Benchmarking: An International Journal

Emerald Article: The relationship between strategic purchasing and customer satisfaction within a total quality management environment Terry Brookshaw, Mile Terziovski

Article information:
To cite this document: Terry Brookshaw, Mile Terziovski, (1997),"The relationship between strategic purchasing and customer satisfaction within a total quality management environment", Benchmarking: An International Journal, Vol. 4 Iss: 4 pp. 244 - 258 Permanent link to this document: http://dx.doi.org/10.1108/14635779710195096 Downloaded on: 11-04-2012 References: This document contains references to 27 other documents To copy this document: permissions@emeraldinsight.com This document has been downloaded 3241 times.

Access to this document was granted through an Emerald subscription provided by UNITED STATES INTERNATIONAL UNIVERSITY KENY For Authors: If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service. Information about how to choose which publication to write for and submission guidelines are available for all. Additional help for authors is available for Emerald subscribers. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.com With over forty years' experience, Emerald Group Publishing is a leading independent publisher of global research with impact in business, society, public policy and education. In total, Emerald publishes over 275 journals and more than 130 book series, as well as an extensive range of online products and services. Emerald is both COUNTER 3 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation.
*Related content and download information correct at time of download.

BQM&T 4,4

244

The relationship between strategic purchasing and customer satisfaction within a total quality management environment
Terry Brookshaw and Mile Terziovski
Department of Management, Faculty of Business and Economics, Monash University, East Caulfield, Australia
Introduction Research problem Pressure on companies to maintain profit in an increasingly complex and competitive global marketplace has seen a focus by management on the purchasing process. Superior performance by purchasing is considered a key element in the success and contribution to meeting an organizations strategic objectives, (Kekre et al., 1995). Prior research and study in the area of strategic purchasing suggests that organizations are implementing and developing successful purchasing strategies (Carter and Narasimhan, 1996). The term concurrent purchasing (Hines, 1996) is used to describe a new paradigm where purchasing is repositioned as a key strategic and operational process rather than a stand alone function. The term reverse marketing (Biemans and Brand, 1995) is suggested as the required significant change to the purchasing function. Contributions by purchasing to organizational performance improvement in quality, cost and design processes are the proposed outcomes. Empirical research by Carter and Narasimhan (1994), documented the role purchasing plays in guaranteeing a high level of quality and customer satisfaction. Results from an analysis of variance in their research suggested that purchasing and manufacturing are most closely interfaced in the area of quality improvement programs followed by new product development. A survey of purchasing professionals, members of the National Association of Purchasing Management (NAPM) in the USA, however, indicated:
that suppliers were generally weak in the areas of quality, delivery, cost reduction, adoption of new technologies, financial health and handling design changes. The result points to a need for buying firms to obtain higher levels of performance from suppliers, either by locating new sources of supply or working with present suppliers (Ettore, 1995).

Benchmarking for Quality Management & Technology, Vol. 4 No. 4, 1997, pp. 244-258 MCB University Press, 1351-3036

The United States General Accounting Office (GAO) found in February, 1994, (Barrett and Greene, 1995), that even though the USA produced the best

weaponry in the world, wasteful procurement methods within the Pentagon added billions of dollars to defence acquisition costs. It was stated that reforms and effective management of the purchasing process, however, would not succeed unless the underlying culture of the Pentagon changed. The purpose of this study is to therefore address the gaps in the literature by investigating the strength of the relationship between strategic purchasing and customer satisfaction in a TQM environment. A study of best manufacturing practices in Australia and New Zealand by the Australian Manufacturing Council (AMC, 1994), found that although many organizations recognize customer focus as essential, many more dedicate less effort to mutual arrangements with their suppliers. The study also found that less than half of all sites surveyed reported working closely with their suppliers in product or process development. Best practice as defined in the AMC study is:
The co-operative way in which firms and their employees undertake activities in all key processes: leadership, planning, customers, suppliers, community relations, production and supply of products and services and the use of bench marking. These practices when effectively linked together, can be expected to lead to sustainable world-class outcomes in quality and customer service, flexibility, timeliness, innovation, cost and competitiveness (AMC, 1994).

