The Effects of Purchasing Strategies on Quality
Author(s):
Matthew A. Waller, Ph.D.
Matthew A. Waller, Ph.D., Haworth College of Business, Western MI Univ., Kalamazoo, MI 49008-3806, 616/387-5334
79th Annual International Conference Proceedings - 1994 - Atlanta, GA
INTRODUCTION.
This research examined how the supply management strategies
used by manufacturing firms--to procure components that are critical to the
quality of the final product--actually affect the final product's quality.
Quality was defined according to certain dimensions of quality identified by
Garvin (1987). The supply management strategies that were considered involved
a continuum of strategies between a comprehensive implementation of
Just-In-Time Purchasing (JITP) to a supply management strategy that is quite
the opposite of JITP--referred to as the traditional supply management
strategy (TSM).
REVIEW.
The literature review identified five key elements of the JITP
supply management strategy that are used for critical components: (1) few
suppliers for each critical component, (2) long term contracts with suppliers,
(3) frequent sharing of production schedule information, (4) using many
criteria, in addition to price, in selecting suppliers, and (5) frequent
deliveries of critical components. The literature suggested that the supply
management strategy for a critical component implemented by a firm is notably
affected by two key environmental factors: (1) environmental uncertainty and
(2) the importance of quality in the market for the final product.
METHODOLOGY.
Hypotheses were drawn from the literature and used to build
a model. The model was then used to derive a system of structural equations
which were used to test the hypotheses and the conventional wisdom about JITP.
The resulting covariance structure model was estimated using LISREL 7
(Joreskog and Sorbom, 1989), a computer program that unifies construct
measurement and structural equation modelling.
FINDINGS.
The statistical analysis of the data suggests that, when
procuring components that are critical to the quality of the final product,
firms using fewer suppliers and taking more frequent deliveries secure lower
production process variability, thus enhancing product quality levels. Longer
term contracts with suppliers of critical components were found to be
associated with higher quality levels but were also associated with higher
process variability levels. The analysis suggested that firms using long term
contracts should make the contracts contingent upon acceptable levels of
variability in the components being purchased. Firms with high levels of
perceived environmental uncertainty tended to avoid long term contracts with
suppliers. Production process variability was found to have a strong impact on
product quality: lower levels of process variability were associated with
higher levels of product quality. Statistical evidence was found to reject
many of the hypotheses derived from the literature, calling into question
some of the conventional wisdom.
REFERENCES
Garvin, D.A. "Competing On The Eight Dimensions of Quality." Harvard Business
Review (November 1987): 101-109.
Joreskog, K.G. and D. Sorbom. LISREL 7: User's Reference Guide. Mooresville:
Scientific Software, Inc., 1989.
Matthew A. Waller is Assistant Professor of Management at Western Michigan
University. He received his Ph.D. and M.S. degrees from The Pennsylvania State
University and his B.S. (summa cum laude) from the University of
Missouri--Columbia. His work has been published in Journal of Business
Logistics, Journal of the Operational Research Society, International Journal
of Production Economics, and Journal of Manufacturing Systems.
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