Suppler Qualty Performance Measurement System* LIU Yumn School of Busness, Zhengzhou Unversty, P.R.Chna, 45000 Abstract Qualty performance s excellent performance that organzatons reach to hgh qualty at lower cost when they operate and manage accordng to advanced qualty management system. How to measure suppler qualty performance or excellent performance s very mportant for mprovng the qualty of an organzaton s products and servces. There have been ample researches on suppler selecton crtera and performance evaluaton, however, much less work can be found about the practce of suppler qualty performance measurement. In ths paper, suppler qualty performance measurement system s developed usng the Chna Qualty Award (CAQ) as the theoretcal framework, then emprcal approach for suppler qualty performance measurement s presented by means of Qualty Functon Deployment (QFD) method based on data from motorcycle ndustry. Key words Suppler, Qualty Performance, Performance Measurement, QFD, Qualty Award. Introducton Global competton has pushed enterprses to pay more attentons to the development of core competences. So far researches on suppler selecton and suppler performance evaluaton have receved wdespread concerns. Suppler performance evaluaton has been focused on the three key ndcators that are qualty, servce and dstrbuton for a long tme. These ndcators can not evaluate supplers exactly and comprehensvely, some other factors should be added to suppler performance evaluaton system, such as envronment (Sungmn and Nermn, 2006). There have been ample researches on suppler selecton crtera and performance evaluaton, but much less work can be found about the practce of suppler qualty performance. How to let suppler to get excellent performance and how to measure them s very mportant for organzatons. There are several fnancal and non-fnancal factors related to qualty performance (La, 2003). Kevn ponts out that there are sx specfc constructs that ndcate the qualty performance of an organzaton, ncludng product qualty effectveness, operatonal process effcency, customer focus, emphass on employee, suppler role, and fnancal performance (Kevn Laframbose, 2002). In other words, there are latent constructs, whch measure or defne qualty performance. The selecton of these constructs s based on the crtera and measures of busness results found generally n the dfferent natonal qualty awards programs and specfcally n the Malcolm Baldrge Natonal Qualty Award (MBNQA) of the Unted States. Snce the md-990s, the topc of qualty awards and self-assessment has receved consderable attentons from researchers and s well defned n the lterature. Western companes adopt the busness excellence models n natonal qualty awards to self-assess busness performance. A self-assessment process for new product ntroducton s adopted and appled by organzatons to evaluate ther performance aganst best practce, and to mprove conformance through rgorous applcaton (Tennant and Roberts, 2003). By means of the crtera of natonal qualty awards, some self-assessment practces are carred out to obtan comprehensve performance ratngs to measure qualty performance of the productons and servces (Rtche and Dale, 2000). In ths context, t s essental for organzatons to montor ther performance on a regular bass that reled on the maor natonal qualty awards, especally, on the Chna Qualty Award (CAQ). Qualty performance s excellent performance that organzatons reach to hgh qualty at lower cost when they operate and manage accordng to advanced qualty management system. It s very mportant for lowerng product costs and mprovng qualty to select fewer supplers and establsh long-term cooperatve partnershp wth them on the bass of qualty performance measurement. A relable and vald measurement tool for qualty performance should satsfy two cardnal condtons. * Ths paper s supported by Natonal Scence Funds for Dstngushed Young Scholar No. 7025004 and Natonal Nature Scence Foundaton of Chna No.70572050. 43
