Content –

1. Introduction
i. What is TQM
ii. What is SCM
2. Relationship between SCM and TQM in the automotive industry
3. Relationships among the practices of SCM, TQM and firm’s supply performance
i. TQM practices and SCM practices
ii. TQM practices and firm’s supply performance
iii. TQM practices and firm’s supply performance (FSP) through SCM practices
4. Measures
5. Research method
i. Data collection and sample
ii. Qualitative case study
iii. Reliability and validity
6. Findings and discussion
7. Reference

Total Quality Management –

Supply Chain Management –

Firm’s Supply Performance –

Intro-

TQMP not only has a significant direct positive impact on SCMP and on FSP but also a significant indirect
positive impact on FSP through SCMP.

TQM – A management approach to long-term success through customer satisfaction. In a TQM effort, all
members of an organization participate in improving processes, products, services, and the culture in
which they work.

SCM – Supply chain management is the handling of the entire production flow of a good or service —
starting from the raw components all the way to delivering the final product to the consumer.

Total Quality Management (TQM) and Supply Chain Management (SCM) have been considered to be the
two most important strategic approaches for the organizations like manufacturing, services and Small
and Medium Enterprises (SMEs). They have become the prerequisite for success and competitive
advantage in the global market.

 Leading companies have adopted supply chain management (SCM) and total quality
management (TQM) to strengthen their organizational performance. However, a simultaneous
implementation of both systems is challenging and consumes a considerable number of
resources due to the extended scope that covers not only internal functions but also the
operations of external business partners. If the simultaneous implementation can be
accomplished, the organization should reap great benefits. If it fails, the impact on the business
performance would be serious.
 I will talk here about the relationships among total quality management practices (TQMP),
supply chain management practices (SCMP), and firm’s supply performance (FSP) with respect
to the internal supply performance of the automotive part suppliers, a critical component of the
whole supply chain.
 Canada’s automotive industry is centered in the heart of North America’s largest vehicle
producing region, accounting for 10% of manufacturing GDP and 23% of manufacturing trade.
It’s supply chain is very complex and the Canadian automotive industry is very active in both
SCM and TQM.
 Or, The automotive Sector in Association of South East Asia Nations (ASEAN) region was
employed as a case study; because, the automotive supply chain is very complex and specially
the Thai automotive industry is very active in both SCM and TQM.

Relationship between SCM and TQM in the automotive industry

An average automobile consists of over 15,000 components, only a few are manufactured by the final
assemblers (Perez and Sanchez 2001), while most are manufactured and supplied by a network of
specialized vendors. Therefore, price, quality and delivery of an automobile depend significantly on
those of its components, which in turn are influenced by quality and efficiency of all partners along the
supply chain. As a result, the automotive industry is one of the most active industries in the
development of supply networks. Romano and Vinelli (2001), in a case in the textile and apparel industry
in traditional and coordinated supply chains, found that the coordinated supply chain had better ability
to meet customers’ quality expectations than the traditional supply chain. Choi and Rungtusanatham
(1999) compared QM at three supply chain levels, i.e., final assemblers, top-tier suppliers, and tertiary-
tier suppliers, in the automotive, electronics and other industry groups. They could not identify any
statistically different quality levels across the supply chains in their samples. Therefore, it is important to
explore and confirm what impact TQM can have on SCM. The following research questions address this
need. (1) Does TQMP have a direct positive effect on SCMP? (2) Does TQMP have a direct positive effect
on FSP? (3) Does TQMP have an indirect positive effect on FSP through SCMP that address issues
targeted by TQMP?

Relationships among the practices of SCM, TQM and firm’s supply performance

SCM and TQM are more than just approaches or tools. They are management theories that have been
applied as large-scale management systems with a variety of techniques. They have certain similarities
and differences that could affect each other. Both TQM and SCM aim to achieve customer satisfaction.
For differences, Many SCM frameworks do not include internal human resource practices, for instance,
the SCM framework of Global Supply Chain Forum (GSCF) (Croxton et al. 2001). On the other hand,
human resource management related practices are emphasized and included in most TQM frameworks
(Hoang et al. 2006, Perdomo-Ortiz et al. 2009, Vanichchinchai and Igel 2009). The similarities and differences in
management techniques between SCM and TQM could either complement or contradict each other,
and this should be investigated further and empirically proven. So, the following is the hypothesis: H1: A
firm’s TQM practices have a direct, positive influence on its SCM practices.
TQM practices and firm’s supply performance (FSP)