Purchasing and customer satisfaction 245

The AMC definition of best practice is used in this paper for defining reengineering as a change programme aimed specifically at key processes to achieve best practice. The synergistic process that integrates purchasing into corporate strategies is sparsely researched (Etorre, 1995). The components for the repositioning of purchasing as a key strategic process and contributor to the value stream are neglected in much of the available literature. Can re-engineering the purchasing process, to achieve best practice, be done in isolation to re-engineering the total organization to achieve best practice processes, provide significant performance improvements and enhance the organizations competitive edge? Do organizations need to simply develop a process to assist in linking purchasing to corporate competitive strategy and other functional area strategies (Watts et al., 1995)? Or is a more basic cultural change and methodology required, based on TQM principles whose objectives are customer satisfaction? Strategic purchasing processes firmly rooted in TQM processes from the literature reviewed have been given mainly anecdotal or single case study treatment (Stuart and Mueller, 1994). An empirical analysis to substantiate the interrelationship is required. This raises the important question: does strategic purchasing have a significantly positive effect on customer satisfaction in a TQM environment? This paper addresses part of the above question by a preliminary empirical analysis evaluating the relationship between strategic purchasing and customer satisfaction using the statistical analysis package SPSS.

BQM&T 4,4

246

Literature review Background and review of prior research Total quality management is described (Terziovski et al., 1996), as a comprehensive set of processes which engage all people in a company on process improvements. TQM requires organizations to design their services and products with knowledge of their customer requirements. Stuart and Mueller (1994) describe TQM as a system of management whose primary objective is customer satisfaction and includes the quality of supplier produced materials. Quality management and partnering or strategic relationships with suppliers is inexorably linked. The customer within TQM is anyone in the supply chain that receives materials from a prior step in the supply process (Stuart and Mueller, 1994). Customers are both internal and external to the organization. For purchasing to be strategic there must be a view of both the internal customer and the external or end-consuming customer in the supply chain and be part of an organization-wide change programme to achieve strategic relationships. Conforming to customer expectations demands that each stage in the supply chain conforms to specifications based on these expectations (Stuart and Mueller, 1994). All processes must be in control, both the suppliers and the customers, and have minimal variation. A key component of TQM is the importance of continuous improvement. Best practice recognizes that customer expectations increase over time and that supplier continuous improvement is a necessary element (Klein, 1991). Slater (1996), however, suggests that although quality remains important to providing value to customers, it is losing its power to deliver superior value. As buyers expectations of quality rise, the Japanese have a new phrase, atarime hishitsu, which means quality taken for granted (Slater, 1996). The argument is that competitive advantage is therefore lost and is even causing problems in some industries by lengthening the time between purchases of new products (Slater, 1996). Companies who successfully re-engineer themselves begin by developing a complete understanding of the business processes necessary to deliver customer value. These companies then benchmark to assess their cost position and process capability (Slater, 1996). Strategic purchasing The need for purchasing strategies is a response to emerging dynamics of competition in the global environment. A major aspect of the impact on manufacturing companies and their strategy is the need for identification and development of global sources for procurement of raw materials and parts components (Palaniswami and Lingaraj, 1994). The implication to the purchasing process and the emerging new role requires interdisciplinary efforts which could include marketing, manufacturing, engineering, purchasing and human resource development (Chen, 1994). Analysis of the Profit Impact of Market Strategy (PIMS) database (Carter and Narasimhan, 1994), shows that the long-term critical factor impacting a

