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Relationship between supply chain quality management practices and their effects on organisational performance.

Abstract

In today's global market place, the traditional approaches to supply chain management increasingly prove to be ineffective. This paper investigates the relationship between supply chain quality management practices, as well as the direct and indirect effects of these practices on firm performance. A conceptual model was developed and tested through path analysis using the cross-section data collected from automotive industry in Iran. The findings support the relationship between supply chain quality management practices and the positive effect of these practices on organisational performance, suggesting that organisational performance could be enhanced through improved supply chain quality management.

Key Words: Quality management; Supply chain management; Organisational performance

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In today's global market place, competition among firms hinges critically on their supply chain (Wipple and Frankle, 2000); supply chains have thus attracted considerable attention among managers. On the other hand, traditional approaches to managing supply chain have proved inefficient (Kanji and Wong, 1999; Flynn and Flynn, 2005). Therefore, quality is held to be a key strategic variable not only within the single firm, but also across the supply chain (Forker et al, 1997; Romano and Vinelli, 2001; Kannan and Tan, 2005; Sila et al, 2006; Kaynak and Hartly, 2007).

Quality management practices have been extensively investigated at firm level (Ahire et al, 1996; Flynn et al, 1994; Saraph et al, 1989), and several studies have also examined the relationship between quality management practices and organisational performance (Dow et al, 1999; Kaynak, 2003; Samson and Terziovski, 1999). However, the issue of quality management has not been sufficiently investigated in supply chain, specifically in west Asian countries.

This study, hence, attempts to identify the potential relationship between supply chain quality management (SCQM) practices, and the direct and indirect effects of SCQM practices on the performance of automotive companies in Iran, based on the data obtained from 150 firms and analysed. It contributes to the literature by extending the examination of QM into the supply chain. It provides guidance for the effective management of the supply chain, through allocation of resources to improve practices that bring optimal results for farms.

Literature Review

Companies all over the world are aware of the importance of meeting the customers' needs as an important factor in their success in a competitive marketplace. To survive in such an environment, organisations should not operate as an "isolated and independent entity" (Christopher, 1998). On the contrary, they must seek to cooperate with others in order to identify sources of competitive advantages (Knowles et al, 2005). The companies have also found that the involvement of suppliers, which is critical to the improvement of quality and fulfillment of the customers' specifications, can enhance their performance (Kanji and Wong, 1999).

Forker et al (1997) have investigated the impact of quality management practices throughout supply chains and have found that management of supplier quality throughout the chain is directly related to the higher levels of quality conformance. On the other hand, Kanji and Wong (1999) have proposed a structured model for supply chain management to demonstrate the relation between supply chain management and quality management principles.

Romano and Vinelli (2001) have analysed the performance of a textile and apparel manufacturer operating in two different supply chains. They have reported that the whole supply network could be improved to meet the expectations of the final consumer in terms of quality through the joint definition and co-management of quality practices.

Choi and Rungtusanatham (2001) compared the implementation of QM practices across three levels in the supply chain (that is, final assemblers, top-tier suppliers, tertiary tier suppliers) and across several manufacturing industries. They observed no differences in QM practices across the three levels in supply chain. The only difference across industries was the implementation of strategic planning.

Further, Kuei et al (2001) have tested the association between supply chain quality management practices and organisational performance and have found that perceived improvements in organisational performance are associated with improvements in supply chain quality management.

Analysing the empirical data collected from Taiwan and Hong Kong, Lin et al (2005) have identified the factors affecting supply chain quality management. Their findings reveal that quality management practices are significantly correlated with the supplier participation strategy and this has an important impact on organisational performance. They found significant correlation between quality practices and supplier selection stra-tegy.

Another study by Bandyopadhyay and Sprague (2003) describes how the implementation of TQM could help the manufacturing sector attain SCQM using the United States automotive industry as a case example. The authors have argued that making TQM as an integral part of a supply chain could help manufacturing companies improve quality and make them more competitive.

Moreover, Sila et al (2006), analysing the state of supply chain quality management in manufacturing companies in the USA, have reported that although companies believed that SCQM would have a positive impact on the quality of the final product, they did not fully implement it. Their study has also indicated that quality is the most important factor for companies in their relationships with suppliers and customers.

