Abstract: The automotive industry is one of the most important industrial sectors in the world. Therefore, consideration must be given to the development of collaborative activities between the automotive industry and supply chain partners to survive and succeed in recent world market. Supply chain integration can collaborate between a manufacturer and its supplier and costumer which enables firms to work together and improve product quality which is an important key competitive capability. This is why, the relationship between supply chain integration and product quality in automotive industry should receive sufficient attention from the research community. Hence, the purpose of the study is to develop and validate the supply chain integration and product quality instrument in the automotive industry. The research methodology for this study was devised based on the literature in general and survey instrument in the automotive industry in particular. The instrument were examined by using a survey conducted in Malaysian Automotive and Supplier Industry for empirical analysis. The study identified indicators of each dimension of supply chain integration; particularly customer integration supplier integration and internal integration and each dimension of product quality in supply chain; specifically design quality and conformance quality and validated a supply chain integration and product quality survey instrument. This questionnaire instrument can be used effectively in any manufacturing firm.
INTRODUCTION
Manufacturing sector has a critical and fundamental role to play in economic growth. The automotive industry is one of the economy cores in the manufacturing sector. The automotive industry has contributed significantly in developing nations drive towards an industrialized nation (MAI, 2012).
Industrial competitiveness is a major issue for developing and industrialized nations. In an environment of agile globalization and liberalization, industrial competitiveness for improving nations requires obtaining innovative capability and for developed nations, improving higher technological advancement. Product quality development and supply chain integration play a crucial role in industrial competitiveness.
In highly competitive environments, companies are forced to implement Supply Chain Management (SCM) in order to reach competitive advantages and enhance their supply chain performance. The SCM consists of integration, co-ordination and collaboration within organizations and all over the supply chain. That means, that the supply chain management requires internal (intraorganizational) and external (interorganizational) integration (Gimenez and Ventura, 2005) that known as supply chain integration. Supply chain integration, if applied effectively, is known to bring about a significant improvement to all companies. The target of seamless supply chain is to enhance material and information flows within a company and also connect it with other supply chain members. With the technology available today, very intimate, beneficial and profitable supply chain integrations can be structured (Yunis et al., 2012).
The integration of supply chain between a company and its supply chain partners can yield manufacturing competitive capabilities. Product quality is one of the key factors of competitive capability which is needed to survive and succeed in recent world market. Enhancement of product quality and services of enterprises may increase the value for customers. By evaluating the improvements of the market, managers can rank these improvements.
The objectives of the present study are: (1) To identify indicators of each dimension of supply chain integration; particularly customer integration, supplier integration and internal integration and each dimension of product quality in supply chain; specifically design quality and conformance quality, (2) To propose a supply chain integration and product quality survey instrument and (3) To report on validation of the survey instrument in the automotive industry.
Researchers have demonstrated that firms which collaborate and cooperate with other firms or create inter-firm relationship with others, will have better competitive advantages than those which do not. Hence, there are an increasing number of empirical studies and investigations devoted to the direct and indirect impacts of supply chain integration on product quality and company’s performance (Lotfi et al., 2013d; Kim, 2009).
Many researches have been conducted to show the relationship between supply chain integration and some factors of supply chain performance. Some researchers believe SCI is one-dimensional (Marquez et al., 2004; Rosenzweig et al., 2003) while others have divided it into external and internal integration (Campbell and Sankaran, 2005; Petersen et al., 2005; Zailani and Rajagopal, 2005). There are also some researchers that have represented multiple dimensions (Droge et al., 2004; Gimenez and Ventura, 2005; Koufteros et al., 2005).
In previous study, Lotfi et al. (2013c) investigated and classified some supporting literature on dimensions of supply chain integration and performance and then classified all performance into two categories which include: Strategic performance and operational performance. It was concluded that very little attention has been granted to the dimensions of supply chain integration and product quality that is made of design quality and conformance quality. So, it was proposed a conceptual framework that focuses on the relationship between dimensions of supply chain integration and dimensions of product quality of the entire supply chain.