Customer satisfaction is the ultimate goal of both SCM and TQM. Customers, in general, demand higher
product quality, faster delivery, and lower prices. Traditional QM, on the other hand, concentrates on
specification-based performance, or "small-q" (Vanichchinchai and Igel 2009). The more immediate
purpose of SCM is to satisfy consumers through delivery or performance that is time-based. SCM aims to
respond to customers as quickly as possible, at the correct time, place and cost. Also, aims to achieve
speed-to-market, agility and the flexibility to respond quickly to customer requirements at minimum
cost. SCM emphasizes the flow of materials and information throughout the entire supply chain.
Consequently, a conflict may arise between delivery and quality goals. Conversely, there may be a
synergy in the ultimate goal, customer satisfaction. The following hypothesis tries to investigate the
relation. H2: A firm’s TQM practices have a significant positive effect on FSP

TQM practices and firm’s supply performance (FSP) through SCM practices

SCM and TQM both require the participation of all internal functions as well as collaboration with all
external partners. According to Oakland (1989), the term "total" in TQM refers to all departments and
employees at all levels of the organization. All employees are treated as internal customers in a TQM
framework. It's tough to create value for the external customer if the internal customers aren't happy.
As a result, TQM emphasizes employee participation. However, putting too much emphasis on internal
engagement may make the real TQM implementation problematic. According to Yeung and Amstrong
(2003), a main obstacle to TQM implementation was a lack of external attention, as quality
improvement efforts were mostly focused on internal issues.

SCM requires internal and external business process integration throughout the supply chain (Gimenez
2004), and the degree of integration has a substantial impact on its efficacy and efficiency. The fact that
the organization must cooperate with its customers and suppliers inside the same SCM system may
explain the external focus of SCM. Most SCM frameworks emphasize the relationship with external
business partners while almost ignoring the human resource component. Although SCM emphasizes
external business partner integration, the real implementation must start with internal integration and
then move on to external integration. SCM focuses on external corporate collaborations, whereas TQM
emphasizes participation from primarily internal functions. As a result, when implementing a combined
set of SCM and TQM systems, an eventual integration and a variation in primary focus can be a source of
both synergy and hurdles in improving FSP. Therefore, the third hypothesis is as follows: A firm’s TQM
practices have a significant positive indirect effect on FSP through SCM practices.

Case Study

Measures

Twelve companies were selected from the database of Thailand Automotive Part Manufacturer
Association (TAPMA) and the directory of Thai Automotive Business. The key informants were
executives in SCM and TQM systems in their companies. Since both the paper-based questionnaire and
electronic questionnaire were for the large-scale survey, the pilot questionnaire was prepared in the
electronic form to be delivered via email to test the applicability of the electronic questionnaire. The
researcher contacted the respondents for additional remarks after receiving the returned
questionnaires. Because SCM was new in Thailand, even in the automobile industry, some advised
including a definition in the questionnaire. As a result, its definition, scope, and applicability may be
unclear, and various managers and firms may interpret it differently. The SCM definition of the GSCF was
introduced in response to this comment, which is defined as ‘‘the integration of key business processes
from end-user through original suppliers that provide products, services and information that add value
to all trade partners’’ (Lambert et al. 2005, p. 28) was added.

Research Method

Data collection and sample

To strengthen the credibility of the information acquired, multiple responses from each organization
were encouraged by requesting at least two responders per company to complete the questionnaire.
Carr et al. (2000) found that many Asian companies were reluctant to participate in research surveys
unless they first established a relationship with the researchers. To overcome these possible roadblocks,
a variety of tactics were utilized to achieve a high response rate, including personal phone requests,
supportive requests from professional organizations, and incentives and awards for respondents.

Table 01 – Organizational characteristics

Characteristics and description Company Percentage (%)

Position    
Managing Director/President/CEO 13 6.20%
Director/Deputy Managing Director/Vice President 93 44.10%
Manager 105 49.80%
Ownership    
Thai 75 35.90%
Japanese 106 50.10%
Other Nationality 30 14.30%
Missing 3  
Company Size    
Small to Medium <=200 54 25.60%
Large>200 157 74.40%
Tier in the Supply Chain    
First Tier Suppliers 177 87.20%
Other Tier Suppliers 26 12.80%
Missing 8  
Management System    
ISO 9000 92 43.60%
ISO/TS 16949 155 73.50%
lean manufacturing 45 21.30%

The profiles of 35 non-respondent firms were reviewed over the phone, on the firm's site, and in the
IEAT database. The respondent and non-respondent companies' organizational features were compared
using the Chi-square test.