Moreover, Kaynak and Hartley (2007) have replicated and extended the relationships among the QM practices and their effects on firm performance suggested in Kaynak (2003) using survey data gathered from firms operating in the USA. The result indicates that there is a significant relationship between quality management practices, which affect the firm performance.

Conceptual Framework

Several authors have found significant correlations among TQM practices (Ahire et al, 1996; Samson and Terziovski, 1999) and also between TQM practices and performance (Powell, 1995; Hendricks and Singhal, 2001) in the individual firms. However, only a few studies have investigated the relationship between QM practices and their effects on performance in the supply chain context (Kaynak and Hartely, 2007; Kanji and Wong, 1999).

A review of the relevant empirical literature (see Table 1) reveals that six TQM factors, that is, leadership, strategic planning, customer focus, human resource management, process management, and supplier management are the most often extracted factors.

Considering the factors mentioned, a conceptual model is developed in order to demonstrate 16 hypotheses regarding the relationships among these factors. It should be noted that previous studies have also supported these relationships. This model is represented in Figure 1.

[FIGURE 1 OMITTED]

In the result section, a brief account of the literature related to each hypothesis is provided. The arrows in the model suggest a hypothesised direct effect from one factor to another..

Leadership

Leadership, an important factor in successful TQM implementation, acts as a driver of QM. It creates values, goals, and systems to satisfy customer expectations and improve organisation's performance (Ahire et al, 1996). This factor is not only documented by quality gurus (Deming, 1982; Juran, 1988), but also it is mentioned in empirical studies (Table 1). Leadership can improve performance by affecting other TQM practices (Ahire and O' Shaughnessy, 1998; Anderson et al, 1995; Wilson and Collier, 2000).

Moreover, leadership is a critical factor in achieving strategic and operational objectives and changes in supply chain (Van Hoek, 2002). Thus, supply chain represents an ideal area where optimising activities implemented by strong leadership can yield considerable synergy and competitive advantage (Venkatesh et al, 1995). Leadership in supply chain management should go beyond company walls. On one hand, it should provide the resources necessary to implement quality management and motivate employees to develop and utilise their full potential; on the other hand, it should help suppliers to provide customers with the best services.

Supplier Quality Management

Many studies have pointed out that supplier quality management or supply management is an essential component in TQM (Ahire et al, 1996; Fernandez, 1995; Saraph et al, 1989) because poor supply quality results in high levels of inventory and order backlogs (Shin et al, 2000). Supplier quality management refers to various management-driven efforts aimed at enhancing the overall quality performance through more effective management of quality on the supply side (Caddick and Dale, 1998; Carr and Pearson, 1999; Shin et al, 2000).

Since supplier quality management requires a fundamental shift in buyer-supplier relationship from an arm's length model to the long-term business partnership (Lo and Yeung, 2006). Companies should select suppliers based on quality rather than price or schedule (Galt and Dale, 1991) and improve supply quality with the assistance of operation improvement on the supplier's side. (Dale, 1999)

Human Resource Management

The total quality management approach is able to provide a considerable potential for improvement if accompanied with appropriate human resources. Indeed, human resource management is at the core of quality management because employee involvement and commitment is essential for both successful introduction and implementation of total quality management (Redman et al, 1995; Chen, 1997; Blackburn and Rosen, 1993).

However, it seems that research on human resource management in SCM is still in its preliminary stage (Cooper et al, 1997; Leenders et al, 2002; Noe et al, 2003), and the role of people in SCM is often not explicitly addressed (McCarter et al, 2005). Management and employee support can overcome the barriers to the implementation of supply chain, and enhance the value added and the firm efforts to get better results than their competitors (Gowen and Tallon, 2002).

Strategic Quality Planning

Quality planning is necessary in order to manage quality throughout the organisation (Juran, 1988; Saraph and Sebastian, 1993). Therefore, strategies used to support quality are fundamental to survival in the market. Strategy optimises the use of resources and ensures the availability of trained employees.

Supply chain also needs to respond to market requirements aligned with the company's business strategy (Hugos, 2003). Strategies specify the means and activities to realise supply chain opportunities and achieve competitive advantage (Robinson and Malhotra, 2005). Supply chain members thus should extend the scope of strategies beyond a firm' s own boundaries and broaden it into the upstream and downstream channel members.