Sharing information, material and financial information within the organizational units can act as supply chain management (Stadtler and Kilger, 2008) so, that it will meet the needs of the customer and lead to an enhancing of the entire supply chain involved (Lotfi et al., 2013a).
Supply Chain Integration (SCI) can be defined with the amount of collaboration between a manufacturer and its supply chain partners as well as the extent to which a producer conducts internal and external organizational processes (Flynn et al., 2010). The integrated supply chain can cause in the effective gains and flows of services, money, information, products and decisions with the goal of offering highest value to firm’s customers (Frohlich and Westbrook, 2001). Companies need to recognize where they stand in their supply chains, where they lack integration and how to improve that Which in turn would make them more efficient, effective and competitive in the World market (Lotfi et al., 2013b).
Supply chain integration includes of internal and external integration. The external integration is also divided into customer and supplier integration. In this study, the internal integration, customer integration and supplier integration upon some researches was considered (Wong et al., 2011; Koufteros et al., 2005; Stank et al., 2001; Narasimhan and Kim, 2002).
Customer integration refers to acquiring technological, marketing, production and inventory information from the customers (Mentzer, 2004; Lau et al., 2010). Manufacturers can use these acquired information and customer requirements to produce products that meet users’ preferences (Chen and Paulraj, 2004; Flynn et al., 2010; Zhao et al., 2011). Customer integration direct to establish a relationship with customers and hence gaining a better and clearer understanding of customers’ preferences and also includes methods and ways to enhance coordination among the manufacturer and the customer (Swink et al., 2007; Frohlich and Westbrook, 2001).
Supplier integration involves a relationship between the firm and the upstream suppliers (Vijayasarathy, 2010). With supplier integration, suppliers provide information and participation in making decisions (Petersen et al., 2005) with sharing production plans, demand forecasts and levels of inventory to enhance the product and production requirements and better utilizing the supplier’s and factory’s capabilities and structure of cost. Such effective relationships and communications possess a major significance in advanced firms since suppliers know the components supplied better than the firms (Jammernegg and Reiner, 2007; Luo, 2007; Zhao et al., 2011; Swink et al., 2007).
Internal integration demonstrates the extent to which a firm can build all its functions and practices into a collaborative and organized manner to meet customers’ needs (Zhao et al., 2011; Kotcharin et al., 2012). It involves integration across departments and functions under the control of the manufacture from incoming material to distribution in order to fulfill customers’ requirements. Therefore, the functions and departments within a manufacturer operate as one integrated and coordinated system working together to meet customers’ requirements and improve performance. There are some very important elements that lead to better performance such as, shared information, joint planning, functional coordination teams and collaborating together (Flynn et al., 2010; Boon-Itt, 2011).
According to Feigenbaum (Reeves and Bednar, 1994) product quality defines as “The composite of product characteristics of engineering and manufacture that determine the degree to which the product in use will meet the expectations of the customer”. Fujimoto (1999) divided quality into two categories: Design quality and conformance quality that design quality include, customer needs, product concept and product plan (basic design) and also conformance quality consists product design, process design, process, product structure and product function.
Design quality can be noted as the inherent value of a product in the marketplace or how to measure the characteristics of a product designed to meet the requirements of a given group of customers. It measures how well the customer expectations are represented in the product concepts and then into detailed product designs. According to Fynes and De Burca (2005) design quality can distinguished in engineering design quality and industrial design quality. Engineering design is the development of a product from its technical view via detail design and the design of the relevant manufacturing process and tools. Engineering design quality is measured by frequency of engineering change notices, technical performance, material, design, cost and ease of production or assembly (Fleischer and Liker, 1992). On the other hand, industrial design is primarily concerned with matters of style and aesthetics. Industrial design quality is measured with perceptions of aesthetics, ease-of-use and appearance (Yamamoto and Lambert, 1994).
