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The Impact Of SCM On Customer Satisfaction


Supply Chain Management Submitted to: Professor Khadija Submitted by: Shawana Anjum (MBA)

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TABLE OF CONTENTS
TABLE OF CONTENTS.................................................................................................................. 2 THE IMPACT OF SUPPLY CHAIN MANAGEMENT ON CUSTOMER SATISFACTION ..................... 3 ABSTRACT ............................................................................................................................... 3 INTRODUCTION ...................................................................................................................... 4 PROBLEM STATEMENT........................................................................................................... 5 LITERATURE REVIEW .............................................................................................................. 6 DIMENSIONS OF SUPPLY CHAIN RELATIONSHIPS ................................................................ 11 1- Communication: .......................................................................................................... 11 2- Trust: ............................................................................................................................ 11 3- Conformity: .................................................................................................................. 12 4- Dependence: ................................................................................................................ 12 5- Commitment: ............................................................................................................... 12 6-Cooperation: ................................................................................................................. 12 CONCEPTUAL MODEL FOR SUPPLY RELATIONSHIP QUALITY .............................................. 13 RESEARCH FINDINGS ............................................................................................................ 14 CONCLUSION ........................................................................................................................ 17 REFERENCES ......................................................................................................................... 18

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THE IMPACT OF SUPPLY CHAIN MANAGEMENT ON CUSTOMER SATISFACTION


ABSTRACT
All organizations or institutions provide goods or services to customers with other organizations cooperation. To cope up with market instability, companies now look beyond cost advantage. Speed, quality and flexibility are being emphasized as means of responding to the unique needs of customers and markets. Good relationship between the customer and the supplier contributes to reliable information flows, and reliable information flows in turn leads to high efficiency. In a fast-growing systems business such as fast food industry, the supplier needs to be able to adapt its offering to a wide variety of customer situations and needs. Understanding the customers situation and need together with the right offering contributes to good co-operation in improving the supply chain, which further leads to high customer satisfaction. A supply chain adapts the changes if it is responsive in nature and customer satisfaction is considered to be one of the important criteria for the quality maintenance. The aim of this paper is to represent the impact of supply chains on customer satisfaction. The study concludes with a discussion on these variables, as it is found that the supply chain management has direct relationship with customer satisfaction.

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INTRODUCTION
Todays management identified the customer satisfaction as the major item in business and indicated that the company's success depends on improving management relationships. The existing business environment is very different from the past and the competition has a unique role (Gilaninia & et al,2011).New forms of structural reforms, competitive and exchange process causes communication concept for the long-term relationships between buyers and suppliers (Seyedi, Moosavi, Heidari, 2009). Activities such as supply and demand planning, material preparation, production and product planning, product service, maintenance and inventory control, distribution, delivery, customer service which used to be performed by company, now it has be done by the supply chain. A key issue in the supply chain management is to control and organize all these activities. Supply chain management is a fact that provides the fast and reliable service with high quality and lowest cost to customers (Maboodi, Javanshir, Rashidi, Valipour, 2010). In the present competitive market, development and quick changes has compelled the organizations to overcome the competitors by taking more attention on systems that influence the progress of organization activities (Shekari, Akhondi, Fatollahi, Sayadmanesh, 2006). Therefore, new approaches and attitudes about supply chain management have developed. In general, the supply chain is composed of two or more organizations that are typically separated and related to each other by the information and financial flows (Maboodi, Javanshir, Rashidi, Valipour, 2010). Therefore, this study presented the definition of supply chain management, and then investigated the relationships between suppliers and customer satisfaction was investigated.

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PROBLEM STATEMENT
To develop and survive in economic competition, Companies and organizations should be given special importance to customer satisfaction and build strong relationship with the buyer of goods. The customer is said to be the centre of all marketing activities. Senior management knows well that their success in achieving the overall goals of the organization is customer satisfaction. In this age of global rivalry, the various products should be available according to customer's request. Customer demand for high quality and fast services has increased pressure on companies, so that the companies cannot manage all things alone. Organizations have used different ways to review and revise their strategies and found the satisfaction of customer as the key of survives. For effective supply chain management, supplier and customer interact together in a coordinated way and using sharing and full information communication. This rapid flow of information among the chain elements enables them to create an effective supply chain.