Customer Focus

It seems that there is consensus in the literature that the customer is critical to effective quality management and achieving customer satisfaction (Ahire and Ravichandran, 2001; Flynn et al, 1995; Hackman and Wageman, 1995).

Supply chain effectiveness relates to the alignment of the supply chain value proposition with consumers' requirements (Zokaei and Simon, 2006). Similarly, SCM is a business process that plays a significant role in integrating and coordinating the processes throughout all entities of the supply chain to ensure that the quality of the product or service leads to the final customer's satisfaction (Robinson and Malhotra, 2005). Therefore, in addition to the product, the entire chain of business activities--from raw material to the final point of consumption-should be effectively managed to deliver the end-consumer's value (Christopher, 2005).

Process Management

Another critical TQM factor is process management. It refers to how an organisation designs and introduces products and services, and how it integrates production and delivery requirements (Evans and Lindsay, 1995). Furthermore, it helps to ensure that variation is kept within the acceptable limits, in turn, efforts aimed at managing and reducing process variation lead to continuous quality improvement (Tari et al, 2007).

Supply chain management is defined as the integration of key business process from end user through original suppliers that provides products, services and information, which add value for customers and other stakeholders (Lambert et al, 1998). In other words, SCM offers the opportunity to capture the synergy of intra-and inter-company integration and management (Grieger, 2004). Organisations in the supply chain might be involved in different processes, which often cut across organisational boundaries; they may be broken or disrupted by lack of communication and coordination between organisations in supply chain. A smooth and synchronised linkage between dissimilar processes and/or operations is, hence, critical to an efficient and operative supply chain (Robinson and Malhotra, 2005).

Organisational Performance

Organisational performance deals with the extent to which an organisation achieves its market-oriented and financial goals (Yamin et al, 1999). The short-term objectives of SCM are increasing productivity and reducing inventory and cycle time while its long-term objectives are increasing market share and profits for all members of the supply chain (Tan et al, 1998). In this study, organisational performance is measured using both financial and market criteria, including return on investment (ROI), market share, and profit margin on sales, productivity, cycle times, total inventory turnover, and overall competitive position.

Sample

The population for this study consisted of manufacturing companies in automotive industry located in Iran. During 1995-2005, automotive industry growth in Iran was about 25 per cent. It is estimated that total sale in this industry was US$8.7 billion in 2005 and it has created about a million direct and indirect jobs in Iran.

Vehicle production in Iran includes passenger car, pick-up truck, four-wheel drive vehicles, mini-bus, bus, and truck. Passenger cars possess the highest share of production (83.5 per cent) while trucks have the lowest share (3.2 per cent). Iran Khodro and Saipa companies, as the biggest auto companies in Iran, produce about 96 per cent of cars, and over 2,000 component manufacturers work within the supply chain management of these companies.

Components are designed and supplied by SAPCO Co and Saze Gostar Co for Iran Khodro and Saipa, respectively. On the behalf of these two companies, 1,000 questionnaires were mailed to the general managers, quality assurance, and quality control managers of component manufacturers by the authors, and follow-up was done through the telephone. After four months, 130 questionnaires were filled up and sent back.

Instrument

Based on a review of literature and interviews with industry professionals, 121 indicators are identified to measure the supply chain quality management practices. A survey with a five-point Likert scale is used to measure responses on each scale item, where "1" is equal to "strongly disagree" and "5" means "strongly agree". The Likert scale, as a uni-dimensional scaling procedure, is used in this study to eliminate the subjective judgments made by respondents (Oppenheim, 1966).

The initial version of the questionnaire is pilot tested on general managers of 15 companies. Where necessary, it is modified to improve the clarity and validity of the questions. The resulting instrument is reviewed by quality experts and university lecturers, and revised further to make sure that the measures are valid, reliable, and user-friendly (Flynn et al, 1990). The final version of questionnaire consists of 86 items.

Reliability of each item of SCQM and performance constructs is estimated through calculating Cronbach' s [alpha] (Cronbach, 1951). It is found that all TQM and perceived performance scales have acceptable reliability levels, values of [alpha] equal to 0.70 or higher (Nunnally and Bernstein, 1994).

