SUPPLY CHAIN QUALITY MANAGEMENT (SCQM): NEW

EVIDENCE FROM MALAYSIAN COMPANIES

Roaimah Omar
Universiti Teknologi MARA
Faculty of Business Management, 78000, Malacca,Malaysia,
roaimah_omar@yahoo.com
Suhaiza Zailani & Mohamad Sulaiman
School of Management, University Sains Malaysia, 11800, Penang, Malaysia,
shmz@usm.my, sulaiman@usm.my

Abstract: This paper presents a conceptual overview of supply chain quality management (SCQM). With
the increase in competition due to globalization, the competition of today’s enterprise is among the supply
chain rather than company wide perspective, which involve all supply channel members and external
organizations. As a result, the quality management practices should no longer be confined to the four
walls of the organization but need to be extended beyond the supply chain. The intra-organizational
perspective of quality practices have its limitation, therefore manufacturers should adopt the inter-
organizational approach to quality practices such as SCQM. Proper adoption and implementation of
SCQM will enable the manufacturing companies to be more market driven in meeting the needs of the
customers. The paper also features the findings of an exploratory study conducted on twenty electrical
and electronics (E & E) companies in Malaysia to determine their awareness and extent of SCQM
practices. It is evidenced from the industry survey that the manufacturers perceived that the quality
practices are important besides the needs to extend good relationship with suppliers.
Key words: Supply Chain Quality Management (SCQM), E&E industry, Malaysia

1.0 Introduction
Malaysian manufacturers are operating in a complex and competitive business environment
due to stiff competition coming from both the domestic and foreign players. One of the most
paramount problems faced by the manufacturers particularly those in the Electronic and
Electrical industry is the competition from low-cost producers, especially China which has lower
production cost as well as lower and better pricing of their products. As today’s customers are
apparently more demanding in terms of their requirements for better and higher quality
products, greater product variety , lower prices, and faster service; the competition among the
manufacturers has become more intense than ever. The changes in the operating environment
have obviously put on great amount of pressure among the manufacturers to improve quality and
to take cost cutting measures. Consequently, to remain competitive and to earn a reasonable
profit the manufacturers are turning to supply chain management as a solution to gain
competitive advantage. However the traditional view of supply chain of sourcing, manufacturing
and delivering products to customer may no longer work or deemed sufficient in this contexts.
All the participants in the supply chain, the manufacturers, retailers, the distributors and other
channel members in the supply chain in fact need to coordinate planning and execution based on
market demand and requirement driven to stay competitive and to compete in a global supply
chain.
According to Robinson and Malhotra (2005), the focus of the current and future (for the
year 2004 and beyond) is SCQM. SCQM is designed to respond to the market demand
requirements effectively by managing the supply chain for quality. Three key features of SCQM
are customer focus, quality of IT system and trust relationship (Kuei and Madu, 2001).
Furthermore, Langabeer and Rose (2002) confirmed that the firm strategy should be focused on
the consumer demand and that the supply chain needs to be transformed to demand chain; to
become demand driven.

This paper provides a conceptual overview of SCQM based on the literature review. The
framework for SCQM design and other supporting components is also provided basically based
on the works of Madu & Kuei (2001) and other researchers. A practical insight of the SCQM
practices with respect to the E&E industry in Malaysia is also being highlighted.

1.1 Research problem

In Malaysia, the quality management practices, specifically total quality management

(TQM) are being widely practiced among the Malaysian manufacturers particularly the E & E
sector in the quest to improve the quality of goods and services. The driver behind this
movement is to strengthen their competitive position in the local market as well as to ensure their
products are accepted by the foreign market. Although the manufacturers are implementing
TQM and ISO 9000 certified, the problem is to what extent these practices are integrated in the
supply chain and the factors that lead to SCQM excellence is practically not yet established in
Malaysia.

2.0 Literature review

2.1 Definition of SCQM

Kuei and Madu (2001) in their survey identifying critical success factors for SCQM
defined SCQM by using simple equations where each equation represents the letters that make
up SCQM.
SC = production – distribution network.
Q = products should be in responsive to market demands and able to meet customer
satisfaction speedily, accurately and at a profit.
M = the conditions that permits and enhance trust for supply chain quality.