business units performance and share of the market is the quality of its products compared to the competitions. The implications for the purchasing role are significant. Changes in the processes and measurements employed in managing the supply market to achieve the end quality required to compete must be identified. The changing character of purchasing is accentuated in existing literature. In the 1960s through to the 1970s, the need for active supplier development was discussed. In the 1980s, single sourcing was suggested but debate centred on the dangers of reliance on one supplier (Biemans and Brand, 1995). The 1990s discussion on purchasing is characterized by terminology like reverse marketing (Biemans and Brand, 1995), an aggressive type of purchasing described as actively identifying potential suppliers and offering suitable suppliers proposals for long-term collaboration. Other descriptors are proactive procurement and market-driven procurement (Burt, 1989). Competitive advantage is the basic driver for corporate strategies in the, 1990s. Savings on procurement are recognized as going straight to the bottom line of corporate profit, up to 5 per cent increase on return on sales over average performers and 5-15 per cent in total spend over a three-year period (Keough, 1994). Major organizations have turned to purchasing to improve profits. Strategic sourcing is proposed as a disciplined, analytical and systematic approach to purchasing. The impact from strategic sourcing and the processes employed and what the purchasing function does affects all other sections of an organization (Mehltretter, 1996). The transition and evolution of the purchasing process is a trend to a movement from purchasing as a tactical decision to one of strategic sourcing. A movement from a regional focus to a global one creates a shift in behaviour of the supply market in a deterministic way. It is stated (Carter and Narasimhan, 1994) that it seems inconsistent to expect a high degree of purchasing involvement in assuring TQM success without a clear and consistent participation by purchasing in the development of a firms business plans. The importance of purchasing involvement in development of business strategy is central to achieving organizational competitiveness. Partnerships Recent literature has concentrated on buyer-supplier relationships and the implications for performance. Although recent research has generated considerable insight into the nature of buyer-supplier relationships, the existing literature is incomplete in several respects, in particular, the undocumented performance implications of adopting different forms of relationships (Heide and Stump, 1995). The risk is that strategic purchasing can be viewed simply as undertaking strategic realignments of various kinds. Partnering arrangements, single sourcing and multiple sourcing are all forms of relationships proposed in the literature. Actual benefits achieved in productivity and quality from supplier relationship activities has relied on either questionnaire survey data, anecdotal

Purchasing and customer satisfaction 247

BQM&T 4,4

248

evidence or single case studies to draw conclusions. The applicability of supplier partnership relationships from such research and the long-term impact on corporate performance and customer satisfaction raises some concerns (Stuart and Mueller, 1994). The issue of maintaining competition over time for repeat procurement items is important, with competitiveness being much more than just the price (Klotz and Chatterjee, 1995). The intangible benefits that leading-edge organizations are seeking can come from better communications and interpersonal trust associated with close working relationships with critical suppliers. Is it, therefore, just a matter of purchasing professionals employing tools like value analysis to identify and plan an appropriate approach to a particular supply market, or is there a need to integrate the procurement process with the philosophy and technique of the continuous improvement aspects of TQM? (Sprague, 1996). Statistical analysis from a longitudinal field study (Stuart and Mueller, 1994), examined supplier partnerships from the perspective of continuous improvement in quality and productivity. The contrast between partnering and non-partnering approaches provides a contrast of benefits achieved in productivity and quality in partnering relationships. The case study refers to Dr Edward Demings recommendations that to reduce sources of variance in incoming product quality, organizations must limit the supply base and form single source relationships. The findings suggest that if corporate purchasing management are committed to TQM and continuous improvement, reverting to traditional multiple sourcing purchasing and fragile trust relationships must be avoided. However, Carter and Narasimhan (1996) found the essential issue for purchasing organizations seeking to be leaders in TQM is that they must operate in the suppliers domain, building teamwork, trust and long-term commitment to improvement. The partnering relationship therefore made possible market share growth, for both the buying and supplying organizations, and mutual long-term commitment to improvement, change and teamwork. Trent and Monczka (1994), in findings from a major research project at Michigan State University during, 1992-1993, found that a factor critical to success of cross-functional teams is the need to encourage selected supplier involvement. The issue of multiple sourcing or partnering is not discussed nor how inclusion of competitive multiple source suppliers into a cross-functional team is achieved. Ellram (1995), in a review of relevant literature, develops a five-stage model for partnership development. The review indicates that a consensus in the literature suggests that supplier partnerships develop over time rather than being created overnight. The conclusion states, it seems unlikely that purchasing partnerships are a passing fad. The definition given for a purchasing partnership is:

An agreement between buyer and a supplier that involves a commitment over an extended time period, and includes the sharing of information along with a sharing of the risks and rewards of the relationship (Ellram, 1995).

