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Achieving supply chain management excellenceAlfred Wong aa Lingnan University , Tuen Mun, Hong KongPublished online: 25 Aug 2010.

To cite this article: Alfred Wong (2003) Achieving supply chain management excellence, Total Quality Management &Business Excellence, 14:2, 151-159, DOI: 10.1080/1478336032000051331

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TOTAL QUALITY MANAGEMENT, VOL. 14, NO. 2, 2003, 151–159

Achieving supply chain managementexcellence

A WLingnan University, Tuen Mun, Hong Kong

Companies are increasingly aware that they need to work together with their supplypartners in order to best serve their customers and achieve business excellence. This paper makes useof the Supply Chain Management Excellence Model previously developed by the author to indicatehow companies can get the best support from their suppliers to outperform their competitors. Themodel has incorporated in it the success factors of total quality management principles and concepts.It has been previously tested using the supply chain activities of 139 companies in Hong Kong. Thispaper will look at the content validity of the model constructs and apply the model to two companies.Answers from 59 companies to an open-ended question on their suppliers provide support for thecontent validity of the model constructs. In-depth interviews on the application of the model wereconducted with the supply chain managers of two companies. Results support the belief that the modelwould be useful for companies to achieve supply chain management excellence.

Introduction

Competition is no longer on a firm versus firm basis but rather on a supply chain versussupply chain basis (Whipple & Frankel, 2000). Thus, supply chain management has increas-ingly become more important (Cooper et al. 1997; Ross, 1998). Supply Chain Managementis a means to help companies utilize their suppliers’ resources in improving their owncompetitive edges (Cavinato, 1991; Ellram & Cooper, 1990). However, the author foundthat total quality management (TQM) principles could help improve the effectiveness ofSupply Chain Management in enabling companies to achieve competitive advantage. There-fore, the Supply Chain Management Excellence Model is developed so that organizationscan make use of this new model to achieve business excellence (Kanji & Wong, 1999). Inthis model, TQM principles have been used to enrich supply chain management. The aimof the model is to help companies achieve business excellence through better managing theirsupply chains.

This paper will first introduce the Supply Chain Management Excellence Model and itsdifferent constructs. Secondly, content analysis on the comments from 59 companies on theirsupply partners is conducted to identify the themes on managing supply partners. Thethemes are compared with the model to see whether they provide support for the contentvalidity of the model constructs. Thirdly, the supply chain management of two case companiesis analysed using the Supply Chain Management (SCM) Excellence Model. Finally, conclu-sions and implications are discussed.

Correspondence: Alfred Wong, Lingnan University, Tuen Mun, Hong Kong. E-mail: wongsh@ln.edu.hk

ISSN 1478-3363 print/ISSN 1478-3371 online/03/020151-09 © 2003 Taylor & Francis LtdDOI: 10.1080/1478336032000051331

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Figure 1. Supply Chain Management Excellence Model.

SCM Excellence Model

The SCM Excellence Model has the role of improving the performance of supply chains.There is a set of core principles and concepts underpinning the model. These core principlesand concepts were adopted from the Business Excellence model (Kanji, 1998), with specialfocus on the supply chain level instead of on the overall business level of an individualorganization. The model consists of six constructs, namely, leadership, customer focus,cooperative relationship, management by fact, continuous improvement and business excel-lence (Fig. 1). The model most notably identifies the importance of the leadership of acompany in creating a cooperative relationship and in developing close operations withsuppliers. In addition, companies should be aware that, in order to achieve Supply ChainManagement excellence, they have to pay attention to all the different success factors ofSupply Chain Management—Customer Focus, Cooperative Relationship, Management ByFact and Continuous Improvement. Companies should know that they have to have coopera-tive relationships instead of adversarial relationships with their suppliers in order to get theirsupport in meeting the needs of the final customers. Moreover, it is not enough that theyjust talk about good relationships; they need to have good operations and linkages so as toprovide good services or products to the customers.