Conformance quality refers to how well products delivered to customers conform to the product design or specifications, including reliability, defects in the field, fit and finish and durability (Clark and Fujimoto, 1991). According to Fynes and De Burca (2005), conformance quality can be categorized in two terms of internal conformance quality and external conformance quality. Internal conformance quality is the ability to achieve objectives of quality in the manufacturing unit and implemented as a construct to use measures of defect rates, new product yield and scrap and rework (Fynes and De Burca, 2005). On the other hand external conformance quality is the ability to meet objectives for quality from users’ sight and marketplace which measures with, delivered quality and value, customer complaints frequency, the systems for tracking customer frequency and the priority given to solving product problem frequency (Choi and Eboch, 1998).
As the chain of quality indicates, a high design quality and a high conformance quality are required in order to achieve a high level of total product quality (Clark and Fujimoto, 1991; Fujimoto, 1999).
MATERIALS AND METHODS
To develop the instrument for supply chain integration and product quality relationship that applicable in the automotive industry, three dimensions of supply chain integration and two important dimensions of product quality in supply chains were considered.
In this study, a draft survey instrument, applicable in the automotive industry was constructed and validated by academician and practitioner experts in the field of supply chain management in the automotive industry. Afterwards, the modified instrument was implemented and the gathered data was analysed for validity and reliability of the survey.
This study was conducted to provide a deep understanding and a set of theoretical and empirical findings. Quantitative method was applied to the data gathered from Malaysian Automotive and Supplier Industry in the year 2013. In this method, all the relevant secondary data on general information and demographic, customer integration, supplier integration, internal integration, design quality and conformance quality were used for analysis.
Survey strategy was selected for this specific research with the questionnaire instrument because it is a common research strategy in business and management research, to collect information by asking questions which would allow the researchers to gather abundant data from a large population in a low cost way (Saunders et al., 2012). Keller et al. (2002) described how the quality measures of the research could be affected by the procedure of scale growth in rating the questions. Based on some related researches in SCM, this study is assessed 5-point Likert scale in this study (Wong et al., 2011; Wu et al., 2011; Cao and Zhang, 2011; Fynes et al., 2005; Koufteros et al., 2007; Cousins and Menguc, 2006; Das et al., 2006; Koufteros et al., 2005; Frohlich and Westbrook, 2001; Omar et al., 2010).
The population which was studied in this study, was the Malaysian Automotive and Supplier Industry in manufacturing sector and the sampling method which was applied in it, was the simple random sampling method in probability sampling technique because the chance to select each case is equal and known.
The questionnaire was distributed randomly to the Malaysian Automotive and Supplier Industries in manufacturing sector as target sample via three methods: Email, visiting the companies and participating in the “Vendors Briefing” meetings of large car manufacturers of Malaysia.
Total 250 questionnaires distributed to the Malaysian automotive and supplier industry. This was done with the objective to obtain at least 15-20% response rate. Based on some researchers 15-20% is “normal” (Bagchi and Skjott-Larsen, 2004). Out of the 250 questionnaires distributed, 50 usable responses were analysed representing 20% of those surveyed.
Statistical analysis: This study used SPSS (version 21) to carry out descriptive statistics analysis, variable reliability and validity analysis.
RESULTS AND DISCUSSION
Instrument development: After overviewing the literature on supply chain integration and product quality, this study investigated some supporting literature on indicators of supply chain integration and product quality and then classified the indicators into two categories which include: Information integration and organizational integration as a scope of integration among supply chains based on Skjott-Larsen and Bagchi (2002) study.
Indicators of supply chain integration: Based on some previous researches, were considered three dimensions of supply chain integration in this study, including: Internal integration, customer integration and supplier integration (Wong et al., 2011; Koufteros et al., 2005; Stank et al., 2001; Narasimhan and Kim, 2002). Furthermore, we take information integration and organizational integration into consideration for each dimension as a classification of integration among supply chains based on Skjott-Larsen and Bagchi (2002) study.
| Table 1: | Indicators of each dimensions of supply chain integration |
Table 1 summarizes the indicators of Internal Integration (II), Customer Integration (CI) and Supplier Integration (SI).