It is important to note that the definition given for purchasing partnerships is not prescriptive on the number of suppliers. Apart from listing potential advantages of creating partnerships and that a reduced supplier base is easier to manage, no definitive number is given. This evolutionary non-prescriptive approach is supported by Carter and Narasimham (1996) and Trent and Monzcka (1994). However, Stuart and Mueller (1994) suggest their results from a single longitudinal case study constitute the foundation for similar research efforts to validate that supplier partnerships consisting of one, or a preferred few, suppliers increase the level of quality and lead to continuous improvement in quality over the supply period. It is expected that implementing strategic purchasing as part of an integrated TQM corporate culture with a basis of continuous improvement, cross-functional teamwork and organizational learning, will provide greater long-term performance improvements and customer satisfaction than implementing purchasing strategies in isolation. Value as a competitive advantage Many researchers and practitioners have been calling for a more crossfunctional view of the management of business (Bregman, 1995). Value is expected to result from globally optimized systems through linking diverse functional areas and aggregating purchase volume (Stuart and Mueller, 1994). Total cost of ownership is examined as a methodology and philosophy to look beyond price and therefore create value (Ellram, 1995). Improvement in purchasings effectiveness by reducing the cost of materials, improving the quality and delivery or cycle time reduction can translate to greater profitability for a firm (Hult, 1996; Stanley, 1995). New product design and development and early supplier involvement result in higher performance levels (Stanley, 1995). Some evidence suggests implementation of supply base reduction and the impact of market, environmental and competitive conditions affect performance (Bregman, 1995; Stanley, 1995). Recent research findings by Stanley (1995) concluded that early supplier involvement in product design and development process does impact company performance. The study also concluded that very specific alliances, not the quantity of alliances, correspond to improved performance through relationships that have a spirit of trust and enhanced two-way communication. Sharing information to co-ordinate products and complex supply chains appears to gain competitive advantage all along the supply chain (Stanley, 1995). Other research suggests the key to long-term competitive advantage for a business is a high level of quality and customer satisfaction. Carter and Narasimhan (1994) state, A strong management commitment to TQM and

Purchasing and customer satisfaction 249

BQM&T 4,4

250

customer satisfaction stimulates and energizes an organization to improved performance. Purchasing functions that discover true purchasing leadership in TQM lead the field. The existing literature is incomplete in defining true leadership in TQM. In particular the undocumented performance implications for those organizations who do have purchasing leadership in TQM and the impact on customer satisfaction compared to those who do not. Slater (1996) suggests that if the benefits surpass the costs, then customers will at least consider purchasing the product or service, and that understanding customer perceptions of value is the critical part of the process and one that many companies fail. The review states, that value-driven companies spend enough time with customers so they have a fundamental understanding of their customers businesses, current and latent needs. They also determine the price that will deliver value to their customers early in the product development process. The foundation for competitive advantage is customer value (Slater, 1996). Value, as defined by Sprague (1996):
is the usefulness, desirability or worth of a thing. Value can be thought of as the ratio of any items quality to its cost, where quality is defined by Jurans idea of fitness for use. For the customer the utility, aesthetic features of the product and identifying and removing unnecessary cost and thus improve value, must be done without reducing features the customer wants.