Table 02: Non-respondent bias test

Characteristic Response Non-response df Chi-Square P value
Thai 75 (35.9%) 9 (25.7%) 2 3.11 0.211
Japanese 104 (49.8%) 23 (65.7%)
Other ownership 30 (14.4%) 3 (8.6%)
Small-to-medium 54 (25.6%) 10 (28.6%) 1 0.71 0.71
Large 157 (74.4%) 25 (71.4%)
First-tier 177 (87.2%) 32 (91.4%) 1 0.48 0.479
Other tier 26 (12.8%) 3 (8.6%)

From this test, we can see that there was no significant difference between respondent and non-
respondent samples for every organizational characteristic. All P values were more than 0.05, indicating
that the respondent and non-respondent samples were similar.

Qualitative case study

To learn more about the connections between SCM and TQM, A qualitative case study of two big first-
tier automotive suppliers were performed. The first company was a French majority-owned engineering
parts company (taken over from a Japanese company). It was made of companies with highly developed
SCM and QM systems. The other one was a Thai-owned company producing decorative pieces and
representing a management style that was less developed than SCM and QM systems. Both
organizations were dedicated to SCM and QM, with SCM and QM divisions reporting directly to them.
The informants were SCM managers who played major roles in SCM development and were well-versed
in their firms' SCM and QM. Information about the background and objectives of the research were
explained to the individual informant via telephone to have a clear understanding of the purpose of this
case study. Most of the questions were open-ended to allow for a wide range of responses and honest
perspectives.

Reliability and validity

Item-total correlations and Cronbach’s alpha to examine the reliability of the measurement items should
exceed 0.3 and 0.7, respectively (Nunnally and Burnstein 1994, Hair et al. 1998). With careful
consideration, for SCMP, five items of lean system and one items of partnership management (LS01,
LS04, LS13, LS14, LS15 and PM04) were dropped because of low item-total correlation values. It was
observed that these six items deal with specific operational issues rather than the general management
issues of the sample companies. These items were unique for the individual organisation and products
produced. After the removal, the remaining items had item-total correlation score above 0.3 and their
Cronbach’s values were above 0.7. All TQMP items had item-total correlation scores well above 0.5 and
Cronbach’s well exceeded 0.8 as shown in Table 3. Also, all FSP items had item-total correlation score
well above 0.5 and their Cronbach’s well exceeded 0.7. Consequently, all TQMP and FSP item were
kept.

Table 03 – Reliability and multiple fit indexes of sub-construct.\

Sub- No. Cronba Compo Avg X2 P GF CFI NN SR SRM IFI AG

construct of ch’s α site varian = df val I FI MR EA FI
item reliabili ce ue
s ty extrac
ted
Supply                          
chain
managem
ent
practice
Informatio 5 0.757 0.78 0.42 0.6 0.5 0. 1. 1.0 0.0 0.00 1. 0.9
n 56 76 99 00 0 31 0 00 8
managem
ent
Lean 9 0.853 0.84 0.37 1.6 0.0 0. 0. 0.9 0.0 0.05 0. 0.9
system 31 63 98 99 8 49 5 99 2
Partnershi 6 0.754 0.77 0.36 1.3 0.2 0. 0. 0.9 0.0 0.04 0. 0.9
p 58 01 98 99 8 35 1 99 6
managem
ent
Strategy 6 0.871 0.87 0.54 1.5 0.1 0. 1. 0.9 0.0 0.05 1. 0.9
and 52 57 99 00 9 22 1 00 5
organizati
on
Total                          
quality
managem
ent
practice
Customer 3 0.823 0.83 0.62 0.0 0.8 1. 1. 1.0 0.0 0.00 1. 1.0
focus 30 64 00 00 0 05 0 00 0
Commitm 4 0.853 0.85 0.58 0.5 0.4 1. 1. 1.0 0.0 0.00 1. 0.9
ent and 70 51 00 00 0 06 0 00 9
strategy
Human 7 0.898 0.90 0.57 1.3 0.2 0. 1. 1.0 0.0 0.09 1. 0.9
resource 26 09 98 00 0 22 3 00 5
managem
ent
Informatio 3 0.872 0.87 0.7 1.0 0.3 1. 1. 1.0 0.0 0.01 1. 0.9
n analysis 20 12 00 00 0 31 0 00 8
Firm’s                          
supply
performan
ce
Cost 3 0.796 0.81 0.59 2.1 0.1 0. 0. 0.9 0.0 0.07 0. 0.9
80 40 99 99 8 45 6 99 6
Elasticity 3 0.800 0.80 0.58 0.0 0.7 1. 1. 1.0 0.0 0.00 1. 1.0
80 77 00 00 0 08 0 00 0
Relationsh 4 0.846 0.84 0.57 0.8 0.3 1. 1. 1.0 0.0 0.00 1. 0.9
ip 60 55 00 00 0 08 0 00 8
Responsiv 3 0.851 0.87 0.69 0.0 0.7 1. 1. 1.0 0.0 0.00 1. 1.0
eness 90 61 00 00 0 10 0 00 0