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LITERATURE REVIEW
Brian Fynes, Chris Voss and Sean de Burca (2005) considered the effect of supply chain relationships on quality performance and concluded that Is it possible to measure the multidimensional nature of supply chain relationships in terms of a higher order construct? Define supply chain management by analyzing concepts into both supply chain and supply chain management terms (Gilaninia & et al, 2011). Supply chain management is the result of the logical development. In the 1960s, experts defined the internal relationship between the storage and transportation, the result of study was distribution management. The term supply chain management has been studied seriously from early 1980 and many researchers provide a framework and model for it. Time-based management and the relationship between speed and efficiency has been one of the major issues in supply chain management literature during the 1980s and 1990s. Stalk (1988) describes how time has become one of the most important ingredients of competitive advantage in manufacturing industries. He describes the background for Japans secret weapon (Womack et al., 1991) or lean thinking (Womack and Jones, 1996) by illustrating how the competitive advantage of Japanese manufacturing industry changed from low labour coststhrough scale-based strategy, focused factory and flexible manufacturingto time-based competitive advantage. Stalk describes companies as systems and says that competitive advantage can be achieved by breaking the debilitating loop strangling traditional manufacturing planning. This means that traditional manufacturing requires long lead-times to resolve conflicts between different jobs or actions that require the same property. The long lead-times require sales forecasts to guide planning. Long lead-times make the correctness of sales forecasts decline. Forecasting errors increase inventories and the need for safety stocks at all stages. Errors in forecasts mean more unscheduled jobs in the production line, increasing the lead-times for the scheduled jobs. The planning loop widens, drives up costs, increases delays, and creates system inefficiencies. Holmstrm (1994, 1995) has empirically studied the efficiency prospective of speed in operations. His main results are experimental indications of a strong positive correlation

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TERM PAPER between speed and efficiency in manufacturing and that a focus on speed of operations helps to depict and remove self-induced sources of uncertainty. He claims that the main supplier to uncertainty in slow operations is deformed communication in the activity system. Based on his findings of a speed threshold he suggests that inventory obligation needs to be compact to a point where demand distortion is diminished and a harmonization of production with demand is possible in order to improve performance by speeding up operations. One of the main system issues in supply chains is industrial dynamics. This refers to the fact where orders to the supplier tend to have larger inconsistency than sales to the buying organization and the distortion propagates upstream in a bigger form. This phenomenon is related to the information flows among the members in the supply chain. Information flows in terms of orders have a direct impact on the production scheduling, inventory control and delivery plans of individual members in the supply chain. Information-feedback systems owe their behaviour to three characteristics structure, delays and amplification (Forrester, 1961; Sterman, 1989). The structure of a system tells how the parts are connected to one another. Delays exist in the availability of information, in making decisions based on the information, and in taking action on the decisions. Amplification usually exists throughout systems and it is observed when an action is more powerful than might seem to be implied by the information inputs to the system. Consequently, solutions to the problem often involve growing the abilities of companies to co-ordinate activity and cut lead-times. Uncertainty and the nature of the forecasting problem have a significant impact on the supply chain structure. According to Fisher (1997), the first step in devising an effective supply chain is to consider the nature of the demand for the products. If products are classified on the basis of their demand patterns, they fall into one of two categories: primarily functional or primarily innovative. Each category requires a clearly different kind of supply chain. Fisher argues that with their high profit margins and unstable demand, innovative products require an essentially different supply chain than stable, low-margin functional products.

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TERM PAPER Two distinct types of functions performed by a supply chain should be recognized: a physical function and a market negotiation function. A supply chains physical function is readily obvious and includes converting raw materials into parts, components, and eventually finished goods, and transporting all of them from one point in the supply chain to the next. Less noticeable but equally important is market mediation (demand knowledge), the purpose of which is to ensure that the variety of products reaching the marketplace matches what consumers need. Most important in the environment for innovative products is to read market signals correctly and being able to react quickly during the products short life cycle. The vital flow of information occurs from the market to the chain. The critical decisions about ability and inventory are not about minimizing costs but where in the chain to position inventory and available production capacity in order to get around against uncertain demand. Suppliers should be chosen for their speed and flexibility, not for their low cost (Fisher, 1997). The first step in designing a responsive supply chain is to accept that uncertainty is inherent in innovative products. Uncertainty can be avoided by cutting lead-times and increasing the supply chains flexibility so that it can produce to order or at least assemble the product at a time closer to when demand materializes and can be accurately forecast. Modified standardization tends to be the number one customization strategy in this type of industry. Transactions between the buyer and the supplier involve negotiations and mutual relationships between buyers and sellers. Once the configuration has been decided, the production function assembles prefabricated components into finished products. Texts on supply chain structure normally recommend that great benefits could be achieved by co-operation between the customer and the supplier and giving the supplier access to the customers real demand data. Productivity gains in the supply chains are possible when firms are willing to make transaction or investments (Williamson, 1985; Perry, 1989). Recent empirical work confirms that investments in relation-specific assets are often linked with better performance compared to more arms-length relationships (Parkhe, 1993; Dyer, 1996a).