In terms of information integration, communication is one of the important key indicators of integration within the firm and with major customers/suppliers which requires all the departments to communicate through IT tools (Wong et al., 2011; Flynn et al., 2010; Narasimhan and Kim, 2002; Frohlich and Westbrook, 2001). Communication methods can be classified into two groups: Traditional communication methods and advanced communication methods. The use of telephone, fax, e-mail, written letters and face-to-face contact are cassified as traditional communication methods (Wong et al., 2011; Narasimhan and Kim, 2002; Flynn et al., 2010; Sriram and Stump, 2004; Leek et al., 2003). On the other hand, computer-to-computer links, Electronic Data Interchange (EDI) and Enterprise Resource Planning (ERP) are known as advanced communication methods (Wong et al., 2011; Narasimhan and Kim, 2002; Flynn et al., 2010; Sriram and Stump, 2004; Lee and Whang, 2000; Sahin and Robinson, 2005). Real-time searching of the level of inventory information being the other indicator, can lead to an internal integration and share knowledge of inventory with company’s major customers/suppliers to conduct a customer/supplier integration (Wong et al., 2011; Flynn et al., 2010; Narasimhan and Kim, 2002; Frohlich and Westbrook, 2001). The usage of track and trace systems across the departments or with company’s major customers/ suppliers is more common in integrated firms (Zhang et al., 2011; Boehme, 2009). Also, follow-up feedback (Joshi Sarang et al., 2012; Zhao et al., 2011; Flynn et al., 2010; Narasimhan and Kim, 2002; Frohlich and Westbrook, 2001) and the establishment of quick ordering systems with company’s major customers/suppliers (Wong et al., 2011; Flynn et al., 2010; Narasimhan and Kim, 2002; Frohlich and Westbrook, 2001) are significantly important.
On the other hand, in terms of organizational integration, there are some indicators like the sense of responsibility within the departments in a firm (Wong et al., 2011; Flynn et al., 2010; Narasimhan and Kim, 2002), periodic interdepartmental meetings (Flynn et al., 2010) and physical flows among firm departments. There are also some strategic partnership (Barnes and Liao, 2012; Wong et al., 2011; Flynn et al., 2010; Narasimhan and Kim, 2002), joint planning and forecasting (Wong et al., 2011; Flynn et al., 2010; Narasimhan and Kim, 2002; Frohlich and Westbrook, 2001) and the involvement of major customers/suppliers in the decision making process in departments. These departments include R and D (research and development)/Engineering (Ebrahim, 2012; Wong et al., 2011; Flynn et al., 2010; Bagchi and Skjott-Larsen, 2004; Narasimhan and Kim, 2002), Inventory management (Wong et al., 2011; Flynn et al., 2010; Bagchi and Skjott-Larsen, 2004; Narasimhan and Kim, 2002; Frohlich and Westbrook, 2001), Marketing and sales (Wong et al., 2011; Narasimhan and Kim, 2002; Flynn et al., 2010; Frohlich and Westbrook, 2001), Procurement (Wong et al., 2011; Flynn et al., 2010; Bagchi and Skjott-Larsen, 2004; Narasimhan and Kim, 2002; Frohlich and Westbrook, 2001), Production and packing (Wong et al., 2011; Flynn et al., 2010; Bagchi and Skjott-Larsen, 2004; Narasimhan and Kim, 2002; Frohlich and Westbrook, 2001), Quality control (Machikita and Ueki, 2012), Distribution (Wong et al., 2011; Flynn et al., 2010; Bagchi and Skjott-Larsen, 2004; Narasimhan and Kim, 2002) and Supply chain software implementation (Bagchi and Skjott-Larsen, 2004) with company’s major customers/ suppliers.
Indicators of product quality: In this study, two dimensions of product quality as design quality and conformance quality were considered. According to Fynes and De Burca (2005), design quality can distinguished in engineering design quality and industrial design quality. Engineering design quality is measured by engineering change notices frequency, technical performance, material, design, cost and ease of production or assembly (Fleischer and Liker, 1992). On the other hand, industrial design quality is measured with perceptions of aesthetics, ease-of-use and appearance (Yamamoto and Lambert, 1994). In term of design quality, the indicators for engineering design quality and indicators for industrial design quality were demonstrated. Then each indicator was with a statement.