Methodology

To examine the content validity of the model constructs, answers from the supply chainmanagers of 59 companies to an open-ended question regarding their suppliers are analysed.The companies include manufacturers, traders and wholesalers, who are members of theFederation of Hong Kong Industries. Each company was asked to give any comments on

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ACHIEVING SUPPLY CHAIN MANAGEMENT EXCELLENCE 153

one of their major suppliers. The comments may relate to aspects such as the supplier’srelationship with the company, its contributions towards the company or problems it bringsto the company, etc. The comments are valuable because they reflect those overall perceptionsthat companies have concerning their key supply partners. The comments are qualitativedata that may provide rich information on the success factors for supply chain management.

In qualitative research, it is the ‘concepts and categories, not their incidence andfrequency, that are said to matter’ (Brannen, 1992). Content analysis is used to help identifythemes on the comments relating to the supply partners. The themes are then examined tosee whether they support the model constructs. Content analysis, which is used to provideinformation about the thematic content of communications and about the assertions foundin them, ‘will probably turn out to be the most productive’ ( Janis, 1965, p. 67).

To further validate the model, in-depth interviews on the application of the model wereconducted with the supply chain managers of two companies. The results are discussed inthe second part of the paper. The two companies are selected using theoretical sampling.The first company is a typical buying office commonly found in Hong Kong, which servesas a sourcing centre. The second company is a typical local manufacturer, which has its officein Hong Kong but with factories in China. The concern here is about the replication of thefindings in other similar cases. Moreover, inferences are usually theoretical or causal insteadof statistical.

Comments on the supply partners

Many respondents talked about all the good points of their supply partners, while sometalked about their suppliers’ bad points (Tables 1 and 2 respectively). Some respondents alsogave comments on the reasons for changes in the relationship, i.e. from having a closerelationship to a not so close or poor relationship. Several themes can be gained from thecomments, and they are discussed as follows:

Table 1. Characteristics of good supply partners

Flexible Has bonded warehouseReliable Quick response to reorderingLong-term relationship Ready to accept our feedbackProactive Supply market information, new technologyResponsible Free technical support and consulting serviceResponsive Have cooperative spiritDependable Satisfy our needsStraight to the point Meet our urgent ordersCommunicate effectively Understand our needsHandle complaints quickly Win–win situationProducing samples quickly and timely Systematic operationProfessional InnovativeDedication Setting up plants next to usChange with environment Good after-sales serviceLean structure Technical supportEfficient and direct Flexibility in logistic arrangementGood connections Easy to get problems solvedGood relationship Problem solvingCompetitive pricing Quality is good

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Table 2. Characteristics of poor supply partners

Do not have up-dated information No quality improvement conceptSmall varieties of products available No system/procedure to handle materials rejectsNot enough stock Only concerned with relationship with top managementUnstable quality Old machinesPoor system Lacks attention to detail in productionDo not have positive response to quality problem Difficult to follow upNo suggestions, actions on improving product Late delivery

performance

Theme 1. Attitudes of the supply partner

Characteristics of good supply partners. The respondents used the terms ‘reliable, responsible,responsive, proactive, professional, flexible, dedicated, efficient, cooperative and adaptive tochange’ to describe their good supply partners. From the use of these terms, it reflected thatthe good supply partners were trustworthy. They were quick to react to the needs of thecustomers. Moreover, they would take the initiative to foresee the needs of the customersand would meet the needs in a professional, dedicated and efficient manner. A good supplypartner should also be flexible in its dealings with its customers, e.g. flexibility in deliveryschedule in order to meet better some urgent needs of customers. It should keep up with thechanges in the environment in order to meet the ever-increasing demands of the customers.Some respondents in fact stated that their supply partners were very cooperative and theyworked as strategic partners who took care of the needs of each other.

Characteristics of poor supply partners. Some respondents said that their supply partners didnot attend closely to their needs. They also did not pay attention to quality improvement.They did not have a positive response to quality problems. These kinds of attitudes towardscustomers and quality would certainly adversely affect the ability of the suppliers in buildinga good relationship with their customers.