Literature synthesis There has been much written about strategic purchasing the relationship to other management processes, the environment required to maintain it and the practices that constitute strategic purchasing (Biemans and Brand, 1995; Burt, 1989; Ellram, 1995; Hult, 1995; Klein, 1991; Mehltretter, 1996; Palaniswami and Lingaraj, 1994; Slater, 1996; Stanley, 1995; Stuart and Mueller, 1994; Trent and Monczka, 1994). Attempts were also made to link performance impacts within a TQM environment (Carter and Narasimhan, 1994; Deming, 1994; Klotz and Chatterjee, 1995; Sprague, 1996). The many articles which advocate strategic purchasing best practice methods often provide anecdotal or single case study evidence of the impact on performance. Empirical research is incomplete and further rigorous research is required. From the review of the literature, five purchasing variables from the AMC data base are proposed to represent strategic purchasing activity and therefore the independent variable: (1) Suppliers work closely with the customer in product development. (2) The customer works closely with their suppliers to improve each others processes. (3) Suppliers have an effective system for measuring the quality of the materials sent to the customer. (4) Relative to domestic and international competitors, the customer has an advantage in the relationship with suppliers.

(5) Relative to domestic and international competitors, the customer has an advantage in access to raw materials. Wider theoretical framework, strategic purchasing construct and strategic purchasing framework From the review of literature, a wider theoretical framework and strategic purchasing construct (Figure 1) is proposed, along with a strategic purchasing framework (Figures 2 and 3).

Purchasing and customer satisfaction 251

Strategic

Organisation

Suppliers

TQM

Customer Satisfaction

Performance Purchasing Figure 1. Wider theoretical framework

Strategic purchasing construct: Develop advantage over competitors in access to raw materials. Suppliers with an effective system for measuring quality of products supplied. Develop advantage over competitors in relationship with suppliers. Work closely with suppliers on product development efforts. Close working relationship with suppliers to improve each others processes. Research design Based on the literature review, it will be hypothesized that strategic purchasing does have a relationship to customer satisfaction. Therefore, the research hypothesis is stated below. Research hypothesis (H1) Strategic purchasing has a significantly positive effect on customer satisfaction.

BQM&T 4,4

The null hypothesis is stated below based on the research hypothesis. Null hypothesis (H0) Strategic purchasing does not have a significantly positive effect on customer satisfaction. Research methodology The stated hypothesis will be tested using mail survey data obtained by the Australian Manufacturing Council in a research project started in late 1993, to

252

Quality Loop
Marketing and market research Disposal after use Continuous Improvement Technical assistance and maintenance Customer /Consumer Producer /Supplier Procurement Process planning and development

Strategic Planning

Process Management

Customer Focus and Satisfaction Strategic Purchasing

Production Installation and operation Sales and distribution Inspection, testing and examination Packaging and storage

Customer Organisational Performance Satisfaction

Figure 2. Strategic purchasing framework

Information and Analysis

Leadership

Human Resource Development and Management

Marketing and market research Disposal after use Continuous Improvement Technical assistance and maintenance Customer /Consumer Producer /Supplier Procurement Process planning and development

Production Installation and operation Figure 3. Quality loop Sales and distribution Inspection, testing and examination Packaging and storage

investigate the extent of best practice adoption by Australian and New Zealand manufacturers and the impact on business performance. The various analyses and other statistical calculations were performed using the statistical software SPSS for Windows v6.1. A model and definition of best manufacturing practice was developed by the Australian Manufacturing Council which forms the basis for the synthesizing of a strategic purchasing framework (SPF) (Figure 2) in this paper. A questionnaire based on the components and structure of the best manufacturing practice model was completed. Responses to questions examining purchasing variables were included under the Quality of Process and Product and Manufacturing Structure categories, as shown in Figure 1. The questions asked in the Quality of process and product category were:
Please circle the number which accurately reflects your sites present position: Our suppliers work closely with us in product development We work closely with our suppliers to improve each others processes Our suppliers have an effective system for measuring the quality of the materials they send us

Purchasing and customer satisfaction 253

An ordinal scale was used for respondents to select the following: Strongly disagree (1) Disagree (2) Neither agree nor disagree (3) Agree (4) Strongly agree (5) The purchasing questions asked in the Manufacturing structure category were:
Relative to our domestic and international competitors, this site has an advantage/ disadvantage in the following areas: Our supplier relationships Our access to raw materials

