Quality Management in Supplier-Buyer Relationships

Introduction

In contemporary global competition and liberalization of the economy, the improvement of quality and cost reduction has become one of the chief factors to achieve a competitive edge. Goods or services with good quality and with reasonable price will always lead to a burgeoning of profits, and customer satisfaction and retention. As the business environment becomes more complex and the market inclines towards globalization, pressure mounts on the management to improve competitiveness by reducing operating costs and improving quality. The trend is due to the fact that consumers are currently more informed, more demanding, and prone to change brands and companies in order to obtain the best for their money.

TQM Approaches

One of the approaches employed by the management in bolstering customer satisfaction is through implementing Total Quality Management (TQM), a strategy that seeks to improve quality and performance by assimilating all quality-related roles and processes throughout the company. Research has shown that TQM meets and even exceeds customers’ expectations and by so doing supports an organization to gain competitive advantage (Ashraf 2016).

This paper looks at the concept of TQM as a modern theme in operational management and the supplier-buyer relation and how the two are entwined. Emirates, an airline company based in UAE and owned by the government of Dubai’s Investment Corporation of Dubai serves as proof of how proper implementation of TQM is beneficial to a service industry.

TQM evolved from the quality assurance techniques that were initially established around the time of the First World War. The war resulted in enormous manufacturing endeavors which frequently produced poor quality. As a remedy, quality assessors were incorporated into the production line to make sure that the level of failures due to quality was reduced. The need for quality products remained despite the end of the war. Thus, quality assessment became an established practice in manufacturing settings. It led to the introduction of the Statistical Quality control (SQC) method where quality inspection is based on sampling (Jacobs & Chase 2014).

The post-war era saw inferior quality products flood the Japanese market. Dr. Edward Demings came up with the SQC tool to equip staff with technical skills to support quality production. By the 1950s, most manufacturing plants in Japan had adopted quality control at all organizational levels (Garcia & Aleson 2015). The 1980s saw more non-Japanese firms adopting quality management procedures, resulting in a wave of quality control which was christened Total Quality Management. Accordingly, TQM is defined as “the management of initiatives and measures that are intended to achieve the delivery of quality products and services” (Garcia & Aleson 2015, p. 23).

The TQM techniques to improve operational performance encompass the scientific approaches for work organization, scrutinizing, and value analysis of work processes, identification of the elements of uppermost influence for quality improvement, continuous appraisal of alternative solutions to diagnose problems, and full and elaborate documentation of the results obtained after changes are effected. It incorporates and supports all useful areas, practices, and systems of businesses, including planning, development, assembly, delivery, and client support (Garcia & Aleson 2015).

In order for the TQM to be effective and impact strongly on operational performance, (1) the top management should spearhead it and craft an environment that ensures its fruitfulness(visionary leadership), (2) there is a need for continuous training of the employees on the methods and models of quality, (3) the TQM should be dedicated to customer satisfaction, (4) the quality decisions should be evidence-based, (5) companies should have continuous mechanisms for improving manufacturing and quality protocols, (6) there should be the use of valid tools and methods that are able to identify, quantify and respond consistently to incidences of non-conformance (7) the firm has to embrace a culture that promotes workers’ ability to be pro-active in identifying and tackling quality-related problems as a team.

Supplier-Buyer Relationships

Implementation of the TQM in a company on a platform of the above-listed principles results in a myriad of benefits to the firm. Most firms consider inventment in quality control in production costs. Hence, they are reluctant to implement them.

However, the risk associated with inferior quality products on the brand image has been shown to outweigh the investment in TQM (Alhashmi 2015). Further, TQM permits companies to not only obtain a high degree of diversification, satisfying customers’ needs and consolidating brand image, but also to reduce costs by preventing errors and wasted time and by making improvements in the firm’s procedures. TQM is important in eliminating prevention, appraisal, and failure (PAF) costs.

Supplier-buyer relationship in the supply chain is defined as “the re-creation of the marketing habits of the pre-industrial era where producers and consumers intermingled directly with each other and developed emotional and operational bonds in their economic market behaviors” (Maria, Amado & Perez 2012, p. 704). It constitutes one of the most important elements of supply chain integration. That is because how it is established and managed along the supply chain determines the success a firm experiences.