Alternatively, Ferguson (2000) refers to Supply chain quality management as

encompassing all quality management activities associated with the flow and transformation of
goods from raw material stage through the end users (finished product) stage along with flow of
all information related to quality. Malhotra and Robinson (2005) defined SCQM as the formal
coordination and integration of business processes involving all partner organizations in the
supply channel to measure, analyze and continually improve products, services and processes in
order to create value and achieve satisfaction of intermediate and final customers in the
marketplace. Lai, et al., (2005) defined supply chain quality as conformance to mutually agreed-
upon requirements among the partner firms with the aim of improving the performance of the
transactions taking place in the chain. Both supplier and buyer have to agree on specifications,
exchanges of information, coordination and control at the inter-organizational level to ensure
product quality is not affected and the quality in the supply chain is achieved.
2.2 Supply chain management (SCM) and SCQM

Lummus and Vokurka (1999) defined supply chain as ‘all the activities involved in
delivering a product from raw material through to the customer including sourcing raw materials
and parts, manufacturing and assembly, warehousing and inventory tracking, order entry and
order management, distribution across all channels, delivery to the customer, and the information
systems necessary to monitor all of these activities’.
Although the quality is considered as one of the outcomes of effective SCM, its link with
the quality management perspective is limited to traditional firm-centered that is product-
oriented internally driven supply chain quality management practices (Robinson and Malhotra,
2005; Kuei and Madu, 2001). To gain competitive edge, firms must offer better quality products
and services compared to its competitors. Poor-quality products and services can cause negative
chain reactions such as higher safety stocks, lost time and low productivity due to product and
component repairs, increased warranty repairs, high customer returns, loss of customer and
adversely affected reputations, (Wisner, et al., 2005).
SCQM involves process that is driven by market demand requirement determined by the
customer; communicated, aligned and proceeded through the upstream supply chains such as
sales channel, retailers, distributors, manufacturers and other supply chain participants (Kuei and
Madu, 2001; Langabeer and Rose, 2002). In addition to it, the quality management practices are
integrated along the supply chain, which is not emphasized in SCM. SCQM on the other hand is
not only focused on managing quality within the intra-organizational perspectives but extend the
quality management among the supply chain participants (Kuei and Madu, 2001; Robinson and
Malhotra, 2005). SCQM recognized a shift from product-oriented internally driven quality
management practices to externally focused process-based approaches. In other words SCQM is
more focused approached in evaluating quality management issues within the internal and
external supply chain contexts.

The premise of SCQM is inter-organizational supply chain orientation involving

customers, suppliers and other partners. Customer satisfaction can only take place when product
quality, service and value are linked at every node in the chain. It must integrate both service and
production processes across the supply network. Maintaining good supplier and customer
relationship, teamwork with supply chain partners is fundamental in supply chain quality
management. Between the years1990–2003, the focus of SCM is on all supply channel members
and mostly internal organizations. Year 2004 and beyond is the era of SCQM, which main focus
is on all supply channel members and mostly external organizations. Quality management
programs need to be reengineered by the organizations in order to meet and improve the demand
for superior products and service (Robinson and Malhotra, 2005).

2.3 Importance of SCQM

i. SCQM implementation enables the companies to improve organizational
performance. Studies conducted by past researchers have indicated that SCQM
has an impact on organizational performance (Lin, et al., 2005; Kuei, et al., 2001;
Kuei and Madu, 2001). Kuei and Madu (2001), survey 162 practicing managers in
the U.S., the results indicate that managers of high performance companies
perceive high performance in the area of customer satisfaction, productivity and
financial results.
 ii. Customers are the driven force and the reason for companies’ survival and
acceptance in the market place, thus making SCQM approach which is customer
focused very relevant.

iii. Greater business challenges in the supply chain such as stronger competitions,
volatile demand, shorter product life cycle, product proliferation and increase in
cost. SCQM is thus significant in today’s challenging and complex supply chain.

2.4 Objectives of SCQM

i. To enable conditions for total quality across the supply chain. This can be
accomplished by maintaining and sustaining IT-based and quality driven
capabilities by the organizations. By doing so, the customers are assured of
getting the right product on a timely basis.

ii. To enhance trust for total quality along the supply chain. Relationship between
customer and supplier must be enhanced and established because trust is the
underlying success of SCQM. There are several researches conducted that
emphasized on the importance of trust and Supplier –customer relationship. This
includes research by Wong, et al. (1999), Fynes and Voss (2002); Kwon (2004);
Lai et al. (2005) and Fynes, et al. (2005).