Frst, t should measure what t s supposed to measure. Second, t must be able to measure them correctly. In ths paper, a suppler qualty performance ndcator system s developed usng the CAQ as the framework, and the emprcal approach s provded usng QFD as a useful method based on the data from motorcycle ndustry. The qualty performance of supplers has a drect mpact on the enterprses growth and development n a hghly compettve envronment. A set of obectve, accurate suppler qualty performance measurement system s developed n ths paper, whch s good for the selecton of supplers and development of long-term partnershp. 2. Suppler Qualty Performance Model Most natonal qualty awards provde a framework of crtera to show the essental elements of an organzaton's qualty performance and get the Qualty Performance Score (QPS). It s essental for organzatons to montor ther performance on a regular bass that reled on the maor natonal qualty awards. Chnese Qualty Award crtera were revsed n 2003 accordng to the crtera for performance excellence of the MBNQA. From 2005 onwards, Crtera for performance excellence were cted as the natonal standard (CQA, 2003). CQA model for performance excellence have been establshed based on the CQA crtera (Lu and Xu 2003). As a symbol of world-class busness excellence, the CQA encourages organzatons to strengthen ther management system to mprove ther compettveness. Suppler qualty performance model s establshed n the paper based on CQA model for performance excellence. CQA crtera has seven categores: leadershp, strategc plannng, customer and market focus, measurement, analyss, and knowledge management, human resource, process management, and busness results, whch defne fundamental aspects for the pursut of excellence performance. There are 9 tems accordng to the categores, the tems under each crteron are meant to address varous aspects of the organzaton. There are 32 areas to address under the tems. To mantan a good cooperatve partnershp, only measurng busness results s not enough whle ts ablty to develop long-term cooperaton should be focused on from the perspectve of development. Good customers and market can make supplers fully understand the demand of customers and market, and then provde products needed by the customer. Adequate resources ensure the avalablty of hgh qualty products at an approprate prce. Stable and relable supply process ensures supplers send the exact quantty of products to the correct locaton at the approprate tme. Effectve nformaton and knowledge management can help enterprses progress and develop contnuously, and satsfy customer's evolvng needs. Therefore suppler qualty performance can be measured from fve aspects that are customers and markets, resources, supply process, nformaton and knowledge management, busness results. Suppler qualty performance model s developed based on CQA, as shown as Fgure. 4. Informaton and Knowledge Management.Customer and Market Focus 2. Resources 3. Supply Process 5. Busness Results Fgure Suppler Qualty Performance Model Ths suppler qualty performance model ncludes three aspects: three core modules that are customer and market focus, resources and supply process; a support system whch s nformaton and knowledge management; busness results reflectng the suppler's overall operaton. 3. Suppler Qualty Performance Measurement Indcator System The frst condton for a relable and vald measurement tool of qualty performance s that t must 44
measure all dmensons of busness that are deemed to have mpact on overall organzaton's qualty performance and construct a measurement attrbute system or ndcator system. Accordng to the suppler qualty performance model, suppler qualty performance ndcator system s developed. Suppler overall qualty performance (OQP) s one ndcator whch reflects the overall qualty performance of busness. The fve modules n Fg that are customers and market focus, resources, supply process, nformaton and knowledge management, busness results are taken as the frst level ndcators. Through analyss of factors mpactng the suppler qualty performance, some tems are chosen from the correspondng categores n CQA crtera as the second level ndcators, some areas to address are extracted form the correspondng tems n CQA crtera as the thrd level ndcators. 