Managing quality costs and the role of Information Technology (IT) the case of small and medium manufacturing industries in Tanzania.

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University of Dar es Salaam
Though quality is receiving lot of attention worldwide to enhance competitiveness, the situation here in Tanzania is different. Regardless of the importance attached to small and medium industries in Tanzania still the sector is the most neglected as, to date it has not been provided with an enabling environment to operate efficiently and effectively. This study has introduced some specific areas to address to increase efficiency as well as reduce operational costs for the companies to become competitive. In order to seize the opportunity of globalisation and with stand the impact of word-wide competition, companies are seeking over-increasing levels of productivity improvement and reduction of operational costs. Efficient operations, better co-ordination of functions, economies of scale, efficiencies of labour force are among the many possible means for productivity improvement and reduction of costs. Companies in Tanzania are faced with under-utilisation of capacities and high operational costs, due to a number of factors. Many companies are run without focused plans and the resources available are never utilised fully due to lack of company management vision as well as lack of company planning resulting to overall economic mismanagement. While taxes are really paid, complaints are always given by the managers that the high taxation rates are killing the local industries. Local products not only are much more expensive compared to other products from outside but are of very low quality and non-standardised. Operational costs including the overhead costs are unnecessarily too high and not even known by the SME companies in Tanzania. Since most companies have not attempted to measure quality costs, they may be virtually throwing profits out of the back door in the form of waste, rejects, idle capacities, poor skills, poor application of technology, idle workers and repairs[1][2][9]. A survey of 60 companies in Dar es Salaam, Arusha and Mwanza was made. Data on the area of quality costs as well as the number of companies available were collected from all industries visited. Relevant financial data from the companies were collected to establish ratios of the quality costs for management to see for their utmost and prompt action. From the data analysis it was established that company management in the small and medium industries lack the basic knowledge on quality costs and the role information technology could take for the enhancement of proper decision from top management. Without adequate information system, it would be difficult to manage quality costs effectively and organisations cannot be customer oriented for an assured company growth, sustainability and long term profitability. Quality costs has remained to be a new concept to be implemented in Tanzania and the companies have accepted the same as part and parcel of their day-to-day operations. The primary objective of the study has been to raise quality awareness in the area of quality costs and explore the possibility of using Information Technology (IT) in tracking the quality costs. The study has looked at the problems of managing quality-costs and the necessary strategies including application of Information Technology to strengthen quality management systems to enhance quality awareness. The study was focused mainly on SMEs given their growing importance to Tanzania and elsewhere in developing countries. Specific objectives that guided the study were: I. To develop a model relating IT, Quality Management, quality costs and industrial financial performance. II. To develop a simple computer-assisted methodology for SMEs to use in the management of quality costs. III. To establish the level of poor quality costs in Tanzania SMEs including those companies with computers; IV. To establish the number of computers available and the rate of application in solving specific quality problems in manufacturing companies in Tanzania; The following six hypothesis were tested: • HI: SME companies in Tanzania have quality costs more than 50% of their company turnover;• H2: SME companies in Tanzania spend less than 2% of the sales revenue on prevention cost activities;• H3: High levels of quality management are associated with relatively high levels of profitability; • H4: In Tanzanian SMEs less than 5% of the companies train their staff on quality issues; • H5: Less than 1 % of the companies with computer facilities have established quality costs tracking system. • H6: Higher company performance is associated with those companies with established quality cost tracking system. The study has found that the SME companies in Tanzania are spending an average of more than 50% of their company turnover as quality costs. Companies with low prevention activities/ costs have also low productivity. Training on quality issues is only done by about 18% of the companies in Tanzania but none of them had a recognised training certificate on quality. Companies with high profitability had relatively high levels of quality management. And though about 69% companies visited had computer facilities but there was a very serious underutilisation of computer facilities. As regards quality costs none of the companies interviewed had established quality cost tracking system. Companies with relatively high good quality costs had also high levels of profitability.
Available in print form, East Africana Collection, Dr. Wilbert Chagula Library, Class mark (THS EAF TS156.8.T62)
Industrial engineering, Quality control, Information technology, Tanzania
Toba, R. D. (2000). Managing quality costs and the role of Information Technology (IT) the case of small and medium manufacturing industries in Tanzania. Master dissertation, University of Dar es Salaam.