2.5 Dimensions of SCQM

Fourteen dimensions of SCQM developed by Kuei and Madu (2001) comprise of modified
version of eight critical factors of quality management by Saraph, et al. (1989). The factors are
top management leadership, training, product design, supplier quality management, process
management, quality data reporting and employee relations. Kuei and Madu (2001) introduced
four new quality factors; customer relations, benchmarking, supplier selection, and supplier
participation. Three additional IT-driven change factors were also included; information
technology, IT-driven operations process and IT-driven organization integration.
The paper by Kuei and Madu (2001) also confirmed that a firm’s organizational
performance can be discriminated by SCQM practices. The findings indicate that supplier
participation and supplier relationship can have an impact on organizational performance. In
conclusion the study identified three critical factors of SCQM, namely, quality of IT system,
supplier relationship and customer focus to build competitive advantage. Supporting
components such as QM infrastructure, QM tools and QM practices and QM culture are required
for successful SCQM.
Leadership support for SCQM is important, to ensure the goals of customer satisfaction,
trusted customer-supplier relationship and high level IT based capabilities. Besides that,
innovation culture must be emphasized. Lin et al. (2005) mentioned that traditional quality
management practices and pertinent TQM practices can be incorporated in SCQM process. In
addition, interactions between manufacturers and suppliers based on factor such as cooperation,
trust and long-term relationships could enhance quality improvements among supply chain
members (Wong, et al., 1999). For instance, Wong (2003) emphasized that buying firms should
develop cooperative relationships with suppliers instead of adversarial relationships to ensure
that suppliers able to meet the final customers’ requirements.
The research by Lai, et al. (2005) also suggested that SCQM programs should include
traditional quality management practices by concentrating on operational matters. Suppliers’
participation including TQM practices should be incorporated in SCQM in the supplier
organizations. By considering suppliers as important trading partners and members of the value
chain organizational performance can be optimized. The researchers also stated that quality
continues to be an important attribute in any relationship between the company and its suppliers.
This is made possible by involving suppliers as partners in the design and new product
development process in a supply chain relationship to ensure that quality is built into the product.
This development would lead to improved product quality and increased in customer
satisfaction.
Fynes, et al. (2005) researched the impact of several dimensions supply chain relationships
(trust, commitment, adaptation, communication and collaboration) on quality performance. The
findings indicate supply chain relationship quality dimension has a positive impact on design
quality .The researchers also suggest suppliers to be proactive in the design and product
development process. This can be accomplished through supply chain relationship such as
partnership. Their findings are similar to (Lin, et al., 2005) which stated that suppliers need to be
involved in the product design at the early stage. The net effect of this relationship is improved
conformance quality and customer satisfaction. 80% of the manufacturing cost of new products
is committed in the early stage or 20% of the design stage. Involving suppliers in the early stage
may help to design quality which in turn helps to improve the conformance quality, customer
satisfaction, time-to-market. Improve design quality has an impact on product cost reduction and
external quality-in-use. Conformance quality is an order qualifier whereas design quality is an
order winner (Fynes and De Burca, 2005).
The importance of a quality strategy of effective supply base management and the need to
involve suppliers were stressed in the product development process. Supply chain partners need
to understand supply chain relationships besides the need to focus on quality as a key driver of
performance, Kannan and Tan (2005). The reliance on suppliers has increased as more
manufacturers are focusing on their core competencies. Furthermore, the responsibility of design
activities has shifted to the suppliers. Consequently, the need to manage the quality management
of the suppliers across the supply chain has becoming a critical issue. This development in turn
result greater emphasis on the part of the buying company to select suppliers based on specific
selection criteria such as quality, delivery, cost and flexibility. Obviously the final assemblers are
not taking back seat with regard to quality issue by putting the responsibility on their top-tiers
suppliers, they are in fact taking a proactive role by participating in the sourcing decision of their
suppliers and had shown desiring interest by involving in the selection of their tertiary suppliers
as well (Winter, 1996).