Theme 2. Management systems of the supply partners

Characteristics of good supply partners. Some respondents mentioned that their supply partnershad a lean structure and systematic operations. In fact, having a good structure and systemcould enable a supplier to meet the needs of its customers better.

Characteristics of poor supply partners. Some respondents said that a poor supply partner didnot have a proper system or procedure in handling materials rejects. In addition, their qualitysystem was poor. Hence, the performance was poor.

Theme 3. Interactions with the supply partners

Characteristics of good supply partners. Respondents said that their supply partners couldunderstand their needs, communicate effectively, handle complaints quickly, and adopt awin-win approach in solving problems. Therefore, we can see that these are the ways ofinteractions that can help to achieve a good relationship between a company and its suppliers.If the supplier does not understand the needs of its customers in the first place, it is doomedto fail in meeting its customers’ needs. Understanding customers’ needs requires effectivecommunication. Often, problems or complaints may arise in the interactions, and they have

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to be handled quickly and with a win-win approach by both parties, otherwise the goodrelationships will be endangered.

Characteristics of poor supply partners. Respondents pointed out that it was difficult tocommunicate and follow up the actions of the poor supply partners.

Theme 4. Performances of the supply partners

Characteristics of good supply partners. Performances of the good supply partners as describedby the respondents included: ‘Quality is good’, ‘competitive prices’, ‘producing samplesquickly and timely’, ‘satisfy our needs’, ‘can meet our urgent orders’, ‘quick response toreordering’, ‘innovative’ and ‘ready to accept our feedback’. It can be seen that customersdescribe the performances on the bases of quality, cost and delivery. In fact, the comment of‘satisfy our needs’ may mean needs on quality, or cost or delivery, or all of them. They arebases for competitive advantage. Consequently, the supply partners’ contributions, throughtheir performances, can help companies achieve some competitive advantages.

Characteristics of poor supply partners. Some points mentioned by respondents concerningpoor supply partners included ‘not enough stock’, ‘only small varieties of products wereavailable’, ‘unstable quality standard’, ‘late delivery’ and ‘old machines’. Respondents alsocommented that poor supply partners did not provide suggestions or advice to customers forimprovement.

Theme 5. Supporting services provided by good supply partners

Many respondents mentioned that their supply partners were willing to provide free technicalsupport and consulting services to them. It seems that this is an essential service required bythe customers. Some mentioned after-sales services, which might include technical supportand maintenance support. Another important service mentioned by the respondents was theprovision of market information and information on the latest technology.

Theme 6. Investment in the relationship by good supply partners

Some respondents stated that their supply partners had specific investments in assets in orderto meet their needs. For instance, a supplier had a bonded warehouse set up in China. Itfacilitated the delivery of goods to its customer, which had a factory in China. Anothersupplier had set up plants next to one respondent’s plants in different parts of China. Thisasset specificity had made the relationship between a company and its supply partner closer.

Theme 7. Reasons for relationships turning sour

Some respondents pointed out that their relationships with their supply partners had changed.Reasons provided for relationships turning sour included ‘change in strategies of bothcompanies’ and ‘changes in the management of both companies’. These reflected that theleadership, or the top management, does have an important influence on the relationshipbetween both parties. The change in leadership, in particular, may lead to the adoption ofstrategies that are incompatible with each other. An example given by a respondent was thatthe supplier stopped appointing his company as its agent in Hong Kong. Hence, the changein strategy adversely affected the relationship of the two companies.

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Relationships between the seven themes and the constructs of the SCM ExcellenceModel

From the theme of ‘Attitudes of the supply partners’, we can find support for the modelconstructs of Customer Focus, Cooperative Relationship and Continuous Improvement.Good supplier partners were committed to meeting the needs of their customers. They werecooperative and trustworthy. Moreover, they would continuously improve in meeting theneeds of their customers by keeping up with the changes in the environment. Conversely,poor supply partners did not attend to the needs of their customers or the need for continuousimprovement in their quality.