3. Customer and market focus (FLI) In order to obtan the long-term development and operatng performance, supplers must produce customer satsfed products and servces, must focus on customer and market. It can be measured from two aspects: knowledge of customers and market, customer relatonshps.. Knowledge of customer and market () Knowledge of customer and market may nclude customer dentfcaton (TLI), channels of knowng customer demands (TLI2) and compettors (TLI3). 2. Customer relatonshps (2) Customer relatons can be measured from two aspects: customer relatonshp buldng (TLI4) and customer relatonshp management (TLI5). 3.2 Resources (FLI2) Resources must be measured from four aspects that are fnancal resources, human resources, technologcal capablty and cooperaton.. Fnancal resources (3) Fnancal resources manly measure development capacty (TLI6) of supplers from the fnancal ponts of vew. The debt-to-asset rato can reflect development capablty effectvely. 2. Human resources (4) It can be measured from leadng effcency (TLI7) and staff ablty (TLI8). 3. Technologcal capablty (5) The suppler s technologcal capablty has receved focal attenton as a purchasng decson factor (e.g., Burt, 989; Monczka, Trent & Callahan, 993; Percy et al., 997). It can be measured from two aspects: technologcal nnovaton (TLI9) and certfcaton of qualty system (TLI0). 4. Cooperaton (6) For many suppler frms, establshng and mantanng a network of satsfed sellers s crucal to the long-run vablty of ther channel systems (Dwyer, 980; Geyskenset al., 999). Cooperaton relaton can be measured from two aspects that are nformaton sharng (TLI) and cooperaton ntent (TLI2). Informaton sharng should be stressed n suppler performance evaluaton (Kannan, 2002). 3.3 Supply process (FLI3) Its supply capablty (7)s essental for the supplers qualty performance. Weber, Current and Benton (99) found that prce, delvery and qualty are the three most mportant factors by an overvew of 74 lteratures on supplers, and so supply capablty s nspected from product qualty (TLI3), delvery (TLI4) and prce (TLI5). 3.4 Informaton and knowledge management (FLI4) It can be measured from two aspects: nformaton Acquston, knowledge management.. Informaton acquston (8) Informaton acquston can be measured by staff proposal (TLI6) and other partners (TLI7), whch can be measured by the rate of staff ratonalzaton proposals and the rate of data sharng respectvely. 2. Knowledge management (9) Ths requres advanced nformaton systems and transmts nformaton tmely and relably. Informaton system (TLI20) s the hardware of nformaton-sharng, on whch nformaton s transmtted. To a large extent t determnes the tmelness (TLI8), effectveness and accuracy of nformaton transmsson (TLI9). 3.5 Busness results (FLI5) 45
Busness results should not only consder ts fnancal results, but also nclude ther customers and market, and socal responsblty.. Customers and market (0) Customers and market results can be measured from two aspects: customer satsfacton (TLI2) and market share (TLI22). 2. Fnancal results () Fnancal results manly measure suppler s ncome stuaton (TLI23) by the return rate of nvestment. 3. Socal responsblty (2) Socal responsblty can be measured from ethcal behavor (TLI24) and publc responsblty (TLI25) of supplers. Accordng to the CAQ crtera correspondng to the fve modules, twelve ndcators are chosen from the correspondng tems n CAQ as the second level ndcators, twenty-fve ndcators are chosen from the correspondng areas to address n CAQ as the thrd level ndcators. In the thrd level ndcators, some ndctors can be quantfed easly, such as qualty that s one of the thrd level ndctor s measured by the qualfed rate of products, whle other ndctors are qualtatve ndcators whch scores can t be measure easly, such as ethcal behavor, these ndctors are measured by