Fluctuations in demand make create a fluid market for retailers. To acquire a strong competitive positioning in these market conditions, retailers usually form alliances with partners and suppliers. Satyendra (2008, p. 42) observes that strong supplier-buyer relationships have a “sizable constructive impact on the manufacturer performance, supplier operation, and the running of an entire supply chain”.

Five prominent elements that help to build and cement the supplier-buyer relationship are interpersonal relations, trust, communication, cooperation, and power dependence. To achieve good levels of quality in the supply chain, it is advisable to develop a stable and lasting supplier-buyer relationship. This enables the supplier to make the investments essential to satisfy the customer’s needs.

The bond between buyers and suppliers is important in purchasing. Close relationships are recommended because of the mutual benefits that are inherent. Consequently, there is an effort to standardize as much as possible in the factory and benefit from the economies of scale with close and long-term affiliations with suppliers. However, close relations are not applicable to all purchasing circumstances.

The degree of this closeness is context-dependent because different products and services demand different levels of interaction. If the level of collaboration between suppliers and buyers is reduced in intensity and rate, then the nature of the interaction is loose coupling. Some purchased products and services require more collaboration between the buyer and supplier than others, resulting in a variety of close and loose relationships. Another factor that determines the nature of the interaction is the length of time. Buyer-supplier relations may be described as long-term or short-term relationships. Long-term interactions are endorsed where there is little interdependence between the companies and where the products are regulated.

Firms spend substantial amounts of money on the purchase of raw materials, components, and services. Also, a significant portion of company sales consists of the cost of goods purchased. Because supplier quality affects the overall cost of a product or service, supplier relation is important to enable the supplier to achieve the same quality level as reached within the organization. Customers and suppliers have the ultimate goal of satisfying end-user.

The better quality the merchant, the better his long-term position is since the customer will have better quality. This calls for closer ties between customers and suppliers if they are to maximize their returns on investment, given their limited resources.

Several factors have seen the revolution of the supplier relations from the traditional adversarial to mutually beneficial relationships. First, there has been a shift in tendency during the procurement decision making from awarding contracts to lower bidders to the emphasis on quality and timely delivery. Second, the concept of Just-in-time (JIT) – which stipulates for the arrival of raw materials and components at the production operations in small bits when they are needed and not before – calls for the supplier to make more process setup and frequent deliveries.

Hence reduced setup time and the supply of exceptional quality products are paramount. Third, the practice of continuous process improvement and lastly the ISO 9000 which demands the maintenance of supply chain progress through: “supply of zero defect products, 100% on-time delivery, and a process of continuous improvement” (Maria, Amado & Perez 2012, p. 705).

Companies invest huge sums of money in establishing mechanisms for promoting the good supplier-buyer relationship. These programs have the potential to benefit both the buyer and the supplier. To the supplier, beneficial outcomes of instituting long-term relationships with the customers comprise constructive relational behaviors –reliability and company promotion-as well as positive monetary results, such as increased proceeds and decreased costs.

Jacobs and Chase (2014, p. 297) note that customers involved in a mutually beneficial tie with the supplier are “more likely to be flexible, disclose information, reciprocate, and agree to the seller’s requests in an endeavor to maintain the relationship”. Relational behavior includes endorsements, evangelism, referrals, and activism while positive fiscal outcomes may be profitability-based, sales-based, and aggregate and expertise-based. On the other hand, the buyer benefits depend on the relational context.

In the consumer context, consumers engage in steadied interactions with suppliers because “this association simplifies their purchasing tasks, simplifies information management and improves psychological comfort and cognitive consistency” (Garcia & Aleson 2015, p. 23).

In the service framework, three relational benefits a buyer acquires are confidence, social, and special treatment. Confidence benefits, refer to the well being or feeling of security that a buyer experiences from transacting with a supplier who is familiar. Social benefits entail involvement and friendship with employees and also personal appreciation by the supplier. Special treatment may be monetary such as discounts and price breaks or non-monetary such as time-saving due to receiving quick or customized service.

