SYSTEMATIC MODEL DEVELOPMENT TO ANALYZE SERVICE QUALITY IN SUPPLY CHAIN FOR A MANUFACTURING ORGANIZATION

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1 SYSTEMATIC MODEL DEVELOPMENT TO ANALYZE SERVICE QUALITY IN SUPPLY CHAIN FOR A MANUFACTURING ORGANIZATION Tarun Kumar Gupta 1, Vikram Singh 2 1 Mechanical Engineering Department, NGF College of Engineering and Technology, Palwal, Haryana, India 2 Mechanical Engineering Department, YMCAUST Faridabad, Haryana, India tarungupta1976@yahoo.com Abstract In today cut throat competition, individual firm cannot compete as an independent entity rather they have to work as an integral part of supply chain links. Today most of the organizations are seeking for close association in their upstream and downstream for maximizing their supply chain efficiency, their profit, reduce the lead time. The key to sustainable competitive advantage, in this competitive era, lies in delivering high quality service and that will result high customer satisfaction and ultimately customer delight. Keywords: Service quality in supply chain (SQSC), Distributor service quality (DSQ), Retailer service quality (RSQ), Customer service quality (CSQ). Introduction and literature review Today, in the time of tough competition, every organization changing its focus from profit maximization to maximizing the profit through increase customer satisfaction (Seth et al, 2005). Every organization wants to increase the customer base to reduce the marketing expenses. During the last three decades the scenario of business has considerably changed and organizations are putting more emphasis on quality of service. Quality is a concept, a philosophy and in true sense of realization can be observed when the service delivered results in utmost satisfaction. In this competitive fast developing world economy, there is radical pressure on the organizations to find new ways to improve the services and satisfy the customers, as these are the key to success. It is very easy to calculate the loss due to poor sale but very tough to calculate the loss due to poor service (Gupta and Singh, 2012). The literature of service quality is very enriched by definitions, models and measurements supported by a number of empirical studies from a variety of services. Though there is no universal accepted definition, but many authors & researchers (Lewis & Booms 1983, Gronroos 1984, Parasuraman et al 1985, Zeithaml et al 1988, Christopher 1992, Asubonteng et al 1996,) gives the definition according to their ideas and work but in the current scenario & related to service quality in supply chain Gupta & Singh (2012) define the Service quality in supply chain as how well an organization meets or exceeds the customer expectations in unidirectional or bidirectional for each element of a supply chain i.e. supplier, manufacturer, distributor, retailer and customer or end consumer. The gap model developed by Parasuraman et al (1985) was considered as most accepted model and many research and models are based on that. Supplier service quality During the last decade the purchasing environment has became one of the most crucial elements in establishing the value added contents for the products and services and hence has become the vital determinant to ensure the profitability and survival of business organization in the dynamic international market (Mohanty and Deshmukh, 1993). A supplier becomes part of a weak managed supply chain and it will have a lasting effect on the competitiveness of the entire supply chain (Choi and Hartely, 1996). An extensive study performed by Rossler and Hirsz (1995) found that closer interaction with internal customers improved internal customers perceptions of purchasing responsiveness, but technical knowledge was even more important. Purchasing arguably is a critical link to adding value in the supply chain because it has both internal and external customer and acts crossorganizationally as manager of external suppliers (Giumnipero and Vogt, 1997). Rota et al (2002) developed a simulation based planning model, which can help the supplier manager to determine what parameters affect the company performance. Seth et al (2006) discussed a tool called SSQSC to measure the supplier service quality in supply chain. 953

