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Received 16 January 2011
Revised 4 October 2011
Accepted 5 October 2011

The impact of upstream supply

and downstream demand
integration on quality
management and quality
performance
Hongyi Sun
Department of Manufacturing Engineering and Engineering Management,
City University of Hong Kong, Kowloon, Hong Kong, and

Wenbin Ni
School of Business Administration, Zhejiang University of Finance & Economics,
Hangzhou, China
Abstract
Purpose There are many studies on the impact of supply chain integration (SCI) on performance.
However, the definitions, the measurements, the sample sizes, and scope of both SCI and the performance
vary significantly from research to research. Conclusions are not consistent either. Researchers still believe
that little is known about the impact of SCI on performance and call for more empirical research. The
purpose of this paper is to investigate the impact on quality practices and quality performance of upstream
integration with suppliers and downstream integration with customers.
Design/methodology/approach The research is based on the empirical data from a large
international survey of over 600 manufacturing companies from 20 countries. An intensive literature
review was conducted on the definition and scope of SCI as well as its relationship with quality
practice and performances. In total, five hypotheses were formulated and a conceptual model was
proposed. Structural equation modeling (SEM) was used to test the hypotheses reflecting and
interrelationship among the four variables.
Findings The research reveals that downstream integration with customers influences both the
quality management practice and the quality performance of the company, while upstream integration
with suppliers only influences the quality practice but not the quality performance.
Originality/value This research is different to previous research in three aspects. First, SCI covers
both the upstream integration with suppliers and downstream integration with customers. Second,
integration measurement covers both material integration and information integration. Third, it
considers both quality management practices and quality performance.
Keywords Supply chain management, Suppliers, Customers, Quality management, Integration,
Supply chain integration, Upstream integration with suppliers, Down stream integration with customers,
Quality performance
Paper type Research paper
International Journal of Quality
& Reliability Management
Vol. 29 No. 8, 2012
pp. 872-890
q Emerald Group Publishing Limited
0265-671X
DOI 10.1108/02656711211270342

The research reported in this paper was supported by a General Research Fund (CityU 148808)
offered by the Hong Kong SAR Government.

1. Introduction
Manufacturing organizations worldwide are progressively recognizing the critical
effects of integrating with suppliers and customers in their business operations to gain
competitive advantage over its competitions. This stream of management practices,
termed ad supply chain management (SCM) is regarded as one of the most significant
shift of modern management paradigm by some authors (Chen and Paularj, 2004a). The
core concept of SCM has considered integrating with suppliers and customers a
competitive strategy to improve operational and financial performance of
manufacturers (Li et al., 2006). More integration, better performance is regarded both
in researches and practices as an axiom in SCM. Authors believe that by building
long-term oriented and trust-worthy relationship with other partners along the supply
chain, firms can better understand the need of customer, respond much rapidly to the
market dynamics, delivery much faster and reliable, improve customer service level, and
at the same time, operate at relatively low cost to guarantee maximum profit.
However, does supply chain integration (SCI) really matter? That is, are there
substantial evidences that integration with supplier and customer really positively
relate to the performance of manufacturers? Unless this underlying question is
substantially supported, the new field of SCM is in danger of collapsing into a
discredited management fad (Chen and Paularj, 2004b). Although a great number of
authors (Frohlich and Westbrook, 2001; Rosenzweig et al., 2003; Vachon and Klassen,
2006; Swink et al., 2007) revealed the positive relationship between SCI and
organizational performance, the impact of SCI on performance is far from a fact. Zailani
and Rajagopal (2005) propose that little is known about the connections between
supplier and customer integration and improved operations performance. Power (2005)
concludes the apparent contradiction between promised benefits and limited evidence
of extensive implementation. Some even argues that integration is more rhetoric than
reality (Fawcett and Magnan, 2002). Thus, Fabbe-Costes and Jahre (2008) in their
review caveat that evidence cannot be taken for granted and call for more research on
the impact of SCI on performance.
More surprisingly, extant researches in SCI bountifully shed a great number of lights
on performance metrics such as supply efficiency and responsiveness, but neglect the
impact of SCI on quality. This may due to the origin of SCI. As most of the researches are
from traditional logistics/purchasing function (Ho et al., 2002; Cousins et al., 2006),
researchers only focus on narrowed performance metrics. However, there may be a
trade-off between supply chain efficiency and customer satisfaction (Zailani and
Rajagopal, 2005). As the ultimate goal of SCI is to meet customer need, manufacturing
firms should pay more attention to multiple performance metrics, and manage its
competitive priorities along the supply chain to satisfy customer (Krause et al., 2001).
To effectively manage the supply chain to satisfy customer need, quality is a critical
factor to concern in the production and distribution activities. Forker et al. (1997) show
that supplier quality management (QM) practices do lead to better performance and
encourage firms to continue promoting QM practices throughout the supply chain.
During the last several years, product recalls happened in the USA, Japan and China
exposed the disruption of quality along global supply chain and markedly accentuated
the underlying role of quality as supply chain competency. And more recently, a field
of supply chain quality management (SCQM) is emerging to tackle such QM issues
along the supply chain (Kuei et al., 2001; Robinson and Malhotra, 2005; Lin et al., 2005;