This study categorized conformance quality in two terms: Internal conformance quality and external conformance quality (Fynes and De Burca, 2005). Internal conformance quality is measured by defect rates, new product yield, scrapandrework (Fynes and De Burca, 2005; Zeng et al., 2013). On the other hand external conformance quality is measured by, customer complaints frequency, the systems for tracking customer frequency and the priority given to solving product problem frequency (Choi and Eboch, 1998). The indicators of conformance quality in two categories of internal conformance quality and external conformance quality, with a statement for each one, are indicated in Table 2. Table 2 shows indicators of each dimensions of product quality with related statements.
| Table 2: | Indicators of each dimensions of product quality |
| Table 3: | Cronbach’s alpha for research variables |
Validation of instrument: After investigating the indicators of each dimensions of supply chain integration and product quality, were arranged in a draft questionnaire. Then interviewed with experts in the field of supply chain management to test for content validity to know each question truly measures the concept (Shariat Panahy et al., 2013). The instrument developed in this study illustrates the content validity as the choice of measuring items was based on both, an exhaustive literature review and detailed evaluations by ten academicians and five manufacturers. The questionnaire was finalized after some small modifications. This modified questionnaire was implemented in the study to validate the instrument of measurement by using SPSS (version 21) to carry out descriptive statistics analysis, variable reliabilityandvalidity analysis.
Reliability: In this study, a primary sampling with the size of 50 samples in automotive industry had been done and by using, the internal consistency method that shows the reliability based on the Cronbach alpha. In this study, the Cronbach alpha level of 0.70 is considered good and the reliability is accepted. Table 3 indicates the level of Cronbach alpha for all variables are more than 0.70 that shows high internal consistency. The results of reliability analysis from SPSS are shown in Table 4.
Validity: The instrument was examined for two major types of validity: Content validity and construct validity. Content validity was based on both, an exhaustive literature review and detailed evaluations by SCM experts before implementing the survey. Construct validity was conducted by using the factor analysis method (Hair et al., 2010).
Table 5 and 6 shown the summaries of validity of all independent and dependent constructs. The statistic value of KMO for each variable shows that the result of factor analysis is valid. The eigenvalue for the first factor of each variable with percentage of the total variance suggest that the scale items are unidimensional.
This study demonstrates supply chain integration and product quality indicators which were identified, based on the literature review. It also constructs an instrument to investigate the relationship between dimensions of supply chain integration and dimensions of product quality in the automotive industry, rooted from the indicators of each of these dimensions.
| Table 4: | Summary items analysis from SPSS |
| Table 5: | Factor analysis of independent variables |
| Table 6: | Factor analysis of dependent variables |
This model can be implemented in the automotive industry by researchers in the future studies. Although, in the previous research, the researchers (Lotfi et al., 2013c) investigated the relationship between dimensions of supply chain integration and dimensions of product quality of the entire supply chain in the manufacturing sector, they did not specifically focus on the automotive industry. This study in automotive industry produced results which corroborate the findings of the previous work in the manufacturing sector (Lotfi et al., 2013c).
CONCLUSION AND FUTURE IMPLICATION
In this study, based on the literature review, the indicators of each dimension of supply chain integration and product quality were identified. Moreover, an instrument to investigate the relationship between dimensions of supply chain integration and dimensions of product quality in the automotive industry was constructed. This instrument was validated and evaluated by academicians and practitioners experts in the field of SCM via interviewing with them and also by using SPSS to carry out descriptive statistics analysis, variable reliability and validity analysis. Based on the obtained results, all 5 constructs namely, customer integration, supplier integration, internal integration, design quality and conformance quality, are shown to be valid. The values of the Cronbach’s alpha, correlation coefficients and composite reliability prove the reliability of supply chain integration-product quality instrument. Factor loading demonstrated that all 5 constructs are unidimensional. The questionnaire instrument has 27 items from 5 constructs.
This questionnaire instrument can be used effectively in any automotive industry. Future work should consider more competitive dimensions which may also lead to improvements of firm performance, also expand the framework to include other industrial sectors besides automotive industry.
The validated instrument may use in any study to find the relationship between supply chain integration and product quality in manufacturing sector.