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TERM PAPER Recent SCM and relationship marketing research has attempted to increase understanding of the conditions for winwin partnerships, i.e. customersupplier relationships in which close long-term co-operation concurrently increases the value produced by the demand chain and decreases the on the whole cost of the chain. Several researchers have come to the conclusion that companies need to divide their customer supplier relationships into classes along the range from arms-length relationships to true partnerships (Moody, 1993; Vollmann et al., 1995; Lambert et al., 1996; Cooper et al., 1997; Friis Olsen and Ellram, 1997; Bensaou, 1999). While true strategic partnerships create new value, they are costly to develop, raise and maintain. Also, they are risky given the specialized investments they require (Cooper et al., 1997; Bensaou, 1999). The number of real partnerships a company can build and maintain is limited. Therefore, partnership type of relationships cannot be expected to be built with a large number of customers or suppliers, and focusing the resources on building the right relationships requires careful planning and decision-making. Commitment refers to the readiness of buyers and suppliers to exert effort on behalf of the relationship. Commitment to a relationship is most frequently demonstrated by committing resources to the relationship, which may occur in the form of an organizations time, money, facilities, etc. These types of resources are often referred to as asset-specific resources, in that they are directed specifically towards the other party (Dyer, 1997). Several other studies have also found a relationship between resource commitment and the joint action or continuity between parties within inter-organizational relationships (Heide and John, 1990; Yoshino and Rangan, 1995). These results propose that successful partnerships result when both buyers and suppliers show a willingness to do a variety of assets to a set of future transactions. Two aspects of communication behaviour that address the extent to which the information exchanged is effective in a partnership include information sharing, and the level of information quality and participation (Monczka et al., 1998). Both of these aspects of information sharing (quantity and quality) are required to successfully develop supplier partnerships. Information sharing refers to the extent to which critical and proprietary information is communicated to ones supply chain partner (Mohr and Spekman, 1994).

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TERM PAPER Suppliers and customers can form joint development teams to get better various aspects in the supply chain or suppliers can suggest changes that may lead to quality or cost improvements (Clark, 1989). Information quality includes such aspects as the accuracy, timeliness, adequacy, and credibility of information exchanged (Huber and Daft, 1987). Information contribution refers to the extent to which partners connect jointly in planning and goal setting (Mohr and Spekman, 1994). These information attributes are closely related and significant in enabling members of a partnership to co-ordinate their activities. The earlier mentioned works suggest that successful supplier alliances are linked with high levels of information sharing and information quality and contribution. Interdependence exists when one actor does not entirely control all of the conditions necessary for attainment of an action or a desired outcome. Resource dependence has been explored in empirical studies, which examine the relationship between dependence and control in buyersupplier relationships (Handfield, 1993). For instance, dealers are less opportunistic when they depend on a primary supplier, whereas suppliers with control over dealers decisions exhibit greater opportunism (Provan and Skinner, 1989). Resource dependence can also influence supplier just-in-time (JIT) delivery performance (Handfield, 1993).

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DIMENSIONS OF SUPPLY CHAIN RELATIONSHIPS


There are four main characters in the supply chain which include: Suppliers Manufacturers Distributors Customers Thus, understanding the relationship between the mentioned groups and efforts to optimize this relationship is the chief issue in companies. Perhaps the tricky and important issue in supply chain management is to manage relations between the four main characters, because they have the great effect on all aspects of supply chain and its function level. Many companies supply chain is result of poor communication of expectations and behaviours that occur between characters of the chain (Dehmorde, Shahraki, Lakzaie, 2010). In addition, for result enjoyment, the effective management of relationships is necessary in supply chain that suppliers and customers work together in a harmonized, integrated way with observing of partnership principles, communication, information and dialogue. Suppliers and customers should have the same goals and trust each other (Rajabzadeh, Khadivar, Kazemi, 2007). According to conducted research by Brian Fynes, Chris Voss and Sean de Burca (2005) various dimensions of relationships quality with supply chain are:

1- Communication: is defined sharing formal and informal of important information


between partners. Communication is essential for partners success (Maboodi, Javanshir, Rashidi, Valipour, 2010).