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Sila et al., 2006; Foster, 2008). SCQM expands the extent of QM from internal focus to
external integration to involve all partners in the supply chain to commit to continuous
improvement (Robinson and Malhotra, 2005).
To the emerging field of SCQM, some of the basic questions regarding the
relationship between QM and SCM and their impacts on organizational performance is
far from been explicitly and systematically answered. Foster (2008) pointed out that
more scholarly work is needed in SCQM. Kaynak and Hartley (2008) suggest that
managers should extend their vision beyond their own firms into the supply chain
to manage quality. However, for this to happen, differing firms within the supply chain
must each develop interlocking practices that are based in collaboration, communication,
and collaborative integration. This includes both upstream and downstream quality
improvement processes that must be integrated to provide service and product quality to
the customer.
This paper examines the relationship between supplier and customer integration and
QM practices, and their impacts on quality performance. Specifically, we focus on the
impact of upstream and downstream integration affect quality practice and quality
performance of the firms. The attempt is to bridge SCI and QM, and test effects of their
linkages on quality performance. The paper is organized as follow. Next section presents
the literature review and a conceptual model to form the hypotheses. Then, we test the
model using a cross-sectional data from international manufacturing strategy survey
(IMSS) from more than 500 companies. Discussion of the results and conclusions of the
research are provided at the end, with implications and limitations of this research.
2. Literature review and research hypotheses
2.1 Supply chain integration
There is no universally accepted definition of SCI. Ho et al. (2002) in their review of
literature assert that there is little consistency about the basic definition and content of
SCM and the definitions of SCM are divided by functional approaches among extant
researches. So it is critical to clarify the core meaning of SCI at the beginning of
research though exact definition may not be a plausible way.
For the purpose of this research and to synergize previous researches, two basic
questions relating to the definition of SCI should be elucidated, they are, integration with
whom (the scope of integration) and what to integrate (the areas of integration)? The extant
literatures potentially appear convergent in these two questions. For example, in
Fabbe-Costes and Jahres (2008) literature review, the scope of integration may include
upstream, downstream, and extended integration. This way is also adopted by other
authors. Das et al. (2006) summarize that the areas of SCI includes customer/market
integration, information integration, logistics and distribution integration, supplier
integration, and purchasing integration. This is as well consistent with most of the literature
on SCI (Frohlich and Westbrook, 2001; Rosenzweig et al., 2003; Swink et al., 2007).
2.1.1 The scope of SCI. The scope of SCI answers the question of whom to integrate
with along the supply chain, that is, the nature and number of partners to integrate with
by a manufacturer. They are the subjects of integration activities. The question of what
to integrate is closely related to the question of integrating with whom.
Traditionally, the integration of supply chain is mainly from the perspective of
purchasing function, the aim is to integrate the supplier for smooth flow of information
and materials (Tan, 2001). The term of supplier integration and related researches

dominate supply chain researches in logistics, purchasing areas as well as new product
development studies (Morgan and Monczka, 1996; Wagner, 2003; Sanders, 2006;
Das et al., 2006; Song and Di Benedetto, 2008).
But as the area of SCM evolves, the concept of integrating both upstream suppliers and
downstream customers takes the place. Especially from the more broad perspectives of
operations management, SCM or general management, authors believe that a firm should
integrate both its suppliers and customers to gain competitive advantage (Narasimhan
and Kim, 2002; Vickery et al., 2003; Vachon and Klassen, 2006; Swink et al., 2007; van der
Vaart and van Donk, 2008). For example, Frohlich and Westbrook (2001) conceive SCI as a
set of activities that manufacturers use to integrate their operations with both suppliers
and customers. Their research in arc of integration show that extensive integration both
with suppliers and customers (outward facing as termed by the authors) will lead to
largest performance improvement than other pattern of integration. Cousins and Menguc
(2006) call for consistent involvement of both the buyer and the supplier to facilitate the
interchange of information and ideas between the parties.
In this research, we focus on a firms integration with its first-tier supplier and
customers. This approach is also adopted by most recent researches (Kannan and Tan,
2005; Swink et al., 2007). We will test how upstream integration and downstream
integration, respectively, affect the adoption of quality practice, and hence the quality
performance.
2.1.2 The areas of SCI. The areas of SCI answer the question of what to integrate
between partners along the supply chain, i.e. the aspects or contents in which
integrative activities are developed. These areas are the objects of integration. The goal
of SCI is to achieve prescriptive performances, such as cost, efficiency, quality, speed,
accuracy on these objects. The extant literatures are potentially consistent in the core
areas of SCI, though different terms or coverage may exist.
Primarily, the aim of SCI is to smooth the flow of information, and materials. Tan
(2001) notes that the SCM at its early stage is a synonym of integrated logistics
concept, evolving from the traditional purchasing and logistics functions and is a
broader strategic approach to materials and distribution management. The focus is
mainly balance the trade-off between inventory control and customer service level. So
the performance of integration is to reduce cost, speed delivery, reliable delivery and
higher customer service level (Boon-itt and Paul, 2005). Frohlich and Westbrook (2001)
propose that the concept of logistical integration includes the extent of cooperation in
managing basic informational and material flows along the supply chain. The focus of
their model was information sharing pertaining to planning systems, production plans,
inventory levels, and computer linkages. van Donk and van der Vaart (2005)
summarize the areas of SCI include: physical flow, planning and control, organization,
flow of information, production development.
Thus, in line with the above literatures, we distinguish the two areas are agreed in
current literature, they are material integration and information integration. They are
the underlying areas of SCI, as the supply chain is an information-driven material
supply chain to satisfy customer needs.
2.2 The critical role of quality in SCI
The strategic importance of quality in gaining competitive advantage is widely recognized
in extant literatures (Dean and Bowen, 1994; Powell, 1995; Sousa and Voss, 2002).