As claimed by Churchill (1979), relying heavily on the literature and using experts to evaluate measures may ensure content validity and since most of the items of the present questionnaire were extracted from the previous studies and validated by the experts; it has an acceptable degree of content validity. In addition, the construct validity of each measure is evaluated through factor analysis, in which each factor must be one-dimensional. A cut-off loading of 0.6 is used to screen out variables that are weak indicators of the constructs. All the factor loading scores are higher than 0.6, indicating acceptable validity level.

Data Analysis

Path analysis is employed to test the conceptual model. Path analysis is a form of structural equations modeling (Ullman, 1996) that empirically estimates the strength of each causal relationship depicted in a path model (Hair et al, 1998). It represents the correlation between any two constructs as the sum of the compound paths of causal relationships connecting the points.

Path analysis breaks a causal model into a set of multiple regression models, one for each dependent variable. The standardised regression coefficients are decomposed into their effects to allow a detailed assessment of potential specification error, which can result from an improper specification of the functional form of a relationship as well as the inclusion or exclusion of particular independent variables (Berry and Feldman, 1985).

Result and Discussion

Table 2 contains the means, standard deviations, and correlations between TQM factors as well as between these factors and performance. The highest correlation between each two variables is 0.8, while the lowest correlation is 0.16. All of the correlation is confirmed at the significant level of p<0.05 and correlation coefficients were generally above 0.2.

The goodness-of-fit statistics is used to assess the fit of the data to the hypothesised model. The results for the proposed model show that this model does not fit with the data (Table 3). The structural coefficients, in the proposed model output, reveals that some hypothesised effects were insignificant, suggesting that a revised model might result in a better-fitting and more parsimonious model. The Wald Test suggested the elimination of strategic management-process management, supplier management-customer focus, customer focus-performance. All these modifications resulted in a significantly better fit between the model and the data. Table 3 represents the goodness-of-fit summary of the proposed and final model.

The results are demonstrated in Figure 2, where most of the effects hypothesised in Figurel are confirmed. The estimates of path coefficients represented by standardised regression coefficients (13), which appear in the figure next to the arrows indicating the direction of the effects, are all significant at the 0.01 level. The value of these coefficients indicated the weights of the direct effects of one variable upon another, and the lines illustrated significant paths (p < 0.01).

As Figure 2 shows, 12 direct path coefficients are statistically significant. Thus, hypotheses H1, H2, H3, H4, H5, H6, H7, H9, H10, H11, H13, and H15 are supported. Three of the 15 hypothesised paths from strategic planning to process management (H8), from supplier quality management to customer focus (H12), and customer focus to performance (H14) are not supported by statistically significant path coefficients.

[FIGURE 2 OMITTED]

In line with the other studies, our findings confirm the interdependence of TQM practices (Saraph et al, 1989; Ho et al, 2001; Kaynak, 2003; Lee et al, 2003). Therefore, it seems that quality management practices should be implemented as an integrated system rather than as a subset of QM practices (Ahire and Ravichandran, 2001).

Moreover, for the successful implementation of total quality management in the supply chain, it is necessary that each supply chain member internally implement QM (Robinson and Malhotra, 2005). Quality managers also should effectively integrate quality processes with suppliers as well as customers to enhance quality performance (Kaynak and Hartely, 2007).

The findings also reveal that leadership is necessary for SCQM effectiveness because it is directly related to strategic planning, human resource management, supplier management, and customer focus. These direct effects indicate the important role of leadership in the supply chain and support findings of other studies (Anderson et al, 1995; Flynn et al, 1995, Kaynak, 2003; Kaynak and Hartley, 2007; Lee et al, 2003; Sila and Ebrahimpour, 2005; Kanji and Wong, 1999). Leadership is also found to be indirectly related to quality performance.

In addition, findings of this study indicates that human resource management is directly related to process management as reported by Anderson et al (1995) and Flynn et al (1995). Thus, it seems that as quality management extends across organisational boundaries, the importance of human resource management issues such as training and empowerment is likely to increase. However, as reported by Sila and Ebrahimpour (2005), no direct relation is observed between human resource management and customer focus.

Unlike the findings of Sila and Ebrahimpour (2005), this study shows that there is a direct relationship between human resource management and customer focus. If an organisation keeps its workforce (internal customers) satisfied, it can bring satisfaction to the external customers, as well. Therefore, considering the role of human resources in improving the process and fulfilling the customers' expectations and providing their satisfaction, management should seek to empower the workforce and keep them happy.

