In the Context of Total Quality Management, Quality Costs and Effects on Financial Decisions: A Research in Corum's Enterprises

Article excerpt

INTRODUCTION

The most important managerial criteria in supply chains are how to manage product, information and cash flows, and how to maximize profits by either increasing the revenue or decreasing the costs. Although the maximum benefits can be achieved if everyone follows the central planner's suggestions; unfortunately, the individual maximum profits may not be guaranteed.

Rapid and important changes in economical and technical fields happened in the second half of the 20th century carried the competition to global dimension. This process increased the importance of quality and however, brought many new problems about quality. As the importance of the quality increases, enterprises began to adopt total quality management philosophy. Part of this management type is quality cost and the measurement of quality cost. Quality cost information can be used to show the real opportunities for true activities and to obtain promotion for developing quality. For this reason, measurement of quality cost, preparing reports and make them accountable are necessary for the effectiveness of quality systems.

Measuring Quality Costs has been emphasized as an important part of quality improvement efforts since the early 1950's. A chapter on Quality Costs seems to be almost compulsory in every book pertaining to Total Quality Management, Business Process Improvement, and similar topics. There is no doubt that measuring Quality Costs is useful in order to direct improvement efforts, the problem is that the concept is not as valid today as it used to be. While customer requirements and production systems have changed considerably during the last decades, Quality Cost measurement is advocated nearly the same way as it was forty years ago.

Companies can lose money because they fail to use significant opportunities to improve their costs of quality. Most cost accounting data are not revealed to the public and are rarely exchanged among businesses, and there is no known study testing the effect of organization size, i.e., small and medium sized enterprises (SME) and large organizations, on quality costs. The study identified important factors and measures contributing to a successful quality cost program implementation and developed an empirically based model for quality costs in the manufacturing environment.

Investigation of cost accounting, decision making, and quality analysis methods point to a weakness in the business decision-making process and more specifically with the lack of business decision-making tools that are readily available. Computer programs could be used to overcome these weaknesses and to standardize the decision-making process.

In last years, with turn to quality produce, investigate that necessary of quality produce and producing quality product cost is going up in total cost. Certainly all this costs' supplement are growing up in total cost day by day, and they reach rather total at least. But, the accounting system being in force is not including quality costs. Quality costs' dimensions reaching in total cost show us that there must be special studies on quality costs. In this case, we study on quality cost and we try to bring some offer about accounting of quality costs in our accounting system.

Business decisions sometimes appear to be made without first performing a thorough analysis of the problem and ascertaining the impact of that decision on the organization. An organization should make every effort to use available data and effective analysis techniques when making business decisions. We contribute to the research on the quality cost sharing contacts in several dimensions. First, we expand the definition and modeling of quality on a decentralized supply chain to include product failures resulting from design related imperfections. Secondly, we investigate a larger set of external quality cost sharing contracts than what has been studied in the previous literature. …