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Focusing on quality capability changes the pattern of manufacturing competition

from cost efficiency to one of quality (Chang et al., 2003). Advantage in quality capability
helps Japanese manufacturing gain competitive competency (Schonberger, 2007). Quality
is also viewed as the foundation for the development of cumulative capabilities in
manufacturing strategy literature (Ferdows and DeMeyer, 1990; Flynn and Flynn, 2004).
Other competitive capabilities, such as cost, dependency, flexibility is built upon quality
capability.
However, despite the critical role of quality in competition, few attentions have been
paid to how SCI affects the quality performance of firms in extant researches.
Traditionally, the narrowed function of purchasing and logistics dominated the fields of
SCM, though the researches on supply chain are from diversified perspectives, including
marketing strategy, psychology/sociology, economic, information/communication, and
broader operations management (Burgess et al., 2006). The majority of SCM researches
thus focus on reducing demand and supply dynamics along the whole supply chain
(Kannan and Tan, 2005). The aim is to control the inventory from the suppliers of raw
materials to distributors of finished goods to meet the customer demand in an erratic
market (Sila et al., 2006). Most of SCI performance metrics are such as cost efficiency of
information and material flow, cycle time and inventory level (Boon-itt and Paul, 2005).
A literature view by van der Vaart and van Donk (2008) in SCI shows that the mostly
used performance measure are financial performance, customer service, and operational
cost. Thus, the decision making is mainly based on considering the trade-off between
inventory level to satisfy customer demand and cost reduction to maximize the profit.
Consequently, though the importance of quality is recognized by previous
researches, topics of QM is largely fragmented and dispersed across several disciplines
of supply chain research (Robinson and Malhotra, 2005). This view of SCM do not
catch the root cause of problem of how to satisfy customer need (Forker et al., 1997),
since the literature of QM had early on verified the critical role of quality in improving
customer satisfaction.
Recently, the concept of SCQM is welcoming both by the field of QM and SCM to tackle
this understated topic. The relationship between SCM and quality practices are emerging
to pull researchers interesting. Flynn and Flynn (2005) propose that organizations pursue
goals related to supply chain will also pursue goals related to quality, and argue that
supply chain performance are built on the foundation of quality. Yeung (2008) put forward
that a company committed to quality will need SCI. Quality culture drives organizations to
improve their efficiency beyond organizational boundaries and along the supply chain.
Thus, the emerging concept of SCQM urges to incorporate and center quality performance
into the domain of supply chain performance.
2.3 The influence of SCI on quality improvement
Customer focus is one of the critical components of QM. For Juran and Godfrey (1998),
the first critical important meaning of quality means the feature of the product meets
the need of customer; and the second means freedom from deficiencies. The emphasis
on customer also requires a manufacturer to revise its definition of quality to include
customer needs that are not a part of the product specification. Customer focus
or customer satisfaction is also the critical component of every business excellent
models such as Baldrige National Quality Program (BNQP) and European Foundation
for Quality Management (EFQM), which are stemmed from quality award programs.