Developing a stable and dependable relationship between buyer-supplier that transcend the
organizational boundaries is utmost important to improve performance along the supply chain.
The strong and stable relationship can elicit commitment from suppliers to supply quality
products. Supplier’s commitment to quality is enhanced by the relationship stability of the buyer
and suppliers. The transaction characteristic that is the certainty factor also affects the
relationship stability and commitment to quality. The certainty factor that is supplier continues to
supply buyer in the future) strengthens the relationship further (Lai, et al., 2005). The researchers
reiterated that the buyer should develop a stable relationship with their suppliers to encourage a
commitment to quality as well as the certainty of supply must be emphasized in this endeavor.
Furthermore, quality will continue to be an important attribute in any relationship between the
company and its suppliers as stated by Lin et al. (2005). Commitment to quality among the
supply chain members are evidenced in Choi and Rungtusanatham (1999) as there is no
significant difference in terms of quality management practices among the final assemblers, top-
tier suppliers and tertiary tier suppliers. Strong relationship that have been developed and
maintained between the customer and its suppliers as well as among suppliers at different tiers of
the supply chain contributes to this effect. Consequently the close relationship has brought about
the adoption of the quality management practices among the upstream suppliers.

3.0 Methodology
A survey with selected E & E manufacturers was conducted with twenty (20) companies to
determine quality practices in the supply chain. The respondents representing the companies
comprises of Senior Manager of Manufacturing, Head of Logistics, Purchasing Manager,
Procurement Manager, Head of Quality and SC manager. Some of the interviews were
conducted over the telephone, face–to-face and mostly the respondents requested pre set
questionnaires to be posted or emailed to them. To get a better picture of the SCQM practices
pre-prepared questions consisting of items were adapted from several studies done by researchers
on supply chain quality management (Kannan and Tan, 2005; Kuei, et al., 2005; Lin, et al., 2005;
Fynes, et al., 2005).The informants were asked to respond to the questions based on a 4-point
rating scale. (1= ‘not at all practiced’, 2= ‘somewhat practiced’, 3 = ‘moderately practiced’ and 4
= ‘very much practiced’. Due to the nature of study which is exploratory in nature, no further
statistical analysis was undertaken.

4.0 Findings
SCQM in Electrical and Electronic (E & E) industry in Malaysia

The respondents are all from E & E industry, manufacturers of products ranging from IT
products, semiconductors, electrical household, computers peripherals and power supplies. 85%
of the companies are practicing total quality management (TQM) in their organization and all the
companies (100%) are ISO 9000 certified. The findings indicate that generally the E & E
manufacturers ‘somewhat practiced’ the quality management in the supply chain. It is evident
from the industry survey that most of the manufacturers under study do not participate in the
sourcing decisions of their suppliers. The mean score is only 2.20 and rated as ‘somewhat
practiced’. Although they to a certain extent ‘moderately practiced’ joint customer-supplier
quality goal setting, the emphasis in just the immediate customer and buyer not throughout the
entire supply chain. This is further confirmed by the mean score on the item ‘to extend
membership beyond immediate suppliers and customers’ which is ‘somewhat practiced’ rating
2.10. Participation of suppliers in product design can also contribute to improve quality as stated
in (Fynes, et al., 2005; Trent and Monezka, 1999)
It can be concluded that the quality practices of the supply chain members ranges from
somewhat practiced to moderately practice. However, the study was performed on a very small
sample and therefore cannot be generalized. The researchers were urged to explore the study on
SCQM on a wider sample and scope. Some of the issues that need attention are; supplier
participation in the product design (2.60), supplier participation in the sourcing decisions of
suppliers (2.20), creating supply chain management with members from different companies
(2.10), involving all members of supply chain in product/service marketing plans (2.55), extend
membership beyond immediate suppliers (2.10) and willingness to share sensitive information
among the supply chain members (2.50). The summary of the SCQM practices results are
shown in table 1 & 2. The results are classified into two categories based on the mean score.
i. ‘somewhat practiced’ (2.00 – 2.99)
ii ‘moderately practiced’ (3.00- 3.99)

