customer Value Management It is difficult to find a precise definition of COQ since there are many areas combining activities pertinent to quality management and those related to production process. Yet the most widely accepted definition of COQ describes quality costs as the costs incurred in the design, implementation, operation and maintenance of quality management system, as well as the costs of resources used for continuous improvement, the costs of system, product and service failures, and all other categories of costs of activities required to attain a quality product or service [1]. Based on the review of definitions provided by various authors [i.e. 2], we can define and classify COQ according to the following groups: 1) 2) 3) 4)
in a narrow meaning, the costs incurred during production process constitute the basis for defining the costs of quality, in slightly broader meaning, COQ represent all costs incurred by a company, COQ may correspond to the costs incurred by the user, in a broad sense, these are costs incurred during the whole life cycle of a product and by all market users.
In the literature [3, 4, 5, 6, 7, 8], a number of COQ models can be found. Yet, there are two most popular models that generalize all the existing classifications and constitute the basis for developing other definitions, more or less modified and completed. These are: • PAF (Production-Appraisal-Failure) model, and • Process cost model. According to the PAF model, the following costs are distinguished: • prevention costs – costs associated with actions taken to ensure the conformity of products and services, • appraisal costs – costs associated with measuring and assessing the level of quality attained by the process, • failure costs – costs of actions to correct quality of products and services before (internal) or after (external) their delivery to the customer. The process cost model refers to the total costs of conformance and non-conformance for a particular process, assuming that both categories may be a source of savings. • The cost of conformance – costs incurred to produce products or services first time to the required standards by a given process, • The costs of non-conformance – the failure costs (quality losses) caused by the process not being executed to the required standard. Introduction of the quality management systems should result in the increased prevention costs incurred by the prevention and improvement activities for the system and products. These activities lead to reduction of non-conformance costs for both the company and the customer. Whereas, a change of appraisal costs depends on a number of non-conformances, where they occur and the associated costs. Accounting for the costs of quality in food enterprises This paper reports the results of the study conducted by the National Research Institute of Agricultural and Food Economics in Warsaw. The objective of the study was to define the influence of the introduction and application of the quality management systems on the costs
170 PART II. of quality in an enterprise, inter alia. The survey was carried out in Poland in 2008 and involved 50 different food enterprises. The results demonstrate that only 8% of the companies being investigated declared to measure and monitor all costs of quality, 36% calculate only some of them, while 28% expressed their willingness to introduce the COQ calculations. The remaining 28% of the respondents do not have it, neither plan to introduce. Quality cost calculations are used mostly by large enterprises (Figure 1). Within this group, 17% calculate all the COQ, 33% analyze only some of the costs, while the remaining 25% do not monitor any quality costs, although attempt to do so in the future. Only 4% of the medium-size enterprises measure all costs of quality, but as much as 46% of them calculate part of these costs, and 21% declared that they would like to have a quality budget. Among the small enterprises only 7% declared to have introduced the complete COQ concept, 21% in part, while 43% have not introduced it yet plan to do so.
Figure 1: The scope of COQ in small, medium and large food enterprises in Poland (in %) As regards the small enterprises, introduction of the quality management systems (both obligatory and non-obligatory) led to the decrease of prevention costs in 14% of them (Figure 2), while 50% declared to maintain them at the same level; 29% of the small firms investigated revealed that these costs had increased following introduction of the quality management systems. In medium-size companies, 54% of the respondents stated that implementing the quality management systems (whether or not obligatory) raised the prevention costs, 13% declared the opposite, whilst in 17% of respondents in this group the prevention costs remained at the same level. Large enterprises observed that their prevention costs increased (67%), decreased (8%) or stayed unchanged (17%) following introduction of the quality management systems.
171 Quality and Customer Value Management
Figure 2: Changes in prevention costs in small, medium and large enterprises following introduction of the quality management systems (in %) The second category of COQ are appraisal costs (Figure 3) associated with assessing the level of quality of the product at each stage of production process. The appraisal costs should change dependent on a number and value of non-conformances, and more specifically, their detection rate during the control. The more detailed the control and the lower the number of non-conformances, the lower the appraisal costs can be, provided that the non-conformance costs are not increasing. The control should detect non-conformances early in the production process. Analyzing the appraisal costs in small, medium and large enterprises we can observe that overall, in most of them the appraisal costs have increased, specifically, in 58% of the small firms, in 92% of the large firms and in 21% of the small ones. Whereas, 50% of the small companies and 25% of the medium ones did not observe any changes in appraisal costs following introduction of the quality management systems. According to 14% of the small companies their appraisal costs have decreased. 17% of the medium-size firms, 8% of the large ones and 14% of the small companies had problems with assessing this problem.
172 PART II.
Figure 3: Changes in appraisal costs in small, medium and large enterprises following introduction of the quality management systems (in %) Failure costs constitute another category of the quality cost (Figure 4). The companies attempt to minimize these costs by increasing the costs of prevention and appraisal.
Figure 4: Changes in failure costs in small, medium and large enterprises following introduction of the quality management systems (in %)
173 Quality and Customer Value Management As regards the small enterprises, 29% of them observed that implementation of the quality management systems resulted in the decreased costs of non-conformance, 7% stated the contrary, while 57% thought they stayed at the same level. A majority of the medium-size firms (38%) argued that non-conformance costs have not changed, 33% observed the decrease and only 4% of respondents in this group declared the respective increase. Large companies estimated that the quality management systems resulted in the decrease of nonconformance costs (42%) or no respective change, maintaining the costs at the initial level (50%). Nonetheless, none of them observed the increase of non-conformance costs following implementation of the quality management systems.
Conclusions In Polish food enterprises, accounting system for the costs of quality has been implemented in 44% of the respondents, while 28% declared that they want to introduce it. The companies who do not have this accounting system had problems with assessing the role of the costs of quality in the quality management systems. A vast majority of the companies being investigated (70%) observed the relation (whether negative or positive) between introduction of the quality management systems and the costs incurred. This influence was perceived important by 18% of the firms, while of low importance by 52% of the respondents. The remaining 26% of the companies observed that implementation of the quality management systems had no influence upon their costs.
Reverences [1] Schiffauerova, A. and Thomson, V., A review of research on cost of quality models and best practices, International Journal of Quality and Reliability Management, Vol.23, No.4, 2006. [2] Ciechan–Kujawa M., Rachunek kosztów jakości. Wykorzystanie w zarządzaniu przedsiębiorstwem, Oficyna Ekonomiczna, Kraków 2005, s. 56. [3] Balon U., Istota kosztów jakości, Mat. Konf. Nauk. nt.: "Koszty jakości w zarządzaniu jakością”, AE, Kraków 2002. [4] Bank J., Zarządzanie przez jakość, Gebethner i Ska, Warszawa 1997. [5] BS 6143 Guide to the economics of quality, Part 1, Process cost model; BS 6143 Guide to the economics of quality, Part 2, Prevention, appraisal and failure model. [6] PN-EN ISO 9004:2001 Systemy zarządzania jakością. Wytyczne doskonalenia funkcjonowania, PKN, Warszawa 2001. [7] PN-ISO 8402 Zarządzanie jakością i elementy systemu jakości. Terminologia, PKN, Warszawa 1996. [8] Lisiecka K., Koszty jakości podstawą podejmowania decyzji w firmie, [w]: Metody i narzędzia doskonalenia jakości, Tom I, Polskie Forum ISO 9000, Warszawa 2000.
