The Cost of Quality
We all know the pleasure associated with filling up a Woollies trolley with delicious foods and treats. Similarly, walking out of a shop carrying an exquisitely crafted box containing hand-made Italian leather shoes doesn't remotely compare to the experience of buying a pair of made-in-china flip-flops from a side street vendor. Is it the snobby associations of ego-ful pride that adds to the immense sense of pleasure involved; or is there something else at play? We all know that quality provides satisfaction, and also, that it comes with a price tag...
A quick scan of any newspaper advertisement section is filled to the brim with slogans such as ‘quality without the price', ‘quality you can afford', and ‘quality without breaking the bank'. So then, is quality still synonymous with elevated prices in today's age? I am sure at some point we have all made the price-conscious decision to buy a brand not necessarily aligned with quality. Sometimes it pays off, but often it results in an unusable product; necessitating a return to the shops and a purchase of the trusted quality brand...the whole unsatisfactory experience is capped by wasted time, petrol and further expenses.
So then, what is the price of quality, and is it a justifiable expense? 25 years ago, Philip Crosby wrote a global best-selling book entitled "Quality is Free" that many of you in management positions may still be familiar with. Centring on how a worldwide quality process was installed into the ITT Corporation, the book addressed quality management issues in a manner that could be easily understood by all. It contained buzzword conceptualisations that are still very much in use today such as "It is always cheaper to do the job right the first time"; "Why spend all this time finding and fixing and fighting when you could prevent the incident in the first place?" and, my favourite, "Quality is free. But it is not a gift". The rationale behind the book was that the cost of not having quality (whether in products or management systems) is so great that, by comparison, quality is basically free.
Perhaps then, as Crosby suggests, rather than attempting to hazard a guess as to what the actual price of quality is, it would be a far simpler task to weigh up the substantial costs of an absence of quality. Let's have a look at some industry examples. As you are aware, in milling the extraction rate refers to the yield of finished product obtained from the grain. The higher the extraction rate achieved, the higher the production level of top quality product and thus increased margins and profitability. Using the example of a 5 ton per hour milling plant, just 2% additional extraction would provide a supplementary R2.16 million profit per year (5 tons x R3,000 x 0.2% x 600 hours/month x 12 months). Taken over 20 years, the average life span of a quality mill, this would translate to an added R43.2 million. Substantial money in anyone's terms - and that's not even touching on inflation! So definitely here, one could say that in this instance, quality is profitable.
Let's take it a step further and look at operational overheads. Continuing with the example of a 5 ton per hour mill, a good estimate of overheads is R350 per ton x 5 tons = R1, 750 per hour overheads. Multiply the hourly amount by 24 hours in a day and you're looking at overheads of R42, 000 per day. So, in a calamity downtime experience in which the mill was not running, it is still costing R42, 000 per day. And that is not taking into consideration the obvious loss of revenue from non-production (and hence, no sales) and possible long term losses such as contract cancellation resulting from non-delivery. The costs of downtime far exceeds mere overhead costs. This situation I am sure, is not at all unfamiliar and easily transferable to the baking industry.
Imagine the catastrophic situation that could prevail if one were facing a lengthy wait on a diagnostic technician to arrive from, say Turkey or China, and then for the spares to be ordered and couriered across to your remote South African rural location? The point here is that downtime is expensive at best, and can lead to business closure at worst. Does the additional capital expense involved in purchasing quality equipment (that can self-regulate and diagnose, along with local service centres and spares) really equate to a large or unnecessary number when viewed in relation to the down time associated with the alternative option? Does anyone think that large corporations such as Tiger Brands would look at spending figures like R500 million on a new plant if there were other cheaper, viable options? Sayings like run-of-the-mill bear huge relevance here - a mill needs to run!
Quality then, although perhaps often associated with luxury, cannot be considered to be merely a luxury! As I have pointed out in previous columns, milling equipment is not exempt from worldwide quality trends. Preference for English engineering has by-and-large been replaced by a Swiss trend. In an increasingly price and quality driven market the possibility of other viable, quality options is under constant scrutiny.
The Padova region in Italy has been the premier home to Italian milling equipment since... well, since Italians first developed a taste for milled-product s such as semolina for pasta, pizza, and polenta (similar to our maize meal). We are all familiar with the much-used stereotypical view of Italians and their great love for food - along with their unending quest for perfection in it. Having won the hearts of people globally with their fine food (is it possible to visit anywhere without finding an Italian restaurant); if one visits Italy today, you might be surprised to find that they still ignore global trends and stick to Italian milling machines. Surely this, in itself, speaks infinite volumes!
At African Micro Mills we offer you the finest in Italian milling equipment, modified to fit seamlessly within the Southern African context. Our intimate knowledge of Southern African markets and business workings, coupled with a wide range of localised milling solutions, full spares service and ongoing support, HR solutions, mentorship programmes, feasibility studies and other advice will help you capitalize on cereal milling investments and related basic food industries in Southern Africa.
For any queries or comments, please contact us.