Thus, the quality research literatures and practices agree that the capability of quality
is defined by the downstream customers along the supply chain. Having close
relationship with customer facilitate the collection of the customer needs, better
identify the requirement of customers, and thus improve the quality of the product and
service (Zu et al., 2008).
The critical importance of supplier in quality improvement has as well long been
recognized by researchers. According to the QM literature, manufacturers cannot
consistently produce quality products without effective collaboration among suppliers
(Anderson et al., 1994). Long-term relationship with reduced-base supplier is one of
Demings 14 QM methods (Anderson et al., 1994). The just-in-time (JIT) production
practice cannot be implemented without the collaboration of suppliers. The Japanese
quality award, Deming Prize is primary focus on the relation with supplier, compared to
BNQP and EFQM (Bohoris, 1995). Lean supply techniques were introduced to include
supplier tiers, collaboration, joint design and development, and supplier associations.
However, though supplier involvement and customer orientation is regarded as key
constructs of QM, the traditional focus is merely on improving internal quality of one
solo manufacture. QM research is only emerging recently to take an explicit supply
chain perspective. The effort on SCQM is an attempt to bridge these two great modern
management paradigms.
2.4 The relationship among SCI and quality: a conceptual model
Actually, QM, especially the philosophy of total quality management (TQM) and SCI
share several common underlying assumptions. Kaynak and Hartley (2008) identify
supplier QM and customer focus as two QM practices that can be extended into supply
chain. Robinson and Malhotra (2005) also show possibility of merging the body of QM
knowledge with SCM.
Thus, according to extant literature, QM and SCI have intensive affinity. First and
foremost, both of them are customer focus, the ultimate goal of QM and SCM are both
to meet customer needs. Second, they both emphasize on continuous improvement and
learning by organizations. And third, they both emphasize systematic thinks, though
with some difference, as QM focus more on systematic integration of people, process,
machine in the internal firm, while SCM pay much attention to systematic integration
of external partners along the supply chain. In this regard, SCM may be recognized as
the extension of QM practices across the organizational boundaries to further attack
the root cause of quality problems. In fact, supplier involvement or support is one of the
core components of most QM models. As thus, SCQM may be regarded as the further
development of QM in the era of SCM. And as a promising but brand-new management
paradigm, development of SCI may be beneficial from QM researches and practices,
a relative mature and structured management philosophy for more than three decades
development.
The above three common assumptions do not mean that QM and SCI are the same
thing. But rather, supply chain and quality management are two very different fields.
Ho et al. (2002) in their literature review summarize that considerable number of SCM
empirical research adopts the purchasing, logistics, and transportation perspectives.
Contrarily, QM mostly focuses on internal process. But the affinity open a chance to
further scan how concept of QM and SCI can enhance each other to improve
organizational performance.

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The effect of quality practice such as TQM, quality circle or maintenance program on
improving quality performance is recognized by quality literature (Garvin, 1984; Sousa and
Voss, 2002). For example, by using practice of quality circle, firms experience a continuous
improvement process by synergizing knowledge of its workers to solve operational
questions that cause quality problems. Through theses quality improvement process, firm
reduces the variability of its operation process, and subsequently improves quality
performance.
This lead to our hypothesis between quality practice and quality performance:
HQ1. Quality practice has positive effect on quality performance.
The relation between SCI and performance is mixed among literatures. Though most of
the authors regard that SCI improve performance, some even find no effect of SCI on
performance. For example, Swink et al. (2007) show a negative association between
strategic supplier integration and quality capability, and no significant association
between strategic customer integration and quality capability. Das et al. (2006) also
propose an optimal level of supplier integration and show that deviation from the
optimal profile may incur performance deterioration. Fabbe-Costes and Jahre (2007)
figure SCIs effects on performance improvement as the Emperors new suite, and
assert that very few paper relate performance with SCI, and results are ambivalent due
to diverse definitions and weak measurements of SCI, though prevalence of more
integration better performance claim (Figure 1).
Our attempt is to explore and examine how SCI will affect QM practice and quality
performance. Since SCI and QM both emphasize systematic integration, we propose a
process perspective to explore the SCI effect on quality performance. As Vachon and
Klassen (2006) proposed that extensive integration between two firms will expand their
mutual understanding of each others capabilities and priorities and transit toward goal
alignment; this in turn translates into less emphasis on outcome-based activities by the
organizations and greater emphasis on process-based activities. We propose that SCI,
upstream integration and downstream integration improve quality performance through
an internal process of QM. Thus, lead to our other hypotheses on the research model:
HU1. Upstream integration enhances QM of manufacturers.
HU2. Upstream integration enhances the quality performance of manufacturers.
HD1. Downstream integration enhances QM of manufacturers.
HD2. Downstream integration enhances quality performance of manufacturers.
HU1

Upstream
integration

Quality
practice

HU2
HQ1
HD1

Figure 1.
The conceptual model
about SCI and quality

Down stream
integration

HD2

Quality
performance

Based on the five hypotheses, a conceptual model is proposed as shown in Figure 2.