the questonnares. The ndcator system of suppler qualty performance s formed, as shown as Fgure 2. The suppler qualty performance measurement ndcator system measures all dmensons of suppler that have mpact on qualty performance. However, n order to measure qualty performance scentfcally, t also must be able to measure these ndcators correctly. Many methods have been mpled to performance measurement, such as Prncpal Components Analyss, Fuzzy Comprehensve Evaluaton and Analytcal Herarchy Process. In ths paper, Qualty Functon Deployment (QFD) s ntroduced as a measurement tool for suppler qualty performance. The prmary functons of QFD have been expanded from product development (Crow, 2000) and qualty management to product desgn and decson-makng, ncludng performance measurement, evaluatng company s current status (Lu, 2006). 4. Emprcal Analyss for Suppler Qualty Performance Measurement Based on data from a motorcycle sales company at the southern of Jangsu provnce, QFD method s ntroduced for the emprcal analyss of suppler qualty performance measurement system. Accordng to features of system, three-stage QFD s used n the paper. Steps are as follows. 4. Buldng of a three-stage QFD model At frst, there s only one ndcator that s overall qualty performance (OQP) on the left wall n the frst house of qualty, and the crtcal factors mpactng on OQP can be known as the frst level ndcators, that s, customers and market, resources, supply process, nformaton and knowledge management, and busness results. OQP s regarded as the upper level ndcator of the frst level ndcators, and ther relatonshp matrx s n the cells of the house( Fg.3). Correlaton matrx Weght of OPQ FLI FLI 2 FLI3 FLI4 FLI 5 OQP 4 7 5 7 8 Wghts of FLI () w 0.3 0.23 0.6 0.23 0.25 OPQ = 2.84 2.63 3.4 3.02 3.05 2.37 Fgure 3 the Frst House of Qualty of Suppler Qualty Performance Measurement 46
In the second phase, fve ndcators n the frst level must be placed on the left wall n the second house of qualty. Twelve ndcators n the second level are hung on the celng of the second house of qualty. Slmly, the second level ndcators are regarded as the upper level ndcator of the frst level ndcators, and ther relatonshp matrx s n the cells of the house (Fg.4). In the thrd phase, the twelve second level ndcators are put on the left wall of the thrd qualty of house; the twenty-fve thrd level ndcators are hung on the celng of the thrd house of qualty. The relatonshp between the second level ndcators and the thrd level ndcators are put nto the relatonshp matrx n the thrd house of qualty. Correlaton matrx Weghts of FLI () w 2 3 4 5 6 7 8 9 0 2 FLI 0.3 9 8 3 3 FLI2 0.23 7 9 7 8 3 3 5 FLI3 0.3 3 3 3 8 FLI4 0.23 5 3 8 9 FLI5 0.25 3 3 3 3 7 9 5 (2) Weghts of w 0.4 0.59 0.9 0.30 0.26 0.25 0.48 0.52 0.3 0.49 0.20 FLI score 2.63 3.4 2.09 FLI2 score 3.4 4 3.72 2.49 3.48 FLI3 score 3.02 3.02 FLI4 score 3.05 3.59 2.56 FLI5 score 2.37 2.54 2 3 Fgure 4 the Second House of Qualty of Suppler Qualty Performance Measurement 4.2 Assgnng the relatonshp ratngs The choce of a relatonshp ratng scheme s crtcal n mplementng a sutable method of QFD model. The relatonshp matrx used n the house of qualty has a strong and drect mpact on the qualty performance measurement. In ths paper, the relatonshp ratngs between the upper level and the lower level ndcators for qualty performance are measured on a 9-pont scale (-9scale). It s necessary to select a team of 5-7 assessors organzed an evaluaton group. Dependng on the mpact of the upper level ndcators on the lower level ndcators, assessors assgn the 9-pont scale. 4.3 Determnng the udgment matrx (3) For the thrd level ndcators n Fgure 6, assessors can easly gve ther scores, we suppose s (=, 2,,25) denotes ther scores. The k level ndcators correspondng to the k- level ndcators can be ( k prortzed accordng to the relatonshp ratngs, r ) ( k=, 2,3), and then the self-assessment matrx of ( ) qualty performance n k level, ( p k ), s obtaned by s (=,2,,n 4 ), that s : ( k ) 47