Further, strategic planning is found to have a direct effect on human resource management, which confirms previous studies (Lee et al, 2003; Sila and Ebrahimpour, 2005; Tari et al, 2007). Nonetheless, the relation between this factor and process management is not statistically significant in this study, which is in line with the studies undertaken by Lee et al (2003) and Taft et al (2007), yet it contradicts findings of some others (Juran, 1988; Lam, 1997). It seems that more studies are needed to investigate this issue.

On the other hand, a direct relation is observed between strategic planning and customer focus. Because strategic planning processes are aligned with the organisation's focus on customer requirement and satisfaction, the organisation should gather customer information through various approaches and use them in the annual planning processes (Evans, 1996). Thus planning must incorporate customer focus as a central element.

Our findings also indicate that supplier management is directly related to process management, which is consistent with the results of other studies (Kaynak, 2003; Lee et al, 2003; Tari et al, 2007; Flynn et al, 1995), and that it is related to performance as indicated by similar studies (Anderson et al, 1998; Flynn et al, 1994; Kayank, 2003; Tari et al, 2007). Therefore, it appears that supply quality management enhance the performance of both suppliers and buyers, and this is especially true when quality and delivery are buyer priorities (Flynn et al, 1995; Ho et al, 1999; Shin et al, 2000).Whereas it is found that the relationship between supplier management and customer focus is not significant.

Still further, the results confirm the relationship between customer focus and process management as reported in several empirical studies (Samson and Terziovski, 1999; Lee et al, 2003, Tari et al, 2007). One of the interesting findings is that, contrary to the widely-held belief, customer focus has no direct effect on business results. As Wright and Snell (2002) argued, simply having a customer focus and acquiring customers may not be sufficient for success since customers can be easily lost if they have a bad experience with the products and services, or if the new entrants to the market attract them. Therefore, companies should strive to attain customer loyalty and retention to achieve improved business results (Wright and Snell, 2002).

Finally, it is found that process management is directly related to performance, which supports findings of Kaynak (2003) and Lee et al (2003). However, Flynn et al (1995) and Samson and Terziovski (1999) do not find a positive and significant effect of process management on performance.

In order to gauge the effects of the variables included in the model more thoroughly, the correlations between predictors and variables criterion are broken into the sum of their direct, indirect and total effects. Table 4 shows the overall values of the standardised direct, indirect and total effects.

Conclusion and Limitations

This study attempted to examine direct and indirect relationships between SCQM and performance. The proposed model suggests 10 links, of which 15 were supported, either directly or indirectly, while four were not confirmed. The main finding of this study is that leadership has an important role in the implementation of quality management in the supply chain. Leadership affected customer focus, human resource management, strategic planning, and supplier management. Hence, it should not only guide and direct individual company efforts, but also encourage participation and cultivate quality measurement and performance among all supply chain members.

Another finding of this study is that companies must focus their efforts to improve the quality of the products they receive from their suppliers so that they can pass it on to their customers. Supplier quality management directly affects process management and performance. The results also support the interdependence of quality management practices in supply chain and implementation of them as a whole system.

Finally, this study is subject to some limitations: (1) the cross-sectional nature of the data, (2) the relatively low response rate, and (3) using a single respondent for data collection within each organisation that may create the opportunity for bias in the responses. Thus, the results may not adequately reflect the target population.

Future studies should explore all critical quality management factor constructs in supply chain and create a framework that applies in this context. In addition, they should be examined in both upstream and downstream network in future studies to determine why some of the relationships that were claimed to be significant in other studies were empirically non-significant in the current study.

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Adel Azar

Reza Ahmadi Kahnali

Tarbiate Modares University, Tehran, Iran

Allahvirdi Taghavi

Islamic Azad University, Tehran, Iran
Table 1: Supply Chain Quality Management Practices in Literature