The model shows that this research will be different to previous ones in two aspects.
First, SCI covers both the upstream integration with suppliers and downstream
integration with customers. Second, the model covers both QM practices and quality
performance.
3. Methods
3.1 Data collection
The data for this research are from the project of IMSS, which is an international
research network consisting of more than 20 countries and 600 companies
around the world. The project aims to investigate manufacturing priorities, practices
and performance of world manufacturing companies. The participant
companies are in the metal products, machinery and equipment industry, i.e. ISIC
38 segment. For details regarding IMSS project, please refer to the book by Lindberg
et al. (1998).
The research reported in this paper is based on the data from the fourth round
of IMSS survey. Data collection finished in the middle of 2006. Phone contact was
first conducted in most of the participating countries to affirm the respondent
companies. The questionnaires were forwarded to director of manufacturing or
operations or equivalent persons in respondent companies via mailing, fax or
on-site interview. In countries where English is not prevailing, the questionnaire
was translated into local native languages by operations management researchers.
Participating countries sent their data to the coordinator who forwarded the final
database to all participants. For this study, sample firms are from 21 countries. The
total sample size is 660. The sample profiles for 21 participating countries are
presented in Table I.
SCUa

e7

SCUb

e6

SCUc

0.

9
8
0.5 0.4

e8

e4

SCUe

0.66
60
0.

e3

SCUf

e2

SCUg

e1

SCUh

69

Qa

e17

0.74
0.64
0.
60

Qb

e18

Qc

e19

Qd

e20

0.
0.34

Upstream
integration

Quality
practices

879

SCDf

e13

SCDe

e12

SCDd

e11

SCDc

e10

SCDb

e9

SCDa

0.31

0.37

0.
55
0.63

0.57
59
0.

70

QP1

e21

0.83
QP2
0.
53

e22

QP3

e23

0.

Downstream
integration

0.14

Quality
performance

70

SCDg

e14

0.

e15

0.65

0
0.6 .74
0

SCDh

0.6
8

0.40
0.24
0.23
0.20
0.29
0.43
0.25
0.19

e16

0.4

0.

60

SCUd

0.52

e5

e24

54

Upstream and
downstream
integration

e25

Figure 2.
The final model

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Table I.
Sample profiles by
countries

Countries
Argentina
Australia
Belgium
Brazil
Canada
China
Denmark
Germany
Greece
Hungary
Ireland
Israel
Italy
New Zealand
Norway
Portugal
Sweden
The Netherlands
Turkey
UK
USA
Total

Frequency

Cumulative percent

44
14
32
16
25
38
36
18
13
54
15
20
45
30
17
10
82
63
35
17
36
660

6.7
2.1
4.8
2.4
3.8
5.8
5.5
2.7
2.0
8.2
2.3
3.0
6.8
4.5
2.6
1.5
12.4
9.5
5.3
2.6
5.5
100.0

6.7
8.8
13.6
16.1
19.8
25.6
31.1
33.8
35.8
43.9
46.2
49.2
56.1
60.6
63.2
64.7
77.1
86.7
92.0
94.5
100.0

3.2 Constructs measurements

All the constructs (upstream integration, downstream integration, quality practice,
quality performance), their components, validity and reliability tests are listed in
Table II and will be elaborated below.
3.2.1 Upstream integration and downstream integration along supply chain. Both
upstream and downstream integration are measured with an eight-item five-point
Likert scale (1 none adoption and 5 high adoption). The informants are required to
answer how their coordinate with key/strategic suppliers and customers on planning
decisions and flow of goods such as inventory level, production planning, production
forecast, delivery frequency, and replenishment, etc. An approach of confirmatory
factor analysis is used to test the validity of the construct. We hope items measuring
one construct can be reduced into one factor.
For every component, Cronbachs coefficient is used to test the reliability. It is a
measure of the internal consistency of a multi-item scale. Peterson (1994) summarized
a value above 0.7 of Cronbach coefficient thought to be sufficient in most of
the situations. Nunnally (1967) recommended a level above 0.5 to be acceptable in the
early stage of a research. Though the cutoff of 0.7 is preferred, as the constructs of
this research are neither developed nor tested in previous studies, Nunnallys
recommendation is also considered. In fact, several reliability coefficients only close to
0.6 as shown in Table II.
3.2.2 Quality practices. IMSS questionnaire asked the respondents to indicate the
effects put into quality improvement program during the last three year. The constructs
include TQM, Six Sigma, total productive maintaining, continuous improvement as well