From the themes of ‘Management systems of the suppliers’, ‘Supporting servicesprovided’ and ‘Investment on the relationships’, good supply partners had a lean structureand systematic operations and provided valuable technical support and market information.Some of them had even invested in assets for operations with their specific customers. Thesesupport the construct of Management by Fact, which is about the development of closelinkages and smooth operation with suppliers. On the other hand, poor supply partnersappeared to be weak in these aspects.

The theme of ‘Reasons for relationships to turn sour’ indicates that the construct ofleadership is very important in achieving supply chain management excellence. Without thesupport of the top management, relationships and operations with supply partners would beadversely affected. The theme of ‘Performances of supply partners’ suggests that good supplypartners can help companies achieve competitive advantages.

When we put the different constructs together into the SCM Excellence Model andexamine the comments of the respondents, we can find support for the model. From thecomments, we understand that the leadership or the top management of companies wouldaffect the relationship and the operation with suppliers. In addition, suppliers having acooperative attitude should help to develop a long-term relationship with partners. In return,those companies would also take the suppliers’ interests to heart. Both parties would haveopen-minded discussions with each other. The building and maintenance of a good relation-ship would engender trust between the two parties. Therefore, suppliers would be willing toinvest more in the relationship by building plants near to customers, or investing in assetsspecifically for servicing their customers. It thus made the processes more integrated.Moreover, the suppliers would be more willing to provide more information, advice orsuggestions to their customers. They would also cooperate in solving and preventing problemsfrom arising and commit to improving operational processes. Consequently, operations as awhole would be much smoother and closer. With good relationships and close operations,the suppliers can better help companies meet the needs of their ultimate customers andachieve business excellence. Hence, the comments of respondents can be knitted together bythe model.

Application of the SCM Excellence Model on two companies

Case Company 1

Case Company 1 is a company that produces switches, keyboards and displays. The companyhas offices in the USA and Germany. The office in Hong Kong acts as the InternationalBuying Office of the Group and is also responsible for the business in Asia. Its mainproduction lines are located in China, with very few production activities carried out in HongKong. There are 17 employees in the Hong Kong office. Under the General Manager,there are the production, purchasing, accounts, administration, customer service and sales

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departments. The Purchasing Manager reports functionally to the Director of Purchasing inthe US and the Materials Director in Germany.

A supplier that is not satisfactory in performance

This supplier produces plastic casings for a type of switch. It has supplied the product to thecompany for almost four years. The cost of the plastic casing is about 30% of the switch.The main issues with this supplier are its poor quality and late delivery. It is a small supplier.It is not cooperative and responsive enough. The responsibility for quality control seems tofall on the shoulders of the buying company. The supplier is willing just to replace thosedefective parts that are found by the buyer. The supplier initiates no suggestions forimprovement. The buying company and this supplier maintain only a transactional relation-ship with each other.

The response from the supplier is slow and not good. There is only one personresponsible for the ordering of the buying company. Communication is not good. The poorquality of the supply from this supplier has resulted in a cancellation of an order by one ofthe clients of the buying company. Recently, the buying company is looking for a new supplierto replace the poor supplier. However, moulds and tooling have to be prepared before actualproduction can start and would take about 6 weeks to produce.

A supplier that performs satisfactorily

This supplier produces printed circuit boards (PCB) for the company. There are about sixactive suppliers supplying this item to the company. The supplier is medium in size and hasobtained ISO9002 for its factory in China. It has an office in Hong Kong.

The performance of this supplier is very satisfactory. It can handle some short-noticeorders. It provides cost reduction inputs to the buying firm and comments on the productdesign of the buying firm. Because of the good performance of the supplier, the buying firmgives an increasing share of orders to the supplier, which is about 30% of the total PCBbusiness. Each order will last for about 6 to 12 months. There are multiple contacts betweenthe two firms at different levels and locations. The materials are for the use of the companyin the US. The US office can contact the supplier’s plant in China directly and its office inthe USA. There are frequent exchanges of information on design, production and deliveryschedules, etc.