An ordinal scale was used for respondents to select the following: Large disadvantage (1) Disadvantage (2) Same (3) Advantage (4) Large advantage (5) The customer satisfaction outcome question was included under the Performance category of the model shown in Figure 1. The question asked was as follows:

BQM&T 4,4

Please indicate (by writing a single number, ranging from 1 through 5, in the vacant end column) your sites current performance level for the listed attribute. Customer satisfaction Sometimes meets expectations (1) Generally meet expectations (2)

254

Consistently meet expectations (3) Always meet expectations (4) Expectations exceeded delighted customers (5)

Data preparation for hypotheses testing The data preparation involved screening for outliers and checking the normality of the data. The independent purchasing variables and the dependent variable customer satisfaction exhibited moderate kurtosis and skewness in the range of 0.6 to 0.06 Transformation was not considered necessary. The final stage of data preparation was treatment of incomplete responses. Factor analysis requires all cells in the data set to be complete. Values 6 and 7 are treated as missing values in both the dependent variable and the independent variable. The data analysis involved identification of variation in the dependent variables (Customer satisfaction) due to the independent variable (Strategic purchasing). The strategic purchasing scale 1 to 5, was modified by recoding into a cumulative score where; 1 = strategic purchasing companies and 0 = nonstrategic purchasing companies. SPSS analysis procedure The following procedure was used to test the null hypothesis (H0). (1) Conduct a cross tabulation for the purpose of checking linearity. (2) A principal components factor analysis on the purchasing variables was performed to ensure they are a reliable indicator of the strategic purchasing construct. (3) A reliablity analysis to determine the Cronbach alpha of the independent variables. (4) The independent variables were recoded into a new categorical variable Strpurch3 as a composite score; 1 = Strategic purchasing 0 = Nonstrategic purchasing. After two initial trials the criteria were relaxed so that sufficient cases (113 cases) were available for analysis. Data were selected as strategic if, across the five purchasing variables, they responded either: Non-strategic (i.e. 1 or 2) on four of the variables, and strategic (i.e. 4 or 5) on one of the variables. Non-strategic (i.e. 1 or 2) on three of the variables and neither agree nor disagree (i.e. 3) on one of the variables.

Criteria for strategic: respondents answered with a (5) across all five variables (Cumulative score = 5, then 5 was recoded to 1). (5) The new computed variable Strpurch3 was subjected to the MannWhitney U test (Wilcox Rank Sum W Test) to determine if there are purchasing differences in customer satisfaction. Results Results show no linearity in the independent variables. The factor analysis is therefore not reliable. To confirm this the reliability test Cronbach alpha was 0.602 for the independent variables and therefore does meet the requirement for reliability (Cronbach alpha > 0.70). With deletion of the lowest corrected item total correlation and squared multiple correlation, the Cronbach alpha is raised to 0.62, still not sufficient for reliability. The Mann- Whitney U Test on the Strpurch3 variable presented in Table I, show a significantly positive difference (2-tailed p of 0.0195) in customer satisfaction between strategic purchasing and non-strategic purchasing companies.

Purchasing and customer satisfaction 255

Mean rank 49.54 62.92

Sum of ranks 2477.0 3964.0

Cases (n = 113) 50 STRPUR3 = 0.0 Non-str 63 STRPUR3 = 1.0 Str

Notes: U = 1202.0; W = 2477.0; Z = 2.3358; 2-tailed p = 0.0195 Mann-Whitney U Wilcoxon Rank Sum W Test P07A Customer satisfaction performance 1 by STRPUR3 COMPUTE Strpur3 = ms3gre + ms3ire + qp2