Constructs and items

Upstream integration (a 0.802, VE 41.971 percent)
1. Share inventory level knowledge
2. Share production planning decisions and demand forecast knowledge
3. Order tracking/tracing
4. Agreements on delivery frequency
5. Dedicated capacity
6. Require supplier(s) to manage or hold inventories of materials at your site
7. Collaborative planning, forecasting and replenishment
8. Physical integration of the supplier into the plant
Downstream integration (a 0.855, VE 49.799 percent)
1. Share inventory level knowledge
2. Share production planning decisions and demand forecast knowledge
3. Order tracking/tracing
4. Agreements on delivery frequency
5. Dedicated capacity
6. You manage or hold inventories of materials at your customers site(s)
7. Collaborative planning, forecasting and replenishment
8. Physical integration with the partner
Quality practice (a 0.774, VE 59.829 percent)
1. Undertaking programs for quality improvement and control (e.g. TQM
programs, 6s projects, quality circles, etc.)
2. Undertaking programs for the improvement of your equipment
productivity (e.g. total productive maintenance programs)
3. Undertaking programs to improve environmental performance of processes
and products (e.g. environmental management system, life-cycle analysis,
design for environment, environmental certification)
4. Implementing continuous improvement programs through systematic
initiatives (e.g. kaizen, improvement teams, etc.)
Quality performance (a 0.713, VE 63.778 percent)
1. Manufacturing conformance
2. Customer service and support
3. Product quality and reliability

Factor loadings
0.690
0.616
0.640
0.599
0.707
0.668
0.677
0.574

Upstream and
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881

0.747
0.743
0.686
0.678
0.700
0.618
0.777
0.683
0.794
0.808
0.758
0.732
0.824
0.846
0.721

Notes: a Cronbachs alpha; VE variance explained by the factor

as environmental protection. It is measured at a 1-5 scale with 1 non effort and 5 high
effort. The same CFA procedure is used to reduce the items to scale and test the validity.
3.2.3 Quality performance. To most of the authors (such as Garvin, 1984; Sousa and
Voss, 2002), quality performance is a multidimensional constructs. In this research,
quality performance is directly measured by asking the respondents to indicate the
amount of change of the performance dimensions over the past three years, with 1
strongly deteriorated and 5 strongly improved. A CFA following the same procedure
of SCI and quality practice is done on the quality performance.
4. Results
To test the hypothesis proposed above, structural equation modeling (SEM) is used. The
results of SEM for the hypothesized model on Table III show that the path from
upstream integration to quality performance are not significant at 0.05 level. This path
is deleted and the model is re-specification and fitted again. The data analysis results

Table II.
Constructs validity
and reliability of
measurement

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Table III.
The SEM analysis results
of research model

Paths
Upstream integration ! quality practice
Downstream integration ! quality practice
Upstream integration ! quality performance
Downstream integration ! quality performance
Quality practice ! quality performance
Upstream integration $ downstream integration
x2
df
x 2/df
GFI
CFI
RMSEA

Hypothesized model
Weighta
p-value
0.35
0.00
0.31
0.00
20.09
0.277
0.18
0.021
0.40
0.00
0.65
0.00
574.688
216
2.661
0.905
0.906
0.057

Final model
Weighta
p-value
0.34
0.31

0.14
0.37
0.65

0.00
0.00

0.04
0.00
0.00
575.882
217
2.654
0.905
0.906
0.057

Notes: aWeights are standardized; Dx 2 1.194 (df 1)

of path weights and several goodness fit indexes are presented on Table III. Figure 2
shows the final model. According to recommendation of several authors, goodness of fit
index (GFI) ( Joreskog and Sorbom, 1984), and comparative fit index (CFI) (Bentler, 1990),
Root mean square error of approximation (RMSEA) (Hu and Bentler, 1998; MacCallum
and James, 2000) are presented. Generally, according to rule of thumb recommended by
previous authors, GFI and CFI value above 0.9, RMSEA value below 0.05 are regarded as
good fit. RMSEA between 0.05 and 0.08 (Browne and Cudeck, 1993) is also acceptable.
First of all, the impact of quality practice on quality performance improvement is
0.37, and is significant at 0.01 level. So HQ1 was supported. This direct effect is agreed
by most of the QM literature. The result of our data analysis also supports a direct
impact of quality practice on quality performance improvement. The inclusion of
upstream integration and downstream integration does not change the underlying
effect pattern of quality practice on quality performance. However, the mediating role
of quality practice in our final model is different from previous researches, which needs
attention in future research.
HU1 and HU2 predict the impacts of upstream integration on quality practice and
quality performance, respectively. The testing results reject HU2, suggesting that no
direct impact of upstream integration on quality performance, but support HU1,
implicating an indirect impact of upstream integration. The degree of correlation
between upstream integration and quality practice is 0.34.
HD1 and HD2 predict the impacts of downstream integration on quality practice and
quality performance. The data analysis results support both hypotheses. Contrary to
the impact of upstream integration, downstream integration has both direct and
indirect impact on quality performance improvement. However, the direct impact of
downstream integration on quality performance is only 0.14, much weaker than the
impact on quality practice (r 0.31).
The different impact pattern of upstream and downstream integration on quality
performance might reveal the differential function of suppliers and customers on
manufacturing quality improvement. As quality is defined by the needs of customer
( Juran and Godfrey, 1998), does this difference unveil the path of quality improvement
in supply chain era? We will discuss this further in the next section.