() ( k ) ( k ) ( k) k m ax ( k ) p { } 0 = s When r 0 = r p = =,..., n 2 0 Otherwse For example, n order to obtan the udgment matrx n the thrd house of qualty, the thrd level ndcators correspondng to the second level ndcators has been prortzed accordng to the relatonshp ratngs n the thrd house of qualty. Frst, we can see that relatonshp ratngs of TLI correspondng to the, 2, 0 are 9, 5, respectvely, the relatonshp ratng of TLI correspondng to the s the hghest n the there scores, so self-assessment matrx of qualty performance of TLI s wrtten down correspondng to the n the udgment matrx. The udgment matrx of TLI correspondng to other ndcators n the second level are zero. Slmly, the udgment matrx of other ndcators n the thrd level can be obtaned. 4.4 Computng the weghts of ndcators The mportance weghts of ndcators play a sgnfcant role n measurng the qualty performance. The weght of OPQ s because there s only one overall ndcator. Here, we suppose that ( k ) w ( =,2,..., nk ; k=,2,3,4 ) denotes the weghts of the (k-) th level ndcators, and r ( k ) descrbes the relatonshp ratngs of the k th level ndcators to the (k-) th level ndcators. In order to obtan the ( ) weghts, w k ( = n ), of the k th ( ) level ndcators, we should use the weghts w k wth the, 2,..., k relaton ratngs r ( k ). For each ndcator n the k th level, the weght ( )' normalzaton ofw k, whch s computed as follows: n k ( k ) ' ( k ) ( k ) = =, 2,..., k = w r w n w s obtaned through the (2) w = w =, 2,..., n ; k = 2, 3, 4 ( k ) ( k ) ' n k k ( k ) ' w = ( k ) (3) For example, the weghts of the frst level ndcator can be calculated by the weghts of ther upper level ndcators that s the weght of OPQ and ther relatonshp matrx. The weght of OPQ s and relatonshp matrx of OPQ correspondng to the fve frst level ndcators s 4, 7, 5, 7 and 8 respectvely. Accordng to the Formulas (2) and (3), the weght of customer and market focus n frst level ndcators s computed as 0.3.Smlarly, the weghts of the other ndcators n frst level, the second and the thrd level ndcators can be easly got by the same way. 4.5 Scorng the qualty performance The procedure of gettng the qualty performance score keeps n order from the last level to the overall qualty performance n the thrd-phase QFD model. For each ndcator n the thrd level, ts qualty performance score can be obtaned drectly from assessors udgments by questonnares, whch consttute the udgment matrx of qualty performance, ( ( 3 ) p ). Accordng to the above dscusson, the ( k weghtsw ) ( k =, 2,3), of the k level ndcators have been calculated. The qualty performance scores, ( k ) s ( =, 2,..., nk ), of the k- level ndcators are computed usng the score of each row of the assessment matrx n the k level and ther correspondng weghts, that s, n k ( k ) ( k ) ( k ) k = (4) s = p w ( =, 2,..., n ; k =, 2, 3 ) When k=0, the overall qualty performance score, OQPS, s obtaned by ( 0 ) s. For example, n order to obtan the qualty performance score of, we should use the udgment matrx n the thrd level at the same row of and ts correspondng weght. Our case shows that the udgment matrx n the thrd level at the same row of s 4, 3, 3 and ts correspondng weghts are 0.4, 0.36 and 0.23 48
respectvely, accordng to the formula (4),the qualty performance score of can be computed as 3.4. Slmly, the qualty performance score of other ndcators n the second level and the frst level ndcators can be obtaned. Fnally, OQPS s computed as 2.84. We can see from the result that the qualty performance of ths suppler s not very good. 5. Conclusons Natonal Qualty Award crtera usually are used by enterprses as a measurement tool of performance to know whether or not acheve performance excellence, to assess the qualty performance of enterprses. Enterprses can measure ther qualty performance regularly and dentfy areas n need of mprovement accordng to these gudelnes. In ths paper, a suppler qualty performance model s developed usng the CQA as a framework, and a set of scentfc, obectve qualty performance ndctor system s establshed based on the suppler qualty performance