This PCB supplier has performed better than the other PCB suppliers. It has been open,responsive and cooperative. The relationship with this supplier started two years ago. Therehave been signs of improvement in the relationship with this supplier. It has become moreopen to the buying firm with the passage of time.

Application of the SCM Excellence Model in Case Company 1

The purchasing manager emphasized that the poor management of the plastic casing supplierhas led to its unsatisfactory performance. This reflects the incapability of the top managementof the supplier to control the supplier’s performance. The manager stressed the differentattitudes of the two suppliers. The good supply partner is more customer responsive andproactive in making counter proposals than the poor supply partner. Regarding the manage-ment systems and the operation linkages with the suppliers, communication is more frequentwith the better-performing supplier and the quality system of the better-performing supplieris also better. Moreover, the good supply partner also devotes efforts to continuously improve

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the cost and quality of its products by providing cost reduction inputs and suggestions onproduct design to the company. Not surprisingly, the good supply partner’s performance ismuch better than that of the poor one. It can be observed that the relationship and operationswith the good supply partner can follow the SCM Excellence Model, but this is not the casefor the poor supply partner.

Case Company 2

The company is a medium-sized toy manufacturing company. It mainly manufacturesdifferent types of die-cast cars. It is an OEM company. One of its major customers is ERTL.In the early 1990s, the company was only a small company employing about 1500 workersin China. At present, it has more than 3000 workers in China.

A supplier that performs unsatisfactorily

A printing supplier has been working with the company for seven years. It prints packagingboxes for the company. However, the quality of the packaging boxes has deteriorated somuch that the company is considering switching to other suppliers after unsuccessful attemptsto make the supplier improve. The main problems are that the edges of the paper boxes arenot straight enough, and that the shade of colour varies. The problems cannot be solved,even though the supplier has put in some efforts to improve its quality. The PurchasingManageress believes that the problem relates to the capability of the supplier, its qualitycontrol system, and the maintenance of its equipment, which needs to be changed orupgraded, otherwise quality will not improve. Orders are gradually moving from this supplierto another supplier.

A supplier that is very cooperative

The company has a small supplier, which has about 100 workers in China. It is verycooperative; however, its quality is not so good. The company has to send its engineers andQC people to the plant to help the supplier improve its quality. There is also some technologytransfer to the supplier; however, the supplier has agreed not to release this technology toothers. There is trust between the supplier and the company. The supplier has become acaptive supplier of the company. Before being a captive supplier of the company, the supplierhad supplied the company with some metal stamping parts for its toy cars. The companywas very satisfied with the service and cooperativeness of the supplier. Since the companyhas a new product line, it has agreed to obtain all its needs from this supplier. Therefore, ittakes up all the capacity of the supplier.

Application of the SCM Excellence Model to Case Company 2

The manageress believes that better communication and better understanding will make theperformance of the suppliers better. Although the quality of both suppliers was not so good,the company was willing to help the more cooperative supplier—the metal stamping partssupplier—to improve its system and thus its quality. There is better communication andmore trust between the company and this supplier. For the less-cooperative supplier, trustcould not be developed between the companies until finally business was diverted to otherprinting companies. The relationships and operations with the two suppliers suggest that,although the operation systems and the linkages are important, better cooperation and

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understanding will make the difference between the treatment of the two suppliers. Indeciding whether to work cooperatively in the supply chain relationship, the top managementof both companies also plays an important role. Thus, the supply chain relationships in CaseCompany 2 also support the validity of the model.

Conclusions

This paper has reviewed the comments of 59 companies on their major supply partners.Using content analysis, we can understand better the companies’ perceptions and can identifyseven themes from the comments. The seven themes give a better insight into the successfactors of managing supply partners. They give actual examples on how companies can bestmanage their suppliers and on situations where suppliers do not perform well. They provideevidence on the content validity of the model constructs. Moreover, they also support thevalidity of the model that has incorporated the seven themes in its constructs. The applicationof the model to the two case companies further indicates the usefulness of the model inunderstanding and predicting the performance of supply partners. If companies can followthe model more closely, it would certainly help them achieve supply chain managementexcellence.

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