Table I. Results of Mann-Whitney U test

Discussion and implications The null hypothesis is rejected. However, the results indicate the need for further research to develop a reliable strategic purchasing construct and organizational performance construct which includes customer satisfaction. Whilst no suggestion is made that the strategic purchasing variables synthesized and analysed in this preliminary analysis have any causal link to customer satisfaction, the initial results indicate a significant difference in the relationship to customer satisfaction between strategic and non-strategic purchasing companies. It must be acknowledged that the structure and differences of the AMC questionnaire could be a limitation in the analysis. Also acknowledged is that variables other than strategic or non-strategic purchasing could impact customer satisfaction. The significant differences however in strategic and nonstrategic purchasing from the Mann-Whitney test justify further investigation of the direction and significance of each independent variable not only on

BQM&T 4,4

256

customer satisfaction but on an organizational performance construct that includes customer satisfaction. The implication to business operations of a significant difference existing between strategic and non-strategic purchasing is the potential to contribute to improved performance and gain a competitive advantage and therefore a need to review the current approach in purchasing operations. A simple audit of purchasing activities against reliable strategic purchasing variables would be the starting point. Given the limited empirical evidence linking strategic purchasing with customer satisfaction, the findings from this study suggest that strategic purchasing can play a role in ensuring suppliers contribute to customer satisfaction. Strong management commitment to customer satisfaction can energize and stimulate the strategic purchasing effort to develop closer relationships with suppliers. The contribution to performance of the closer relationship can include cost, quality, reliability and timeliness. Suppliers are also a rich source of information on developments in the market, competitors and technologies. The rather low number of cases of close supplier attachment revealed in this study suggest that this may be a greatly untapped source of contribution to customer satisfaction. Further empirical research is required to underscore the importance of supplier relationships and to encourage management to commit to closer supplier relationships. The effect of a TQM environment as a moderator needs to be factored in any future research. Does the dependent variable remain unchanged when adjusted for strong and weak TQM? The TQM philosophy has quality and customer satisfaction as the cornerstone of competition. Effective leadership in TQM is a requirement to earn trust. Prior research has suggested that quality management leaders in purchasing recognize that building a customer service minded supply base, without the suppliers trust and long-term commitment, is impossible. Supplier quality improvement and mutual trust between the buyer and supplier are inseparable. The findings from understanding the TQM influence would have implications in setting organizational policy and quality initiatives. Conclusion The discussion in this paper has been based on a review of current literature and early stage empirical analysis of the AMC database. It provides a summary of the current debate on TQM, strategic purchasing and the relationship to customer satisfaction. It is clear that most organizations compete on the basis of quality and customer satisfaction. However, the definition of quality and what satisfies a customer appears to be relative to that piece of business and to the competition for that business. Strategic purchasing processes firmly rooted in TQM processes, from the literature reviewed, have been given mainly anecdotal or single case study