2 Figure -1 Classification of service quality literature Organization service quality Within the last few years researcher and practitioners have increasingly focused their attention on customer service and how to improve the quality of external service, encounters between the contact employee and external customer. Bitner et al., 1990 was interested in the physical surrounding that improve service encounters, while Parasuraman et al. (1985, 1988, 1991) focused on minimization of organization gaps that effect customer satisfaction. When service quality levels are high, benefits are found to include greater profitability, cost saving and increased market share (Thompron et al., 1985). Davis (1992) asserted that sound service quality strategy results in cost saving and financial gain over the long term. The importance of the internal environment and an employee role in delivering product and service quality to external customers, however in a relatively new idea Heskett et al. (1994) asserted importance of internal service quality to overall customer satisfaction by examining what they termed the service profit chain. Based on extensive care studies, they suggested that profit and growth resulted from customer loyalty, which is an outcome of customer satisfaction service encounters play a vital role in external customer satisfaction and thus to the firm s overall success. Negal and Cilliers (1990) defined the internal customer as anyone who receives product or services by others in the organization. For measuring service quality in the manufacturing side researchers preferred to explored quality management practices and their implications. Distributor service quality Rapid global changes in the environments of industrial markets make distributor commitment more important to suppliers and in some ways more difficult to achieve (Goodman and Dion, 2001). Ma and Deng (2002) also advocated that the distribution part plays a crucial role in the management of a supply chain, so particularly separated it from general supply chain and defined it as distribution chain. Erengue et al. (1999) advocated for integrated production/distribution planning for effective supply chain functioning. Numerous researchers advocated for manufacturer distributor partnership and alliances. Li and Lee (1994) find that in competition between two equal firms, the one furnishing better service enjoys a larger market share and a price premium. A higher-quality service is thus presumed to lead to greater sales revenue. Consumers expect the whole package, which include distribution service (availability of stock, reliable delivery), Kumar and Sharma (1992). Retailer service quality Technical service quality is an important contributor to product quality and value perceptions. Sales person s knowledge has a significant effect on perception of product quality and the value attached to a specific product. Sweeney et al (1997) discussed that service quality at the point of purchase influences consumer s perceptions of value and willingness to buy. A good service first time and every time built up the confidence of customer in the firm specially retailer firm. 954

3 Customer service quality In the supply chain everyone in the downstream is the customer of upstream. Haywood Farmer (1988) discussed that customer is the ultimate judge and he judges the quality by comparing expectations and perceptions of any organization. The organization of paper is as follows: first is introduction and literature survey which further proceed to service quality in supply chain. Then service quality for different elements of supply chain will be discussed. After that model development and discussion will be their followed by conclusion. Framework It is evident from the literature that much work on service quality is in the area of services and models, but the applicability of service quality concepts in supply chain management as a whole seems to be inadequate. Thus there seems to be a gap in the modeling and measurement in supply chain management. This has motivated to propose the model described in the next section. Model development & Discussion For measurement of service quality in supply chain in manufacturing industries a model is proposed along with the detail of different types of gaps in forward and backward direction. This conceptual model is based on the gap model used by different researchers ((Leminen, 2001; Guo, 2002; Seth et al, 2006) for different purposes. The gaps shown in the proposed model are divided in to two categories: Forward Gap: This gap is in the direction of material flow i.e. from supplier to organization, from organization to distributor, from distributor to retailer and from retailer to customer. Reverse Gap: This gap is in the direction of feed back or in the opposite of direction of material flow i.e. from customer to retailer, from retailer to distributor, from distributor to organization and from organization to supplier. The proposed model i.e. fig -2 attempts to analyze the various service quality gaps in the supply chain. The different types of bidirectional gap are: 1) Inter-organizational (between supplier and industry); 2) Intra-organizational (between industry and distributor); 3) Intra-organizational (between distributor and retailer); and 4) Inter-organizational (between retailer and customer). The detail of these gaps is discussed in table 1. This model also indicates that if customer has any problem with service or if customer is not satisfied it affect the whole supply chain. It is visualized that a typical supply chain is always influenced by a variety of external environmental factors which may play an important role in global economy (Seth et al, 2006). The implications of these factors on supply chain are as follows: Competitions: an industry may have a number of suppliers. There may be a competition for Technology, Lead time, Market Share, Price, quality of service etc. for facing this tough competition the supply chain must be review and re-oriented though Chinese, Taiwanese and Korean products affect many customer in Indian market. Political Environment: Tax policies, Expansion policy, Resource allotment policy etc are the political affairs which affect the supply chain. Many times government gives the relaxation in taxes etc. for development of a particular region. It affect the plant location, warehouse, transportation cost etc. Technical: Better feature and performance at fewer prices attract the customer and increase the market share. Those who are having less market share offer fewer price in same segment. In case of cars, for a particular segment, who gives more features and service at less price attract the customer more and enjoy the largest share of market. Price Fluctuation: Many times price fluctuation of the product force the customer to find some alternate. The price fluctuation may be due to Fuel price variation in Global market, USD rate variation, Availability of SPMs, Raw Material, Machining Price, Derivative etc. 955