The validity of each sub-construct was tested by first-order confirmatory factory analysis (CFA) with a
maximum likelihood estimate to remove the items with weak loading coefficients, below 0.5. Two items
of information management, two items of lean system and one item of strategy and organization (IM01,
IM02, LS05, LS07 and SO03) were eliminated because of the low loading coefficient. This was because
the sample companies were mostly the first-tier part suppliers that sell products to the automotive
assemblers rather than to the automotive users. Generally, X 2=df ratio should be less than 3. GFI, CFI
and NNFI should be at least 0.9 and SRMR should be less than 0.1 (Hair et al. 1998). As shown in Table
03, every sub-construct of SCMP, TQMP, and FSP well met these requirements.

Composite reliability of every sub-construct was well above the required value of 0.60 and average
variance extracted exceeded 0.50 except for information management, lean system and partnership
management. Considering Cronbach’s , composite reliability and average variance extracted together,
all sub-constructs were sufficiently reliable.

The second-order CFA was conducted to confirm that these sub-constructs were sub-constructs of
broader constructs. During the second-order constructs validation process, no item was dropped, given
that the loading coefficients between the second factors and their sub-constructs in every second-order
construct were well above 0.5 as shown in Table 4. All t values were higher than 1.96 for 0.05
significance level. The overall fit of every second-order construct was good as shown in Table 5. In
conclusion, SCMP, TQMP and FSP construct comprised the proposed sub-constructs and items in
accordance with their supportive theories.

Table 04 – Second-order confirmatory factor analysis

Second-order construct Sub-construct Standardized estimate t value

Supply chain management Information management (IM) 0.788 8.15
practice
  Lean system (LS) 0.898 8.42
  Partnership management (PM) 0.808 8.63
  Strategy and organization (SO) 1.000 11.30
Total quality management Customer focus (CF) 0.786 9.15
practice
  Commitment and strategy (CS) 1.000 12.10
  Human resource management (HR) 0.982 11.92
  Information analysis (IA) 1.000 14.52
Firm’s supply performance Cost (CT) 0.805 11.15
  Flexibility (FL) 0.690 7.65
  Relationship (RL) 0.960 10.91
  Responsiveness (RS) 1.000 12.07

Table 05 – Multiple fit indexes of the second-order construct

Construct X2/df P value GFI CFI NNFI SRMR
SCMP 0.82 0.9776 0.94 1 1 0.0379
TQMP 1.223 0.0704 0.94 1 1 0.0302
FSP 0.647 0.9627 0.98 1 1 0.0223

Moreover, all measurement models were tested for convergent, discriminant, and nomological validity
as shown in Table 3. Nine of 12 models had average variance extracted value exceeded 0.50, suggesting
acceptable convergent validity. Their correlation coefficients were much below one confirming that the
sub-constructs were distinct. Based on the overall results, these measurement models were found fit
and valid.

Findings and discussion

The overall fit of the model, X2=df ratio = 1.329 was well below 3 with a P value 0.082. GFI= 0.96,
CFI=1.00, NFI=0.99, NNFI=1.00 were above the recommended critical value at 0.9 and SRMR=0.023 was
much lower than the cut-off points at 0.1.

Table 06 – Relationships among TQMP, SCMP and FSP

Path Total effect Direct effect Indirect effect
TQMP → SCMP 0.79 (9.56) 0.79 (9.56) -
TQMP→FSP 0.85 (11.98) 0.51 (5.46) 0.34 (4.15)
SCM→FSP 0.42 (4.55) 0.42 (4.55) -