treatment (Stuart and Mueller, 1994). Further empirical analysis to substantiate the interrelationship is required. The strategic role of purchasing within an organization is focused on the communication activities and relationships in the purchasing process between and within the business units. If an organization is to compete in a fast cycle time climate, the focus is on creating a purchasing culture that stresses a strategic approach. Much discussion has revolved around purchasing partnerships. The essence of the discussion appears to be more about building solid, trustworthy and personal relationships with suppliers than signing partnership deals. For a supplier, the most important benefit of partnering is security, so that a competitor will have difficulty in disconnecting the arrangement. For the customer, it is about value adding and continuous improvement with timely communications and a high level of service. A clearly understood purchasing strategy in alignment with an organization-wide TQM culture and business strategy is expected to intensify the overall delivery of value to the customer. The empirical evidence is, however, minimal. The early research results in this paper provide a basis and rich source for further research.
References and further reading Australian Manufacturing Council (1994), Leading the Way: a Study of Best Manufacturing Practices in Australia and New Zealand, 2nd ed., AMC, Melbourne, Victoria. Barrett, K. and Greene, R. (1995), Procurement, Financial World, Vol. 164, pp. 46-9. Biemans, W.G. and Brand, M.J. (1995), Reverse marketing: a synergy of purchasing and relationship marketing, International Journal of Purchasing & Materials Management, Vol. 31, pp. 29-37. Bregman, R.L. (1995), Integrating marketing, operations, and purchasing to create value, Omega, Vol. 23, pp. 159-72. Burt, D.N. (1989), Managing suppliers up to speed, Harvard Business Review, July-August, pp. 127-35. Carter, J. R. and Narasimhan, R. (1994), The role of purchasing and materials management in total quality management and customer satisfaction, International Journal of Purchasing & Materials Management, Vol. 30, pp. 3-13. Carter, J.R., and Narasimhan, R. (1996), Is purchasing really strategic?, International Journal of Purchasing & Materials Management, Vol. 32, pp. 20-8. Chen, W.H. (1994), Total quality management in manufacturing systems: a review of integrative studies, Asia Pacific Journal of Quality Management, Vol. 3, pp. 62-77. Deming, E. (1994), The New Economics for Industry, Government, Education, 2nd ed., Cambridge. Ellram, L.M. (1995), Total cost of ownership: an analysis approach for purchasing, International Journal of Physical Distribution & Logistics Management, Vol. 25, pp. 4-23. Ettorre, B. (1995), A strategy session with Prahalad, C.K., Purchasing performance measurements influence on concurrent engineering activities customer-supplier relationships: a model of performance in relational exchanges buyer seller relations transaction cost, Management Review, Vol. 84, pp. 50-2. Heide, J.B. and Stump, R.L. (1995), Performance implications of buyer-supplier relationships, in industrial markets: a transaction cost explanation, Journal of Business Research, Vol. 32, pp. 57-66.

Purchasing and customer satisfaction 257

BQM&T 4,4

258

Hines, P. (1996), Purchasing for lean production: the new strategic agenda, International Journal of Purchasing & Materials Management, Vol. 32, pp. 2-10. Hult, G.T.M. and Nichols E.L. Jr (1996), The organizational buyer behaviour learning organization, Industrial Marketing Management, Vol. 25, New York. Kekre, S., Murthi, B.P.S. and Srinivasan, K. (1995), Operating decisions, supplier availability and quality: an empirical study, Journal of Operations Management, Vol. 12, pp. 387-96. Keough, M. (1994), Buying your way to the top, Director, Vol. 47, pp. 72-5. Klein, R.A. (1991), Achieve total quality management, Chemical Engineering Progress, November, pp. 83-6. Klotz, D.E. and Chatterjee, K. (1995), Dual sourcing in repeated procurement competitions, Management Science, Vol. 41, pp. 1317-27. Mehltretter, S. (1996), Strategic sourcing means just that sourcing strategically, CMA Magazine, Vol. 70, p. 6. Palaniswami, S. and Lingaraj, B.P. (1994), Procurement and vendor management in the global environment, International Journal of Production Economics, Vol. 35, pp. 171-6. Slater, S.F. (1996), The challenge of sustaining competitive advantage, Industrial Marketing Management, Vol. 25, pp. 79-8. Sprague, D.A. (1996), Adding value and value analysis to TQM, Journal for Quality & Participation, Vol. 19, pp. 70-2. Stanley, L.L. (1995), Linking Supplier Performance to Purchasing Performance, National Association of Purchasing Management, San Jose, CA, p. 67. Stuart, F.I. and Mueller P. Jr (1994), Total quality management and supplier partnerships: a case study, International Journal of Purchasing & Materials Management, Vol. 30, pp. 14-20. Terziovski, M., Sohal, A.S. and Samson, D. (1996), Best practice implementation of total quality management: multiple cross-case analysis of manufacturing and service organizations, working paper, Department of Business Management, Monash University February. Trent, R.J. and Monczka, R.M. (1994), Effective Cross-functional Sourcing Teams: Critical Success Factors, National Association of Purchasing Management, October, San Jose, CA. Watts, C.A., Kim, K.Y. and Hahn, C.K. (1995), Linking purchasing to corporate competitive strategy, International Journal of Purchasing & Materials Management, Vol. 31, pp. 3-8.