Introduction
The contemporary business environment is more competitive and challenging than ever before; with advances in internet technologies, increasing complexity in customer’s expectation and improved production capabilities.
Supply chain management (SCM) corroborator have claimed that that the supply chain has tried to meet all the instabilities identified within the new economy. Supply chain management has concentrated on moving products and services downstream towards the customer. Typically, the supply chain is organized by manufacturing corporations or dominant resellers who use domestic manufacturing and distribution facilities to achieve market-based objectives such as market share volumes and customer penetration (Walters, 2008).
Due to growing global competition organizations are concentrating substantially on total quality management (TQM) practices which leads to maximizing customer satisfaction and loyalty and to achieve better business performance (Topalvoic, 2015).
Quality experts argued that quality improvement can enhance the profitability by improving the marketability of the product through enhanced performance and driving down costs that result from imperfections and field failures (Deming, 1986; Juran et al., 1999). Significant amount of experimental evidence does suggest that quality management (QM) is positively correlated to improvement in; product quality, customer satisfaction, market share, and competitive advantage (Awan et al., 2009; Fotopoulos and Psomas, 2010)
Researchers have shown increased interest in the study of quality management (QM) from supply chain (SC) perspective in the recent years (e.g. Kuei et al., 2010; Zhang et al., 2011). Foster and Ogden (2008) suggested that SCM and QM efforts improve each other’s performance and integration between the two functions can be beneficial for an organization in many ways.
According to Rashid and Aslam (2012) It is important to integrate supply chain management and quality management because both are related, i.e. better quality cannot be reached without Supply chain integration and efforts to improve quality on continual basis usually consequence in higher level of integration between all the SC partners.
Vanichchinchai and Igel (2009) argued that the crucial goal of both QM and SCM is customer satisfaction which can only be attained through fulfilment of customer requirements linked to quality, cost, (delivery) time, and flexibility.
Total quality management (TQM) and supply chain management (SCM) have been identified as the two most significant strategies for manufacturing and services and have become a prerequisite for success in the global market (Taleb et. al, 2011).
Improving levels of customer satisfaction is important for firms due to the influence customer satisfaction (CS) has on economic performance (Fornell et al., 2006). Basically, customers require better product quality, faster delivery and inexpensive costs, or quality-delivery-cost (QDC). Institutions must meet these necessities to achieve customer satisfaction (Vanichchinchai and Igel, 2009).
Research objectives and questions
This paper examines the potential that total quality management practices offers for improving supply chain management and seeks to examine the effect of Total Quality Management (TQM) implementation on the relationship between Supply Chain Management (SCM) and the Customer Satisfaction (CS).
The three research questions of this study can be expressed as follows:
- RQ1. Is there a positive relationship between SCM practices and Customer satisfaction?
- RQ2. Is there a positive relationship between TQM practices and customer satisfaction?
- RQ3. Is there a positive relationship between SCM practices and TQM practices?
- RQ4. What is the effect of TQM implementation on the relationship between SCM and CS?
- Literature review
1. Supply Chain Management (SCM)
Supply chain management (SCM) can be defined as a process for integrating a chain of objects (such as suppliers, manufacturers, warehouses, stores, and retailers) in a way which ensures the production and delivery of goods in the accurate quantities at the accurate time, while minimizing costs and satisfying customers (Christopher, 1992). While (Mentzer, 2004) defines SCM as a set of three or more corporations directly linked by one or more of the upstream and downstream movements of products, services, finance and information from a source to a customer. Supply chain management covers all the activities related to the flow and transformation of goods from the raw material phase (extraction) to the end user, as well as the corresponding flows of information (Naoui,2014).
Supply chain management is the management of upstream and downstream relations with suppliers and customers in order to deliver greater customer value at lowest cost for the entire supply chain (Christopher, 2011). The major SCM tasks aggregated into four categories or sub functions: ‘Source’, ‘Make’, and ‘Deliver’ refer to the three functional areas, i.e. procurement, manufacturing, and distribution; ‘Plan’ refers to the general planning of these three functional areas (Supply Chain Council 2008).
