CHAPTER 6

A MODEL TO IDENTIFY THE FACTORS OF SUPPLIER COMMUNICATION

AND FINANCIAL AVAILABILITY.

6.1 INTRODUCTION

This chapter proposes the research framework to investigate the relationship between the
structural factors and its associated variables. This research is developing a model relating to
communication with supplier, financial availability and its supporting variables.

6.2 METHODOLOGY

The survey instrument used in the research is a questionnaire that has been developed by
conducting a pilot study with the small group of small and medium scale organizations.
Research is carried out through face-to-face interview with the small and medium scale
managers or supervisors. Analysis of the questionnaire (Annexure 4) was conducted in Kerala
SMEs in September 2015 to February 2016. The questionnaire consists of 16 questions in two
categories

The questionnaire is developed by seeking the expert opinion of the manager or supervisors
who are likely to hold the charge of the lean implementation. Five point Likert scale from 1
(very low) to 5 (very high) was used for the total 16 questions to measure the responses.
Initially, 124 SMEs were considered for the survey and face-to-face interview was conducted
with 124 organizations and all the organizations responded. The research details are shown in
table 6.1

Table 6.1 Research data

Characteristics Research Data

Population under study SMEs
Geographical area Kerala ,State of India
Data collection method face to face interview
Sample size 124 questionnaires
Time frame September–Februvary2015
Response of organisation from the Industrial manager, supervisor
sample
Percentage response 100%

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Specification search is used to test the model with data collected using face-to-face interview
questionnaire. The conceptual framework presented as in figure 6.1 developed from the SEM
approach. The questionnaire was developed based on the two enablers namely the supplier
communication (F1) and Financial availability (F2). For example variable affecting
communication with supplier consists of - right quality of material right time (V5), material
credit system in days(V6), appoint representative(V7),conducting supplier relationship
program(V8), electronics data exchange(V9), face to face interaction between supplier and
buyer(V10), long term buyer-supplier relationship(V11), reduce the number of suppliers to 2
or 4 (V12 ), periodic evaluations( V13), trust between partners(V14).Variables affecting the
financial availability include special scheme of SME (V37), low interest rates(V38), machinery
subsidies(V39), tax wavier(V40), other government organization support ( V41 ) and Support
from industrial association (V42).

Figure 6.1 conceptual framework of communication with supplier and Financial Availability

F1= communication with supplier, F2= Financial Availability

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6.3 DEVELOPMENT OF STRUCTURAL FACTOR USING SPECIFICATION
SEARCH

The modification of an initial model to improve the fit has been termed a specification search
(Long, 1983). A specification search is typically undertaken to detect and correct specification
errors between an initial theory-implied model and true population model for the variables
under study, all of which has been discussed in detail in chapter 3.7.4.

6.4 FACTOR ANALYSIS MODEL

Amos 5.0 while conducting the exploratory specification search for the best subset model uses
the following fit function criteria (Arbuckle, 2003) viz., Chi-square (C), chi-square – df (C –
df), Akaike Information Criteria (AIC),Browne-Cudeck criteria (BCC), Bayes Information
Criterion (BIC), chi-square divided by the degrees of freedom (C/df) and significance level
(p).When choosing the best model from all , only a few of the fit function criteria may suggest
the best fitting model from the specification search. Researchers can choose the best model
from a default list of top ten ranked models. Initially, the theory implied factor model is shown
in the figure 6.2. The specification tool menu was used to select the path as optional in the
initial factor model. Path value with 1.0 fixed (V15and V42) should not be highlighted. The
specification search factor model is diagrammed in Figure 6.3. The specification tool menu
was used to select all paths in the initial path model. Model number 92 in the computer output
was listed as the best specification search model using the chi-square divided by degrees of
freedom (C/df) fit function criteria (Figure 6.3).

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 Figure 6.2 before the Specification Search

The fit function values for the initial and specification search factor models are listed in Table
6.2 Model number 92 in the computer output was listed as the best model because AIC, BCC,
BIC, C/df, and p fit, function criteria were better than the initial factor model fit function values.

Figure 6.3 after the Specification Search

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Table 6.2 Factor Analysis Fit Function Values for Initial and Specification Search Models

Model df c c-df AIC0 BCC0 BIC0 C/df P

Initial 103 550.497 447.497 344.497 311.460 54.008 5.345 0.000
Search 107 555.473 448.473 341.473 307.152 39.703 5.197 0.000
Note. AIC, BCC, and BIC have been rescaled from zero to a positive value (Arbuckle, 2003).
C =chi-square; AIC = Akaike information criteria; BCC = Browne-Cudeck criterion; BIC =
Bayes information criterion.

6.5 SUMMARY

Automated exploratory search is carried out using Amos 20 on the structural factor with two
construct named as the supplier communication and financial availability. The result of the
study shows that variable supporting supplier communications are appoint a representative,
conducting supplier relationship program, electronics data exchange, face to face interaction
between supplier and buyer, reduce the number of supplier to 2 or 4, periodic evaluations of
supplier and trust between partners. The variables affecting the financial availability includes
special scheme of SME, low interest rates, machinery subsidies, tax wavier and support from
industrial association. These are the significant factors associated with supplier
communication and financial availability for successful implementation of lean manufacturing
in small and medium scale enterprises.

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