5. Discussions and implications

5.1 The critical role of downstream integration
The relationship between downstream integration, quality practices and quality
performance gives further insights into the critical issue of SCM. Since the utmost goals
of SCI and QM are both to satisfy customer requirements (Kuei et al., 2001; Flynn and
Flynn, 2005), Customer-orientation culture is critical in winning order and gaining
competitive advantage. Downstream integration with customers help firm better
understand the need of its customers, which will logically affect the quality performance
of the firm. This may explain the direct relationship between downstream integration
and quality performance.
Better understanding of customer needs will also be translated into quality practices.
Meeting customers satisfaction will be the performance goal of quality activities such
as product design, process improvement, teamwork, Kaizen et al. sometimes,
understanding customer needs may come from customer complaints. This will too be
put into quality activities as improvement goal. This may explain the indirect relationship
between downstream integration and quality performance mediating be quality practices.
Our findings are consistent with recent empirical study in SCQM. For example, Sila et al.
(2006) show that customers are integrated into quality process more often than suppliers.
Valsamakis and Sprague (2001) convincingly assert in their research summary that the
small and medium sized manufacturers actively developing closer customer relationships
can be paid off in terms of growth potential and inventory performance.
However, the critical importance of integrate with downstream customers is not
adequately emphasized in previous researches. Although customer-driven culture is
ubiquitously accepted critical to win order on QM, SCM, or broader modern management
paradigms, except for some authors appealing to incorporate customers in SCI, most of
the extant studies in SCM congregate their efforts on upstream integration with
suppliers. For example, in Chen and Paulrajs (2004b) literature review, most of building
blocks of their theoretical framework of SCM are related to suppliers, only one construct
is related to customer focus.
The name of supply chain explicitly suggests the focal concern to be
upstream-oriented, that is, how to manage the relationship with suppliers. The
downstream-oriented is relatively ignored is previous supply chain research. This is
one of the reasons that despite the tremendous popularity of supply chain, some authors
do re-invent terminologies such as value chains, demand pipelines and support chains
(Chen Paulraj, 2004a). Among them, the term of demand chain reflect authors concerns
about the management of relationship with customers, especially in the industrial
marketing field (Mason et al., 2006; Juttner et al., 2007). This demand chain perspective
differs from the traditional view of supply chains where operational manufacturing and
logistics processes performed within organizations focused on maximized efficiencies
(Mason et al., 2006).
From the result of this research, we call for balanced emphasis and equal efforts put on
studying the importance of upstream and downstream partners in SCM field, especially
those from the perspectives of operations management, logistics, and purchasing. The
performance of supply chain should not be bounded within traditional metric of efficient
supply of physical materials; researches in supply chain should pay more attention to how
supply chain activities affects quality, customer service, flexibility to satisfy customers.
The customer/market-orientation supply chain (Heikkila, 2002; de Treville et al., 2004;

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Mason et al., 2006) might be more crucial than the supplier-focused supply chain as the
utmost goal is to meet customer need. The overarching rationale under this argument is
that customer value is being created through the integration of the whole supply chain,
affirmatively including both downstream customers and upstream suppliers.
5.2 The role of supplier in quality improvement
Suppliers influence on quality performance is mediated by internal quality practice.
This finding is consistent with Kaynak and Hartley (2008), who show that supplier QM
affects quality performance indirectly through the mediating variables of process
management. As the results of extant researches on relating upstream integration and
quality performance are mixed, the question of how suppliers affect quality
performance of manufacturers emerges.
The result of this research offers one possible explanation of the above question.
QM literature usually emphasize the importance of suppliers in quality performance, as
Forker et al. (1997) put forward that the quality performance at the end of the supply
chain is dependent on the procurement of defect-free components and parts. Likewise,
the defect-free performance cannot achieve without internal capability on quality,
through which the manufacturer serves the finished product to its customers to meet
customer satisfaction. In this wise, the suppliers contribution in defect-free and quality
supplying to meet customer satisfaction is carried forward and achieved by the
internal quality process.
Another question in relating supplier integration and operation performance is the
definition and measurement of constructs. A plausible explanation of inconsistency of
SCI-performance relationships may be the diverse definition of SCI and the content
validity of construct measurement. For example, three of the six items in Swinks et al.
(2007) supplier integration construct are related to cost information share in the supply
chain, so it is lacking of content validity when relating supplier integration to quality
capability. The first and foremost question when considering SCI should be to ask
what to integrate, then the definition of SCI and the construct measurement should
accord to the answer of what to question. The construct measurement should be
different when integrating material flow from when integrating quality initiatives,
consequently, the performance result will be different.
5.3 Complementary relationship between external and internal integration
The mediating role of internal quality practice found in data analysis illustrates the
importance of complementary relationship between external and internal integration.
External integration refers to coordinate with external partners such as suppliers and
customers, while internal integration focuses on functional integration of quality,
production, marketing, engineering et al. within a manufacturer. The result of this
research shows that SCI is linked to the quality activities at the production level to
produce quality capabilities (Cagliano et al., 2006). This leads to an extension view of
SCI, which not only integrates with external partners, but highlights the importance
of internal functional integration to exploit external capability. The effectiveness
of external integration on performance improvement depends on internal quality
capability. The relationship implicate that external integration and internal integration
are mutually enhanced to develop competitive capability (Flynn and Flynn, 2005;
Yeung, 2008).