According to (Talib et al., 2011) SCM is perceived as a tactic to increase competitive performance by integrating the internal functions of an organization and linking these with the external suppliers’ operations, customers and other members of the chain.
There are four main uses of the term “SCM”: 1) the internal supply chain that integrates business functions involved in the flow of materials and information from inbound to outbound ends of the business; 2) the management of two-party relationships with immediate suppliers; 3) the management of a chain of business including a supplier, the supplier’s supplier, a customer and customer’s to customer; and 4) the management of a network of connected business involved in the eventual delivery of product and service packages required by end customers (Harland, 1996).
The objective of supply chain management is to improve the supply chain process because appropriate product gets to customers on time and with least cost (Si et al, 2007). Believing that supply chain management can lead to better respond to customer and ultimately more gainful, many managers have been care supply chain management (Ketchen et al, 2004).
At a time when world-wide competition is increasing and supply chains are becoming longer and more complicated, the probability of not achieving the desired supply chain (SC) performance increases, mainly due to the risk of SC failures, so (Tummala and Schoenherr, 2011) categorized the risk associated to the supply chain as: demand risk, supply risk, inventory risk, delay risk, capacity risk, system risk, manufacturing risk, disruption risk, and transportation risk.
With regard to the dimensions of supply chain management (SCM); Koh et al. (2007) determined the underlying dimensions of SCM practices (1) Just in time (JIT) supply; (2) many suppliers; (3) holding safety stock; (4) subcontracting; (5) few suppliers; (6) close partnerships with suppliers; (7) strategic planning; (8) outsourcing; (9) third- party logistics (3PL); (10) close partnerships with customers; (11) e-procurement; and (12) supply chain benchmarking. A study on the development of SCM practices by Chen and Paulraj (2004), recognised a set of four reliable and valid practices substantial to SCM: (1) supplier base reduction; (2) long-term relationship; (3) cross-functional teams; and (4) supplier involvement. While Tlib et. al (2011) identified six major SCM practices which are: (1) customer relationship; (2) material management;(3) strategic supplier partnership; (4) information and communication technologies; (5) corporate culture; and (6) close supplier partnership.
The SCM dimensions used to established the proposed framework in this study are the dimensions adopted by Talib et. al, (2011).
2. Total Quality Management (TQM)
Total Quality Management (TQM) focus on understanding customers’ needs in most competitive ways and continuously improving the quality of service or product to delight them.
TQM provides a set of practices that highlights, among other things, continuous improvement, meeting customers’ needs, decreasing rework, long-range thinking, increased employee involvement and teamwork, competitive benchmarking, process redesign, team-based problem solving, constant measurement of results, and closer relationships with suppliers (Crosby 1984; Juran, 1992; Feigenbaum 1991).According to ISO standard, TQM is defined as an approach to organizational management that is focused on quality and based on the activities of By improving the satisfaction level of internal employee and information and analysis system (IAS). Quality management (QM) first concentrated only on quality examination, and then included quality control (QC), quality assurance (QA) and finally TQM.
Due to rising importance of quality awareness, the concept of TQM is no longer restricted to manufacturing sector, rather it is widely applied to service sector as well (Ooi et al., 2011).
According to Mann and Kehoe (1995) there are seven prime factors affecting the implementation of TQM: process factors, type of employees, shared values, management style, organizational structure, number of employees and industrial relations
TQM dimensions adapted by (Pattanayak and Maddulety ,2013) were (1) leadership (LD), (2) benchmarking (BM), (3) information and analysis system (IAS), (4) service culture (SC), (5) service scape (SS), (6) technology-based banking service (TBBS), (7) customer focus (CF) and (8) human resource focus (HRF). Agus and Hassan (2011) has identified four important elements of TQM practices namely: (1) Supplier Relations, (2) Benchmarking, (3) Quality Measurement, and (4) Continuous Process Improvement. While Suwandeja (2015) used seven factors in his study, which included (1) leadership, (2) training, (3) organizational structure, (4) communication, (5) incentives, (6) measurements and evaluation; and (7) teamwork.