Challenges of Supply Chain Management

The challenges that face the establishment of supplier-buyer relationships arise because the supplier and the buyer have to spend a significant amount of investments in building, instituting, and maintaining it. The supplier has to set up mechanisms that translate into the delivery of quality products in order to satisfy and retain buyers. This may be time-consuming, costly, and require additional manpower in the form of employees.

For instance, the implementation of the JIT concept results in high setup and delivery costs. Barriers to implementing of the TQM system also present challenges to the creation of good supplier-buyer relations. These barriers include factors such as lack of visionary leadership amongst the firms’ executive management, interdepartmental inconsistencies, lack of relevant infrastructure that promotes cultural modifications, and the tendency to focus on short term profit rather than sustainability of the business in the long term (Alhashmi 2015).

For the SME’s, setbacks comprise a lack of management competencies, lack of business skills, insufficient planning, poor human resource management and development, lack of customer focus, and limited resources. Also, the unwillingness of either the supplier or the buyer to comply with any factor involved in creating the bond act as a drawback to the successful maintenance of the relationship. For example, if any of the two parties opt out of the responsibility of the control of quality, does not recognize the independence of the other, does not honor the mechanisms put in place to solve any contention emanating from their dealings or does not follow the instituted channels of communication causing its breakdown, then the supplier-buyer link weakens.

It is difficult to talk about buyer-supplier relations without mentioning TQM. That is because TQM takes into consideration what companies must do to better understand customer needs, desires, and expectations to not only offer them goods and services with superior value but also respond quickly to customer needs. In fact, some applicable TQM measures include establishing ongoing direct ties with buyers, improving management through information sharing and more effective, tailored communication methods, and involving employees in customer fulfillment activities. In short, the implementation of TQM measures helps to promote the supplier-buyer relationship.

Many firms in the Gulf have recently become cognizant of the relevance of TQM in modern business. Emirates is an example of the UAE based organization where total quality management has had a positive impact on the buyer-supplier relationship. The company has invested heavily in establishing of TQM. It has established valid communication networks with its clients. The company embraces employee training and satisfaction.

Hence, the customer experience in interacting with the Emirates staff has been excellent. More clients have become loyal and preferred Emirates because of high quality, product innovation, and excellent service. That is why the company was named the world’s most valuable airline brand in 2014 (Ashraf 2016). Because of this, the company has earned both financial, reputation, and market growth. This also impacted the company as a buyer.

Rapid expansion has seen the company invest heavily in the acquisition of jet engines from Rolls-Royces, and airplanes from Airbus and Boeing. It has maintained a special relationship with these companies since they work collaboratively with it to make innovative and efficient airplanes, which are fuel-efficient and are customized for passengers’ world-class travel experience. This partnership helps to reduce the company’s fuel expenses and pollution penalties and may translate into customers’ benefits through reduced travel fare.

Conclusion

In conclusion, TQM and supplier-buyer relations are too important and inseparable areas of operations management. The firm’s greatest and long-term success is dependent on not just formulation, but the implementation of the TQM measures. These, in turn, culminate in buyer satisfaction. The satisfied buyer develops trust and confidence in the quality supplier, thus cementing the relationship between them.

References

Alhashmi, M 2015, ‘Embedding TQM in UAE translation organizations’, A Qatar Foundation Academic Journal, vol. 10, no. 1, pp. 1-12.

Ashraf, A A 2016, ‘Total quality management, knowledge management and corporate culture: how do they synchronize for performance excellence’, Pakistan Journal of Commerce and Social Sciences, vol. 10, no. 1, pp 200 – 211.

Jacobs, F R & Chase, R B 2014, Operations and supply chain management: quality specifications and quality costs, McGraw-Hill/Irwin, New York.

Garcia, J & Aleson, M R 2015, ‘Why and how TQM leads to performance improvements’, QMJ: Academic search premier, vol. 22, no. 3, pp. 23-37.

Maria, N P, Amado, J B & Perez, J F 2012, ‘In search of loyalty: an analysis of the determinants of buyer–supplier relationship stability under a quality management approach ‘, Routledge: Total Quality Management, vol. 23, no. 6, pp. 703-717.

Satyendra, S 2008, Business practices in emerging and re-emerging markets, Palgrave Macmillan, New York.