QM practices   Descriptions           Studies

Leadership     Top management         Forker et al. (1999);
               support Top            Handfield et al. (1998);
               management             Bandyopadhyay and Sprague
               commitment             (2003); Tan et al. (1999);
               Specificity of         Choi and Rungtusanatham
               quality goals.         (1999); Kanji and Wong (1999);
               Acceptance of          Ahire et al. (1996); Anderson
               quality                et al. (1995); Black and
               responsibility.        Porter (1996); Caddick and
               Importance attached    Dale (1998); Flynn et al.
               to quality in          (1994); Powell (1995); Saraph
               relation to cost.      et al.(1989); Romano (2002);
                                      Ellram (1995); Mehra et al.
                                      (2001); Yeung et al (2003);
                                      Fernandez (1995); Adam et al
                                      (1997); Kaynak (2003); Samson
                                      and Terziovski (1999), Saraph
                                      et al. (1989), Wilson and
                                      Collier (2000); Sila and
                                      Ebrahimpour (2005); Grandzol
                                      and Gershon (1997); Douglas
                                      and Judge (2001)

Strategic      Clear long-term view   Choi and Rungtusanatham
Planning       Understanding and      (1999); Dean and Bowen (1994);
               support of mission     Juran (1951); Tan et al.
               strategy               (1999); Park et al. (2001);
               Development and        Trent (2001); Forker et al.
               implementation         (1999); Olhager and Selldin
               regularly sets and     (2004); Kannan and Tan (2005);
               reviews short-and      Gotzamani and Tsiotras (2001);
               long-term goals in     Ahire and Dreyfus (2000);
               planning               Narasimhan and Jayaram (1998),
                                      et al (2002); Paterson et al.
                                      (1999); Krause et al. (2000);
                                      Simatupang Anderson et al.
                                      (1994); Carter and Narasimhan
                                      (1994); Carter et al. (1998);
                                      Dowlatshahi (1998); Ellram
                                      (1995); Krause and Ellram
                                      (1997); Lascelles and Dale
                                      (1990), Sila and Ebra- himpour
                                      (2005);

Human          Use cross-functional   Handfield et al. (1998); Trent
Resource       teams training for     and Monczka (1999); Forker et
Management     quality tools and      al. (1999); Flynn et al.
               techniques.            (1994); Narasimhan et al.
               Employee involvement   (2001); Powell (1995); Saraph
               in quality             et al. (1989); Park et al.
               activities.            (2001); Carter et al. (2000);
                                      Choi and Rungtusanatham
                                      (1999); Ellram (1995); Ahire
                                      et al. (1996); Black and
                                      Porter (1996); Carter and
                                      Narasimhan (1994); Carter et
                                      al. (2000); Gotzamani et al.
                                      (2003); Fernandez (1995); Adam
                                      et al. (1997); Anderson et al.
                                      (1995); Rungtusanatham et al.
                                      (1998); Kaynak (2003); Wilson
                                      and Collier (2000); Sila and
                                      Ebrahimpour (2005);

Supplier       Suppliers selection    Kannan and Tan (2005); Caddick
Quality        based on quality.      and Dale (1998); Hartley and
Management     Long-term relations    Choi (1996); Watts and Hahn
               with a few             (1993); Krause and Ellram
               suppliers. Education   (1997); Krause et al. (1998);
               and technical          Lascelles and Dale (1991);
               assistance provided    Hines (1994); Monczka and
               to suppliers.          Trent (1991); Forkeretal.
               Supplier involvement   (1999); Hahn et al (1990);
               evaluation supplier    Hines (1994); Trent and
               performance based on   Monczka (1999); Krause and
               quality.               Ellram (1997); Forker et al.
                                      (1999); Newman and Rhee
                                      (1990); Galt and Dale (1991),
                                      Fernandez (1995); Ebrahimpour
                                      and Mongiameli
                                      (1990);Ahireetal. (1996);
                                      Black and Porter (1996);
                                      Stuart (1997); Flynn et al.
                                      (1994); Forza and Flippini
                                      (1998); Ho et al. (2001); Dow
                                      et al. (1999); Kaynak (2003);
                                      Wilson and Collier (2000),
                                      Sila and Ebrahimpour (2005)

Customer       Commited to            Kuei and Madu (2001); Kanji
Focus          customers              and Wong (1999); Fernandez
               Customers'             (1995); Lin et al. (2005); Tan
               satisfaction           et al. (1999); Mehra et al.
               Gather timely and      (2001); Choi and
               reliable customer      Rungtusanatham (1999); Romano
               information            (2002); Kannan and Tan (2005);
               Customer involvement   Ahire et al. (1996); Black and
                                      Porter (1996); Adam et al
                                      (1997); Douglas and Judge
                                      (2001), Dow et al. (1999),
                                      Flynn et al (1994); Forza and
                                      Flippini (1998); Grandzol and
                                      Gershon (1997); Powell (1995);
                                      Samson and Terziovski (1999);
                                      Wilson and Collier (2000),
                                      Tari et al. (2007); Kaynak and
                                      Hartley (2007)