In their research Rashid and Aslam (2012) used the following QM practices in the developed framework: leadership and strategic quality planning, supplier relationship management, product design, customer focus, quality data and reporting, process management, and human resource management. The six major TQM practices were used by Talib et. al, (2011) are: (1) top management commitment; (2) customer focus; (3) training and education; (4) continuous improvement and innovation; (5) supplier management; and (6) employee involvement. In another research on service organizations results have shown that only three out of six dimensions of TQM practices (i.e. leadership, customer focus and information and analysis) have certain degree of positive effect on customer satisfaction (Ooi et al., 2011).
The TQM practices used to establish the proposed framework in this study are:
(1) top management commitment,
(2) supplier management,
(3) customer focus,
(4) training and education,
(5) continuous improvement and innovation, and
(6) employee involvement.
3. Customer Satisfaction (CS)
The capability to generate higher levels of customer satisfaction is viewed as an important differentiator and has therefore become a significant element of many firms’ business strategies.
Customer satisfaction (CS) is an important success factor for any profit and nonprofit -oriented organization. Satisfied customers tend to be less influenced by competitors, less price sensitive and stay loyal longer. Kotler et al. (2009) defined customer satisfaction as a person’s felt state, either pleasure or discontent, ensuing from comparing a product’s perceived performance (or outcome) in relation to the person’s expectations.
Research shows that firms with higher levels of customer satisfaction generate higher return on investment, productivity, market value added, shareholder value, and stock market performance (Ellinger et. al, 2012). Furthermore, increasing and maintaining high levels of customer satisfaction enhances customer loyalty and serves as a protection in contradiction of increasing price competition and the commoditization of products (Anderson et. al,1994).
Customers require improved product quality, quicker delivery and inexpensive costs, or quality-delivery-cost. Organizations must meet these requirements to achieve customer satisfaction. (Vanichchinchai and Igel, 2009).
Customer satisfaction is officially measured by some publicly available customer satisfaction databases comprising the American Customer Satisfaction Index (ACSI) in the USA and the Customer Satisfaction Barometer in Sweden (Fornell et al., 1996), The ACSI score comprises of three items: (1) overall satisfaction, (2) expectancy disconfirmation (performance that falls short or exceeds expectations), and (3) performance versus the customer’s perfect product or service.
Bozarth et al. (2009); and Quang et. al (2016) identified customer satisfaction dimensions as: (1) Response to customer standards, (2) Customer evaluation to firm performance, (3) Continuity to use firm’s product/service, and (4) Recommendation of firm’s product/ service to others.
Research Model
3.1 Theoretical Framework
Based on the above literature review, a conceptual framework is developed and a research model has been proposed to examine the link between Supply Chain Management (SCM), Total Quality Management (TQM), and Customer Satisfaction (CS). The proposed research framework is depicted in Figure (1).
SCM is independent variables, TQM is mediating variable, and customer satisfaction is dependent variable.
3.2 Hypotheses Development
Based on the research framework, SCM dimensions were segmented into:
(1) customer relationship, (2) material management, (3) strategic supplier partnership, (4) information and communication technologies, (5) corporate culture, (6) close supplier partnership.
TQM dimensions were segmented into:
(1) top management commitment, (2) supplier management, (3) customer focus, (4) training and education, (5) continuous improvement and innovation, (6) employee involvement.
Finally, Customer Satisfaction dimensions were segmented into:
(1) Response to customer standards, (2) Customer evaluation to firm performance, (3) Continuity to use firm’s product/service, and (4) Recommendation of firm’s product/ service to others.
3.2.1 Supply Chain Management and Total Quality Management
Researchers have shown increased interest in the study of quality management (QM) from supply chain (SC) perspective in the recent years (e.g. Kuei et al., 2010; and Zhang et al., 2011). Foster and Ogden (2008) suggested that SCM and QM efforts improve each other’s performance and integration between the two functions can be beneficial for an organization in many ways.
Organizations, however, are usually involved in these two activities simultaneously and hence require SC integration and quality improvement at the same time. It is also important to integrate SCM and QM because both are interrelated, i.e. better quality cannot be achieved without SC integration and efforts to improve quality on continual basis usually result in higher level of integration between all the SC partners.