Table 1: SCQM practices

No ‘Somewhat practiced’ mean score

1 Creating SCM teams with members from different companies 2.10
2 Extend membership beyond immediate suppliers and customers 2.10
3 Participates in the sourcing decisions of suppliers 2.20
4 Willingness to share sensitive information 2.50
5 Involving all members of supply chain in product/service/marketing plans 2.55
6 Supplier participates in product design 2.60
7 Co-making product with supplier and buyer 2.95
8 Creating compatible communication/information systems for supply chain members 2.95

Table 2. SCQM practices

No ‘Moderately practiced’ Mean

score
1 Improving integration of activities across supply chain 3.00
2 Establishing more frequent contacts with supply chain members 3.00
3 Providing training to suppliers on quality aspects 3.00
4 Cooperate with suppliers with respect to process design 3.10
5 Reducing response time across supply chain 3.10
6 Communicating customer’s future strategic needs throughout supply chain 3.10
7 IT enabled operations, logistics and production 3.15
8 Practicing JIT principles in our operations 3.15
9 Participates in the quality efforts of supplier 3.15
10 Creating a greater level of trust among supply chain members 3.20
11 Emphasis quality instead of price in supplier development 3.20
12 Using informal information sharing with suppliers 3.20
13 Consider supplier’s capability when designing products 3.20
14 Joint problem solving with the supply chain members 3.35
15 Cooperate with suppliers with respect to product design 3.40
16 Joint customer-supplier quality goal setting 3.45
17 Committed to fulfill the needs of supply chain members 3.45
18 Knowing suppliers’ quality records 3.45
19 Keeping suppliers informed regarding any process change 3.50
20 Establishing long-term relationship with suppliers 3.55
21 Cooperate with suppliers with respect to quality practices 3.60
22 Cooperate with suppliers with respect to forecasting and production planning 3.60
23 Inspection of incoming supplies 3.60
24 Selecting suppliers based on quality records 3.70
 Besides the closed-ended questions, the respondents were also asked about other issues
faced by the E & E industry in general that need to be addressed and resolved. Table 3 provides a
listing of some of the responses from the supply chain/ procurement/purchasing/senior managers
on the above issues.
Table 3: Responses from the respondents with respect to issues that need to be addressed

No E & E companies Remarks/Quotations from respondents

1 Semiconductor “A major problem is the price of the material. The oil price does have a big
manufacturer impact on the industry. The other problem is price erosion. The price of the
electronic product only goes one way, which is down hence manufacturer
cannot keep pace with the erosion.”
“Competition from China and the competition is more on price.”
“The only way to be ahead of competition is innovation, which is coming out
with new product with better technology and competitive price. Speed to
delivery to producing the new product is essential. The other is
responsiveness to change is essential to survive’’
2 IT products “E & E industry covers from hand phones to PC’s to Hi-Fi’s and TV’s.
manufacturer Different segments have different problems depending on market situation.
Most likely depend on the key components that are used. Example LCD TV,
LCD monitor, notebooks and hand phone makers used to have limitations in
panels as Malaysia does not have a LCD panel maker, but right now with
excess factory capacity overseas, this is not an issue until Quarter 3 or
Quarter 4 when panels are expected to enter shortage again. In early 2000, the
E & E faced severe shortage of semiconductor products, later half they have
excess”.
“I think the real problem in the supply chain is due to the Forrester Effect,
where the customer demand is distorted and amplified down the supply
chain”.
3 Global Communication “Ensure that Malaysia will be ‘China Plus One’ factor”.
products manufacturer “There is no way we can compete with China with the huge market potential
but we will be sufficient form the ‘left over’ and even better with the
‘niche’ and ‘trust’ from high end investors”.
4 Global CRT, LCD “Meeting on time delivery to our customer’’
Monitor manufacturer
5 Electronic card “Our relationship with supplier and buyer is restricted to ‘before and after’.
manufacturer Cannot fully implement JIT, if the suppliers are late, we are late as well.
However trust is very important in dealing with suppliers or buyers”.
6 Electrical components “Our company is ISO 9000, OS 9000, ISO 14000 and 6 Sigma black belt
manufacturer certification”.
“We also practice TQRDCBE,
T= Technology, Q= Quality, R= responsiveness, D = delivery, C= cost, B=
business, E = environment friendly.
“We are very serious about our suppliers meet the TQRDBE, if they comply
our company will be on track as well. Suppliers must meet the TQRDBE,
which we will audit them individually once a year”
7 Electronic components “Create the Biz/ Get the Biz /Get the Profit (CTB/GTB/GTP)
manufacturer
8 FD & DVD-RAM “Costs has not been reduced”
manufacturer
9 Power supply system “Inventory cost has increased”
manufacturer
10 Computer peripheral “We practice Kanban, Vendor-managed inventory (VMI), and schedule
manufacturer sharing”.
 Qualitative analysis of the above responses shows that relationship with the supply chain
members is restricted to the immediate supplier and buyer, as quoted by one of the respondent
companies, ‘relationship is focused on ‘before and after’. Manufacturers generally do not extend
membership beyond their immediate suppliers and customers. The term ‘before’ means
immediate supplier and the term ‘after’ refer to immediate customer or buyer. For a supply chain
quality management to be successful, one of the critical factors is the team approach in making
decisions which comprises of supply chain members. This does not seem to be the normal
practice among the E & E manufacturers as evidenced from the industry survey which has a
mean score of 2.10. Other elements such as creating SCM teams which comprise of members
from different companies is also ‘not at all practiced’ for most of the respondent companies.
Participation in the quality efforts of the suppliers among the companies are also to a certain
extent not widely in practice as well. This practice is important in integrating the quality along
the supply chain.