Process        Use SPC                Forkeretal (1999);
Management     Less reliance on       Bandyopadhyay and Sprague
               inspection.            (2003); Kuei et al (2002);
               Fool-proof process     Kanjl and Wong (1999);
               design.                Anderson et al (1994); Dean
               Employee self-         and Bowen (1994); Romano and
               inspection             Vinelli (2001); Mehra et al.
               Product design.        (2001); Fernandez (1995); Tan
               Continuous             et al (1998); Choi and
               improvement            Rungtusanatham (1999); Trent
               of processess.         (2001); Ellram (1995);
               Involvement            Vonderembse and Tracey (1999);
               of all affected        Carter and Narasimhan (1994);
               departments in         Trent and Monczka, (1999);
               design Reviews.        Ahire et al. (1996); Black and
                                      Porter (1996); Flynn et al.
                                      (1994); Forza and Flippini
                                      (1998); Grandzol and Gershon
                                      (1997); Kaynak (2003); kaynak
                                      and Hartley (2007); Powell
                                      (1995); Rungtusanatham et al.
                                      (1998); Samson and Terziovski
                                      (1999); Saraph et al. (1989),
                                      Wilson and Collier (2000);
                                      Sila and Ebrahimpour (2005)

Table 2: Descriptive Statistics and Correlations

                           Mean       SD   [alpha]  1        2

1. Leadership               4.14     0.60     0.90  1
2. Human resource
   management               3.56     0.74     0.84  0.62 **  1
3. Strategic management     3.50     0.81     0.87  0.65 **  0.73 **
4. Customer focus           3.49     0.60     0.72  0.60 **  0.62 **
5. Supplier management      3.40     0.71     0.80  0.75 **  0.69 **
6. Process management     613.00     0.65     0.80  0.58 **  0.46 **
7. Performance              3.90     0.62     0.73  0.44 **  0.26 **

                            3         4         5        6        7

1. Leadership
2. Human resource
   management
3. Strategic management    1
4. Customer focus          0.80 **   1
5. Supplier management     0.52 **   0.39 **   1
6. Process management      0.47 **   0.43 **   0.54 **   1
7. Performance             0.36 *    0.31 *    0.32 **   0.44 **  1

* p < 0.05.

** p < 0.01.

Table 3: Goodness of Fit Summary

                                     Recommended
Goodness                              Values for
of Fit            Proposed   Final   Satisfactory
Statistics         Model     Model   Fit to Data

[chi square]/df     3.28     2/33        <3
RMSR                0.11     0/06        <0.08
NFI                 0.81     0/98       0.8-0.9
NNFI                0.69     0/97        >0.9
CFI                 0.83     0/99        >0.9

Table 4: Direct, Indirect and Total Effects

Effect from       Effect to        Direct   Indirect   Total
                                   Effect   Effect     Effect

Leadership        Human Resource
                  Management       0.47     0.14       0.61

Leadership        Strategic
                  Management       0.53     --         0.53

Leadership        Customer Focus   0.44     --         0.44

Leadership        Supplier
                  Management       0.45     --         0.45

Leadership        Process          --
                  Management                0.66       0.66

Leadership        Performance      --       0.27       0.27

Human Resource    Process
Management        Management       0.64     --         0.64

Human Resource    Performance      --       0.16       0.16
Management

Human Resource    Customer Focus   0.19     --         0.19
Management

Strategic         Human Resource
Management        Management       0.38     --         0.26

Strategic         Process
Management        Management                0.10       0.10

Strategic         Customer Focus   0.31     --         0.31
Management

Strategic         Performance      --       0.04       0.04
Management

Customer Focus    Process
                  Management       0.30     --         0.30

Customer Focus    Performance      --       0.13       0.13

Supplier          Process
Management        Management       0.27     --         0.27

Supplier          Performance      0.33     0.12       0.45
Management

Process           Performance      0.43     --         0.43
Management
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Author:Azar, Adel; Kahnali, Reza Ahmadi; Taghavi, Allahvirdi
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Date:Dec 31, 2009
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