2- Trust: is one of the important structures in the analysis of exchange relations. In


marketing literature, trust is the intellect of confidence in the relationship which increases the cooperation of two sides (Vazifedoost, Niknezhad Tehrani, 2008).

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3- Conformity: Compatibility of suppliers with the basic needs of customers and also,
matching customers with the capabilities of suppliers is called conformity of suppliers relationship. Conformity is occurred by investments in product, process technology and human resources (Maboodi, Javanshir, Rashidi, Valipour, 2010).

4- Dependence: Dependence refers to the partners wanted to maintain relationships to


attain required goals. Dependence between two companies is the function of transaction amount a company with another company and the amount of benefit which a company receives another company cooperation (Maboodi, Javanshir, Rashidi, Valipour 2010).

5- Commitment: Commitment can be defined as a desire to maintain mutually valuable


relationships. Therefore, to achieve commitment, the strategy of organization should be customeroriented, long-term and base on mutual benefits ( Vazifedoost, Niknezhad tehrani, 2008).

6-Cooperation: is defined as relations between the two companies to achieve the


ultimate goals and exchange the Isolation behaviour to partnership. Exchange information on production, processing and analysis of products can reduce production costs and improve the innovation of new product process(Maboodi, Javanshir, Rashidi, Valipour, 2010).

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CONCEPTUAL MODEL FOR SUPPLY RELATIONSHIP QUALITY

communication

trust

conformity customer satisfaction dependance

commitment

cooperation

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RESEARCH FINDINGS
Sample size: 50 Respondents: 48 Response rate: 48/50*100 = 96% Communication among customers of textile products supply chain causes the customer satisfaction

communication

25% Yes No 75%

Cooperation among customers of textile products supply chain causes the customer satisfaction

cooperation

25% yes no 75%

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Commitment among customers of textile products supply chain causes the customer satisfaction

commitment

31% yes no 69%

Conformity among customers of textile products supply chain causes the customer satisfaction

conformity

81%

yes no

3.2

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TERM PAPER Dependence among customers of textile products supply chain causes the customer satisfaction

Dependance

25%

yes no

75%

Trust among customers of textile products supply chain causes the customer satisfaction

trust
9%

yes no

91%

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CONCLUSION
Analysis of data collected in this research showed that the evaluation of supply chain management impacts the customer satisfaction. The customer satisfaction increase when the supplier relationships increase in the supply chain. According to research findings, customer satisfaction is divided to 6 dimensions. All dimensions of supplier relations management including communication, cooperation, conformity, commitment,

dependence, trust have direct relationship with customer satisfaction. Communication and dependence have the highest and lowest effect respectively, on customer satisfaction. This paper presented a literature review and evaluation of supply chain definitions, concepts and components to identified components that improve competitiveness, product quality, services provided, increasing customer satisfaction, lower costs and subsequently, increase total profitability as a necessity in the field of economic activities. Analysis of data collected confirmed the research hypothises. Results showed that there is significant relationship between supply chain dimensions (communication, cooperation, conformity, commitment, trust, dependence) and customer satisfaction. Supply chain management as the independent and customer satisfaction as the dependent variable was analyzed. The study was the correlation type and done by field method. Using customer satisfaction management system and Coordination with other parts of the supply chain is positive step in improving knowledge of customer requirements and achieving better performance. Based on the supply chain management approach, customers requirements are provided by other parent suppliers, not by final product delivered to customer. To achieve the effective management of supply chain relationships, supplier and customers have to work together in a coordinated, integrated way and observing of partnership principles, communication, information and dialogue. They should have the same goals, and attract mutual trust each other. Also, customers should trust suppliers about the product quality and services.

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REFERENCES
Impact of supply chain dimensions on customer satisfaction shahram gilaninia1, mohammad taleghani2, seyyed javad mousavian3, samaneh jalilvand4, sahar khanjani5, maryam sajedi rad6, elham shadmani7, zhaleh shiri8, fatemeh zadbagher seighalani9 Impact of Supply Chains Agility on Customer Satisfaction Dr. Akhilesh Barve, Assistant Professor, School of Mechanical Sciences, Indian Institute of Technology Bhubaneswar From supply to demand chain management: efficiency and customer satisfaction Jussi Heikkil, Helsinki University of Technology, P.O. Box 9555, FIN-02015 Hut, Finland Supply Chain Flexibility aspects and their impact on customer satisfaction Open University the Netherlands, Faculty of Management Master of Supply Chain Management, J.Manders BEng (850071988) Supervisor: Dr. P. W. Th. Ghijsen, Second supervisor: Prof. Dr. J. Semeijn

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