This complementary relationship in providing competitive capability lies on the central

of building dynamic capability (Teece, 1986; Helfat, 1997; Das and Teng, 2000). Integrating
complementary resources to create synergy will provide sustainable competitive
advantage to manufacturing in two ways (Harrison et al., 2001). Complementary
relationship provides opportunities to acquire valuable, unique and inimitable resources
that raise possibility to gain competency; and complementary relationship provides
opportunities to mutual learn and development of new capabilities. Both are applicable to
the synergy between internal integration and external integration along the supply chain.
External integration provides the manufacturer the opportunities to acquire resources and
learn from its external partners, while the mediating effect of internal quality practices
provide the mechanism that these acquisition and learning will happen. Similarly, von
Haartman and Bengtsson (2009) show that manufacturing absorptive capability plays
important role in explaining supplier integrations effect on plan performance, with higher
absorptive capabilities, higher contribution of supplier integration to plant performance.
Though this complementary relationship in gaining competency are intensively
researched in acquisition and strategic alliances (Das and Teng, 2000; Harrison et al.,
2001), the SCI literatures need more endeavors to explore how different patterns of SCI
affect the complementary effect and the relation to different performance metrics. As
Swink et al. (2007) put forward that a theory of complementarities among strategic
integration elements has not been put forward or tested. Nevertheless, the concept of
extended supply chain incorporates both external integration and internal integration;
most of extant SCI literatures emphasize the importance of external integration with
suppliers and customers (Frohlich and Westbrook, 2001; Cousins and Menguc, 2006),
while rarely concern about the role of internal integration in supply chain.
6. Conclusions and future research
Studies of SCM have focused mostly on the trade-off between the control of inventory
level and cost. However, merely concerning about inventory level may be detrimental
to customer satisfaction. As inventory is used as buffer in traditional management
philosophy to hedge uncertainties of the supply chain such as quality, delivery and
demand, trade-off between inventory level and cost fails to investigate and solve the
root-cause problems (Forker et al., 1997), thus, might impair both cost-efficiency and
customer satisfaction.
Recently, the emergence of the research on SCQM calls for more efforts to concern
about quality issues along supply chain. This paper is one of such endeavors. The
results demonstrate that integration with external partners such as suppliers and
customers do affect the quality practices and performance of manufacturer. In global
competition, quality is not only the responsibility of a solo finished product producer,
the whole chain in supplying the product to the customer should be accountable for the
quality to meet the customer satisfaction. The TQM philosophy maintain that quality
is not only the responsibility of manufacturing function, but achieved by integration of
purchasing, engineering, manufacturing and marketing functions all round a firms,
and the responsibility of total personnel and process. The result of this and other
similar researches implicate that the concept of total should be extent into all entities
and processes in supply chain from the starting end of raw material to the ending point
of distributing the product to customers. This extended view of TQM might be more
relevant to improve quality performance in SCM era.

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In relating upstream and downstream integration to internal quality practices and

quality performance, the results of this paper have some beneficial findings of different
pattern of suppliers and customers in affecting quality performance. The direct effect of
customer on quality performance underscores the importance of integration with customers
in SCQM. This is also consistent with the definition of quality as meeting customer need.
Intensive information exchange or other interactive activities with customer may help firms
to understand how quality is defined, thus improve performance in meeting customer
needs. By contrary, suppliers only affect quality performance via the mediating role of
internal quality practices. Internal quality practices play as relay. The indirect effect of
upstream and downstream integration that mediated by internal quality practices indicates
the need of synergizing external integration with internal integration. This complementary
relationship between different scopes of SCI is source of sustainable competency according
to the dynamic capabilities theories.
The paper still left some important issues untouched. Two meanings of quality are
defined as defect-free and meeting customer needs (Juran and Godfrey, 1998). More future
researches may be conducted to explore how different patterns of integration with
suppliers and customers affect these two facets of quality. Does integration with suppliers
affect defect-free quality and integration with customers affect customer need quality?
According to the fit theory, firms may have different strategies to integrate with
suppliers and customers (Sousa and Voss, 2008). This requires more contextual
variables such as product complexity, marketing dynamics in the research model. How
are practices of SCQM affected by the contextual variables? What is the form of fit
(selection, interaction or system, Sousan and Voss 2008, p. 706) between external
integration and internal quality practices?
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Corresponding author
Hongyi Sun can be contacted at: mehsun@cityu.edu.hk

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