The Effects of Purchasing Strategies on Quality
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
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).
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.
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.
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.
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.