 For path analysis, all t values were well above 1.96 and significant at 0.05 level. TQM practices
had a strong relationship with SCM practices as illustrated by the high standardized estimate
0.79 and t value of 9.56, thus H1 was supported. Similar approaches like customer relationship in
SCM and customer focus in TQM help explain this. TQM has been expanded in recent years to
incorporate all best practices, including SCM-related ones (Vanichchinchai and Igel 2009).
(Martinez-Lorente et al. 1998). As a result, TQM practices make SCM procedures easier to apply.
 A firm’s TQMP significantly and positively impacts its firm’s supply performance (FSP). The
standardized estimate of their relationship was 0.51 with a t value of 5.46, thus H2 was
supported. TQM targets customer satisfaction as the ultimate goal which also covers FSP such as
responsiveness.
 In addition, TQMP had a significant indirect positive effect on FSP through SCMP. The
standardized estimate of the indirect effect between TQMP and FSP was 0.34 with a t value 4.15
which supported H3. The total effect between TQMP and FSP was 0.85 with a t value 11.98
clearly indicating shared practices and performance. Although, SCMP emphasizes external
partnership with customers and suppliers, the SCMP implementation must be strongly
supported by internal collaboration among departments because coordination within the
organizations is a prerequisite of SCM. So, TQM which focuses on internal participation of all
employees is a critical foundation for SCM.
 Both contribute to the firm’s supply improvement.
 Lin et al. (2005) who surveyed the impact of supply chain quality management in Taiwan and in
Hong Kong found that QM significantly correlated with the supplier participation and selection
strategy in SCM, and this influenced business performance.
 Kannan and Tan (2005) concluded that there were linkages between TQM, SCM, and JIT which
reinforced each other and then improved business performance.
 All the studies mentioned above suggest that TQM and SCM can be used together to create
value.

Implications and conclusion

This research was one of the first to study the relationships among SCM practices, TQM practices and
firms’ supply performance in a developing country. The findings shed light on the argument over the
impact of TQM practices on SCM practices and supply performance of firms. According to the
quantitative findings TQM practices can immediately ease the implementation of SCM and boost the
firm's supply performance. Moreover, TQM practices can improve a firm's supply performance indirectly
through SCM practices. This is since TQM has been expanded to include some SCM techniques as well as
firm performance factors like cost and responsiveness. As a result, TQM can be utilized to implement
SCM and improve firm's supply performance. Findings from qualitative case studies of both companies
also validated these. As a result, although TQM and SCM are large-scale management systems,
managers should not treat them as separate. Both could be implemented together to achieve excellent
performance in the firm's supply-related business process system.

However, the case companies experienced some negative effects of disruptions caused by QM especially
when employees were overly strict with applying QM standards and did not clearly understand SCM
requirements. For instance, when there were contingency events such as quality problems, some
employees were adhering too strictly to working instructions. They made no effort to resolve these
immediate problems up front and neglected supportive tasks not specified in job descriptions which
lead to delivery delays and higher cost. Due to a stronger QM system and awareness, the French firm
was able to respond to these issues better than the Thai company. Both companies tried to solve these
problems with stronger awareness building through more training, better communication between QM
and SCM staff and goal alignment.

Limitations and suggestions for future research

The paper-based questionnaires were distributed using a convenient sample method. Future research
should include a variety of random samples to ensure that the results are more generalizable. Only 19%
of the organizations in the sample provided more than one response, and a single respondent in an
organization could lead to response bias. Other data gathering approaches should be used in future
studies to improve the number of multiple respondent rates. Only automotive part vendors were used
as samples in this study. In future research, the automotive assemblers and downstream business
partners could be studied together with the upstream suppliers to investigate the relationship along the
whole supply chain. The effect of individual TQM practices on individual SCM practices and individual
firm’s supply performance dimensions may also be Investigated.
Lean management is an approach to managing an organization that supports the
concept of continuous improvement, a long-term approach to work that
systematically seeks to achieve small, incremental changes in processes to improve
efficiency and quality.
LS01* We delay final manufacturing activities until customer orders have actually
been confirmed
LS04* We reduce inspection of incoming materials/components/products
LS13* We place our personnel at the business facilities of our trade partners to
facilitate cooperation
LS14* We store our goods at appropriate distribution points close to our customers
LS15* We design our products for modular or unit part assembly (e.g., brake
systems, wiring harness, air-conditioning systems, steering column, instrument
cluster)
PM04* We rely on a small number of quality trade partners
Cronbach's alpha is a measure of internal consistency, that is, how closely related a
set of items are as a group. It is a measure of scale reliability.
The item total correlation is a correlation between the question score (e.g., 0 or 1
for multiple choice) and the overall assessment score (e.g., 67%). It is expected
that if a participant gets a question correct, they should, in general, have higher
overall assessment scores than participants who get a question wrong.
Sub Construct: A secondary or subsidiary construct
NFI/NNFI/TLI: The (Non) Normed Fit Index.
CFI: The Comparative Fit Index is a revised form of NFI. 
RMR/SRMR: the (Standardized) Root Mean Square Residual.
RFI: the Relative Fit Index, also known as RHO1, is not guaranteed to vary from 0
to 1. However, RFI close to 1 indicates a good fit.

IFI: the Incremental Fit Index (IFI) adjusts the Normed Fit Index (NFI) for sample
size and degrees of freedom.

GFI/AGFI: The (Adjusted) Goodness of Fit is the proportion of variance

accounted for by the estimated population covariance.