model. An effectve measurement method and ts mplementaton process are presented n ths paper. A thrd-phase QFD model as a useful tool for measurng qualty performance n organzatons has been ntroduced. The proposed QFD method wll hopefully provde gudance for anyone who wants to develop self-assessment tools for measurng qualty performance n organzatons. The suppler qualty performance measurement system n ths paper can be used not only n the choce evaluaton of suppler, but more mportant s used as a measure and dagnostc tool for organzatons n pursut of excellent performance, so problems can be found n a tmely manner and measures can be taken effectvely for mprovement. It provdes scentfc nstruments for suppler selecton and qualty performance measurement. References [] Bevlacquaa, M., Carapcab, F.E. and Gacchettab G. A fuzzy-qfd approach to suppler selecton. Journal of Purchasng & Supply Management.2006(2): 4~27 [2] Cont, T. Organzatonal Self-Assessment. Chapman and Hall, London. 997 [3] CQA. The Chna Qualty Award. http://www.caq.org.cn.,2003 [4] Crow, K. Performng QFD Step by Step. DRM Assocates, Palos Verdes, CA. 2000 [5] General Admnstraton of Qualty Supervson, Inspecton and Quarantne of the People s Republc of Chna, Standardzaton Admnstraton of the People s Republc of Chna. Crtera for performance excellence. 2004 [6] Sungmn Ryu, Nermn Eyuboglu. The envronment and ts mpact on satsfacton wth suppler performance: An nvestgaton of the medatng effects of control mechansms from the perspectve of the manufacturer n the U.S.A.. Industral Marketng Management.2006 (36):458~469 [7] Jagdev, O., Bradley, P. and Molloy, O. A QFD Based Performance Measurement. Computers n Industry, 997, 33:357~366 [8] Kee-Hung La. Market Orentaton n Qualty-orented Organzatons and Its Impact on Ther Performance. Internatonal Journal of Producton Economcs.2003(84):7~34 [9] Kevn Laframbose. An Emprcal Study of the Relatonshp between Qualty Practce and Busness Performance Excellence n Central Canada. Quebec, Canada. 2002 [0] Kee-Hung La. Market Orentaton n Qualty-orented Organzatons and Its Impact on Ther Performance. Internatonal Journal of Producton Economcs, 2003(84):7~34 [] Lu Y. QFD Model for Qualty Performance Self-assessment. The Asan Journal on Qualty, 2006(): 67~80 [2] Lu, Y. and Xu, J. Customer Satsfacton Measurement Model Based on QFD. The Asan Journal on Qualty, 2003, 4(2):0~22 [3] Rtche, L. and Dale, B.G. Self-assessment Usng the Busness Excellence Model: A Study of Practce and Process. Int. J. Producton Economcs. 2000(66):24~254 The author can be contacted from e-mal : zzyumnlu@63.com 49
TLI Customer Identfcaton Knowledge of Customer and Market TLI2 Channels of Knowng Customer Demand FLICustomer and Market Focus TLI3 Compettors 2 Customer Relatonshps TLI4Customer Relatonshp Buldng TLI5Customer Relatonshp Management Products Popularty Tmes of Customer Complants 3Fnancal Resources TLI6 Development Ablty The Debt-to-asset Rato 4 Human Resources TLI7 Leadng Effcency Rato of Effectve Strategc Decsons FLI2 Resources 5Technologcal Capablty TLI8 Staff Ablty TLI9 Technology Innovaton TLI0 Certfcaton of QS Average Tranng Cost of Staff Introducton of New Products ISO Certfcaton Suppler Overall Qualty Performance (OQP) FLI3 Supply Process 6 Cooperaton 7 Supply Ablty TLI Informaton Sharng TLI2 Cooperaton Intent TLI3 Qualty TLI4 Delvery TLI5 Compettve Prce Tmes of Successful Cooperaton The Qualfed Rate of Products Rate of Accuracy Delvery Prce of Compettve Advantage 8 Informaton Acquston TLI6 Staff Proposals TLI7 Other Partners Staff Reasonable Proposals Rate of Data Share FLI4 Informaton and Knowledge TLI8 Tmelness 9 Knowledge Management TLI9 Accuracy TLI20 Informaton System 0 Customer and Market TLI2 Customer Satsfacton TLI22 Market Share Rate of Customer Complant Rato of Marker Share FLI5 Busness Results Fncal Results TLI23 Income Stuaton Return Rate of Investment 2 Socal Responsblty TLI24 Ethcal Behavor TLI25Publc Responsblty Fgure 2 Suppler Qualty Performance Measurement Indcator System 420