Some researchers have argued that there is no clear difference between the roles of the two functions; SCM and TQM (e.g. Chin et al., 2010). Day by day as competition is getting rougher, the focus is shifting from solo supply chain to an integration of SC and TQM practices (Sharma and Modgil 2015).
Many studies argue that in order to realize the full benefits of QM and SCM efforts, it is imperative that QM practices throughout the SC are aligned with a common focus. It is pr
opounded that this alignment can lead to joint quality policy making and strategy execution, a phenomenon which can be called “total supply chain quality management” (TSCQM) (Rashid and Aslam ,2012). Levy et al. (1995) suggested that such relationship between the SC partners can result in higher level of confidence in supplier’s quality; reduction in the level of inspection; higher delivery speed; and suppliers taking responsibility for the quality.
TQM applications help reduce process variance, which has a direct impact on supply chain performance measures, such as cycle time and delivery dependability, set-up time reduction, allowing enhanced schedule accomplishment and correspondingly quicker reaction to market demands (Vanichchinchai and Igel, 2009).
In addition, TQM is a total system approach which works horizontally across functions and departments, involving all employees, top to bottom, and extends backwards and forwards to include the supply chain and customer chain. Where SCM takes a vertical vision of the buyer and supplier relationship, focusing on the performance of upstream and downstream organizations (Talib et al., 2011).
H1: supply chain management positively affects total quality management practices.
3.2.2 Total Quality management and Customer Satisfaction
Understanding customers, satisfying them and outstanding their needs are important objective of TQM programs and employees need to be customer focused to make TQM employment fruitful in organizations. Satisfaction affects future consumer choices, which in turn lead to improved consumer retention. Customers stay loyal because they are satisfied and want to continue their relationship.
Kristianto et al. (2012) found that adopting TQM in organizations leads to higher CS. Furthermore, the empirical findings of Terziovski (2006) also revealed that quality management practice is the most significant and positive predictor of productivity improvement and customer satisfaction.
One of the key aims of TQM is to maximize customer satisfaction; where satisfied customers are the ones who will eventually become loyal and willing to share the good impression of the company and the purchase will be repeated in the future (Topalovic, 2015). Talib et al., (2011) mentioned that TQM practices guarantee that processes are followed and customers are satisfied.
TQM indirectly help to improve customer satisfaction, as internal employees equipped with proper information provide better service to external customer (Durgesh,2017).
TQM is based on the idea of customer satisfaction. Organizations flourish to achieve total quality (i.e. the chase of excellence, zero defects, continuous improvements, etc.) based on the participation of all its members and aiming at durable success through customer satisfaction, establishing and achieving customer satisfaction is seen to be the ultimate goal of every organization (Boon, 2011).
H2: Total quality management positively affects customer satisfaction.
3.2.3 Supply Chain Management and Customer satisfaction
The Customer Satisfaction must be the ultimate goal of any commercial organization. Believing that supply chain management can lead to better respond to customer and ultimately more gainful, many managers have been care supply chain management (Ketchen et al, 2004). Furthermore, SCM is the management of upstream and downstream relations with suppliers and customers in order to deliver greater customer value at lowest cost for the entire supply chain (Christopher, 2011).
Changes in global customer behavior require a responsive answer from a company and its partners in a supply chain (Naoui, 2014). In supply chains and industrial markets, customer satisfaction has been recognized as a significant part of business strategy and a crucial driver of profitability and market value (Lewin, 2009).
Vanichchinchai and Igel (2009) argued that the ultimate goal of SCM is customer satisfaction which can only be achieved through fulfilment of customer requirements related to quality, cost, (delivery) time, and flexibility. Furthermore, they stated that SCM aims to respond to customers as rapidly as possible, at the right time and place at the lowest cost possible.
The complete satisfaction of customers is possible by tie product quality, service and value in a package at every node of supply chain and quality management practices and should be implemented beyond the boundaries of concerned enterprises. (Sharma and Modgil, 2015).
H3: supply chain management positively affects customer satisfaction.
H4. Total quality management positively mediate the relationship between supply chain management and customer satisfaction.