4 Figure 2. Proposed service quality model for supply chain Poor Quality of Service: Lack of trust in goods and services from supply chain, reduced wages of employees, increase employees turnover are some cause for poor quality of services. Due to poor quality organization may lose market share & profit. Demographic: Generally most of the products or services are designed as per the customer characteristics & requirements. Age, sex, income of family etc. affect the product/ services utmost. Uncertainty: When product does not deliver on time, it loses the faith of customer in organization. This uncertainty may be due to non availability of transport, road conditions, Traffic jam etc. Labor union: More interference of labor union in day-to-day work may results more strike or less production per day which may looses confidence of supply chain in organization. The reason for interference may be more salary requirement due to high inflation, working hour, safety features etc. Socio-cultural: Caste, religion, family, locality etc. affect the future of some supply chains as some products or services like Jewellery items, Food chain etc may not be acceptable for a particular religion/area, e.g. McDonald prepared veg. burger first time in India Economic: Many times Profitability, less sale price, GDP, WTO implication etc. affects the entire supply chain operation. Many times outsourcing may favor economic conditions. Finance problem: During the death of technology/ product/ service organization looses the market share which result in increased inventory and reduces profit. It is better to change or adopt the new technology/ product or service during the death time. 956

5 Table 1. Gap amongst Supply Chain Echelons Sr. No. Gap Type Between 1 Gap 1F Forward Supplier and Organization 2 Gap 1R Reverse Organization and Supplier 3 Gap2F Forward Organization and Distributor 4 Gap 2R Reverse Distributor and Organization 5 Gap 3F Forward Distributor and Retailer 6 Gap 3R Reverse Retailer and Distributor 7 Gap 4F Forward Retailer and Customer 8 Gap 4R Reverse Customer and Retailer Conclusion The model proposed is an attempt to measure the service quality in supply chain considers the unidirectional and bidirectional gaps, their interdependence and may be interrelationship. This paper also indicates that dissatisfy customers affect whole supply chain. This paper may be considered as an attempt to enlighten the specific gaps in SQSC and will help researchers and practitioners to find the gap in their supply chain and to increase the efficiency of their supply chain though there is a need for empirical validation of the model and need for further study to check whether these gaps vary with functional responsibilities or products of different industries. References Asubonteng, P., McCleary, K.J. and Swan, J.E. (1996), SERVQUAL revisited: a critical review of service quality, The Journal of Services Marketing, Vol. 10, No. 6, pp Bitner, M.J., Booms, B.H. and Tetreault, M.S., (1990), the service encounter: diagnosing favorable and unfavorable incidents:. Journal of marketing, Vol 54, No. 1, pp Christopher, M. (1992), Logistics and supply chain management, Pitman publishing, London. Davis, T.R.V., Satisfying internal customers: The link to external customer satisfaction, planning review, vol.20 no.1, (1992), pp Ghobadian, Abby (1993), Service quality: concepts & models, International Journal of Quality & Reliability Management, Vol. 11, No. 9, 1994, pp Grönroos, C. (1984), A service quality model and its marketing implications, European Journal of Marketing, Vol. 18 No. 4, pp Gupta, Tarun K., & Singh, Vikram (2012) Service Quality in Supply Chain: A Review International Journal of Engineering & Technology, Vol. 2, No. 8, pp Mohanty,R.P., and Deshmukh, S.G., Use of analytic hierarchical process for evaluating sources of supply, international journal of physical distribution and logistics management, vol.23, No.3, (1993), pp Negal, P. and Cillier, W, Customer satisfaction: A comprehensive approach, International Journal of Physical Distribution and Logistics Management, Vol.20, No.6, (1990), pp2-46. Parasuraman, A., Zeithaml, V.A. and Berry, L.L. (1985), A conceptual model of service quality and its implications for future research, Journal of Marketing, Vol. 49 No. 3, pp Seth, Nitin, Deshmukh, S.G. and Vrat, Prem (2006), A frame work for measurement of quality of service in supply chains, Supply Chain Management: An International Journal, Vol. 11 No. 1, pp Seth, N., Deshmukh, S.G. and Vrat, P. (2006), SSQSC: a tool to measure supplier service quality in supply chain, Production Planning & Control, Vol. 17, No. 5, pp Sweeney, J.C., Soutar, G.N. and Johnson, L.W. (1997), Retail service quality and perceived value, Journal of Consumer Services, Vol. 4 No. 1, pp Zeithaml, V.A., Berry, L.L. and Parasuraman, A. (1988), Communication and control processes in the delivery of service quality, Journal of Marketing, Vol. 52 No. 2, pp