There is also concern about the price competition and increase inventory in inventory as a
result of ‘Forrester effect’. The only way to be ahead of competition is innovation, which is
coming out with new product with better technology and competitive price. Speed to delivery to
producing the new product is essential. Speeding up the designing, developing and producing
new product is essential in order to be more responsive. The product life cycle of the electronic
products is becoming shorter which reflect the unpredictable customer demand and requirement
are changing at a faster rate. The need to reduce cost to combat price competition is also an
important issue since most companies are facing stiff competition from China. This trend will
continue to persist and put pressure on the way the companies should manage its supply chain to
improve responsiveness. Interestingly, supplier quality management was found to be the least
implemented criteria both large and small firms (Eng and Yusuf, 2003). Both suppliers and
buyers may have different quality management practices. Stanley and Wisner (2001) discovered
that the relationship between the buyer and the supplier should be reinforced to improve an
organization’s capability to deliver quality to customers.

5.0 Conclusion
Overall the industry survey revealed that to a certain extent the Malaysian manufacturing
companies particularly E & E are currently practicing SCQM in their organizations. It is
evidenced from the survey that the manufacturers perceived that the quality practices are
important besides the needs to extend good relationship with suppliers. For example ‘selecting
suppliers based on quality records’ has the highest mean score of 3.70. However there were
evidence whereby relationship with suppliers does not extend beyond the immediate suppliers
and buyers. On the basis of this evaluation which is limited in scope, further study on the extent
of SCQM implementation among the manufacturing companies in Malaysia should be carried
out. It is of particular interest of the researchers to evaluate whether the quality management
practices of the Malaysian manufacturing companies contributes to the effectiveness of SCQM
such as manufacturing flexibility and product quality. Nevertheless, findings from Roaimah, et
al. (2005) indicates that firms that implemented SCQM resulted in improved firm performance in
terms of cost reduction and lowered inventory level compared to those firms which do not adopt
SCQM. Furthermore, firms that adopt TQM placed greater emphasis on supply chain quality
practices compared to firms that do not have TQM.
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Biography

Roaimah Omar, BBA (Operations Management) Michigan, U.S.A., MBA (Marketing)

Connecticut, U.S.A., is a PhD student at the School of Management, Universiti Sains Malaysia,
Penang , Malaysia. Her main research interest is quality management in supply chain, supply
chain relationships, operations management and service marketing.

Suhaiza Hanim Mohd Zailani, B. Sc. Agribusiness (UPM), M.Sc. (Lancaster), U.K.; PhD.
(Lancaster), U.K., She is a lecturer with the School of Management, Universiti Sains Malaysia,
Penang, Malaysia. Her main research interest is in quality management, Operations
Management and supply chain management. .

Professor Mohamed Sulaiman, B.A (Malaya); MBA (Leuven); M.Inst. M. (UK) FBIM; PhD.
(Wales). His main research interest, Strategic Management, Marketing, and Supply chain
management.