Selected Quality Practices Casestudy Vg

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Selected Quality Practices of Small Manufacturers STEPHEN C. JONES, TAMI L. KNOTTS, AND KAREN L. BROWN, SOUTHWEST MISSOURI STATE UNIVERSITY © 2005, ASQ

This article examines the criteria used in an independent evaluation program to assess 1690 small manufacturing enterprises (SMEs) that applied to become suppliers for the national mass merchandising market. Success for firms in this study meant getting their product forwarded for buyer review. Results indicated that the forwarded firms had a higher degree of conformity with the buyers’ criteria in each of the quality management areas. The majority of the SMEs participating in this program were not prepared to do business at the national level, but the study shows that adopting quality management practices improves a firm’s chances of success. Key words: management, quality, supplier

INTRODUCTION Quality issues have become increasingly important for small businesses. In business-to-business (B2B) purchasing relationships, buyers consistently expect higher quality from their suppliers than in years past. One of the downfalls in the manufacture of consumer goods has been that the suppliers have failed to address customer concerns about initial quality (Roper, HewittDundas, and McFerran 1997). Townsend and Gebhardt (1990) suggested that defining what quality means might be important in framing the entire company. This study examines the quality management practices of small manufacturers and their ability to meet the quality expectations of large retail organizations. First, the authors discuss product and management quality and the importance of meeting quality standards for supplier selection. Next, they explain a supplier assessment program and state the research questions. The final section of this article provides conclusions and research implications.

LITERATURE REVIEW Quality Practices During the 1980s, quality became a concern for American manufacturers as global competition cut into markets that previously had been dominated by the United States. American manufacturers responded to the loss in market share with a renewed interest in quality manufacturing practices, and researchers began examining the quality phenomenon. Even the U.S. government became interested in the lag in quality and, in 1987, established the Malcolm Baldrige National Quality Award. Drawing on the views of quality

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Selected Quality Practices of Small Manufacturers Figure 1 Quality components. Product components

Management components

(Garvin 1987)

(Saraph, Benson, and Schroeder 1989)

Performance

Top management leadership

Features

Role of the quality department

Reliability

Training

Conformance

Product design

Durability

Supplier quality management

Serviceability

Process management

Aesthetics

Quality data reporting

Perceived quality

Employee relations

gurus W. Edwards Deming, J. M. Juran, and Philip B. Crosby, Garvin (1987) developed a framework for analyzing product quality. His eight dimensions are shown in Figure 1. Saraph, Benson, and Schroeder (1989) also examined quality practices and built a construct of management components based on a review of the literature (see Figure 1). Udell, Atehortua, and Parker (1995) proposed that both product quality and management quality are part of the strategic process. The quality of the product may be defined by the user, by the manufacturer, or by standards inherent in the choice of inputs or processing of the product (Heizer and Render 2001). In lieu of a production history, an analysis of the system used to produce the product may serve as a proxy (Ward et al. 1998) for addressing the supplying firm’s management practices as well as product characteristics. Product quality has been identified as a characteristic of success in some studies. O’Neill and Duker (1986) found that unsuccessful firms were more likely than successful firms to have inferior products, and Hills and Narayana (1990) reported that a high-quality product or service was an important success factor for entrepreneurs. Tan and Tay (1994) also found that quality products and services were important for manufacturing firms in Singapore. Quality of the supplier’s management typically refers to technical skills, financial stability, and administrative ability (Burt, Dobler, and Starling 2003). While

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generally supporting the findings of Saraph, Benson, and Schroeder (1989), subsequent researchers have modified and expanded their work. Black and Porter (1996) distilled a list of 39 items into 10 broad factors, adding customer satisfaction, external interface management, and teamwork structures into the mix. Similarly, Ahire, Golhar, and Waller (1996) made three notable changes to the 1989 study by including customer focus and benchmarking and redefining “employee relations” as employee involvement, training, and empowerment. Some concern, however, has been raised as to whether this quality discussion is applicable to small manufacturers (Ahire 1996; Ahire and Golhar 1996).

Supplier Selection From a practical standpoint, large buying organizations (LBOs) cannot afford to enter into an unprofitable arrangement with a low quality small firm (St. John and Heriot 1993). Firms that cannot document specific quality criteria do not have a chance at a contract with an LBO. LBOs use purchasing agents to define a set of selection criteria as a barrier to identify acceptable suppliers and prevent poor buyer-supplier relationships (Piercy, Katsikeas, and Cravens 1997). This philosophy allows for the discovery of potential problems before they occur so that future transaction problems can be resolved without the buyer-seller relationship being terminated (Flanagan 1994). Small manufacturers wishing to enter the national retail market must meet or exceed these buyer-defined standards in order to gain a supplier relationship (Udell, Atehortua, and Parker 1995). That set of criteria may vary—in both number of criteria and area of concern—from one firm or industry to the next (Li, Fun, and Hung 1997). However, Ellram (1990) suggests that three supplier criteria are important in any context: production quality, on-time delivery, and performance history. Research shows that production quality contributes to manufacturing success (Roth and Miller 1992; Steiner and Solem 1988; Tan and Tay 1994). Roth and Miller (1992) also found that “superstar” manufacturing firms or high performers placed more value on quality programs than low-performing firms.

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Selected Quality Practices of Small Manufacturers Because meeting quality standards is a competitive requirement for small manufacturers, it is important to understand how these firms can improve their quality level. Roper, Hewitt-Dundas, and McFerran (1997) suggest that small firms might benefit from development programs to assess a company’s relative position and market strength. Dollinger, Enz, and Daily (1991) see development programs as being especially helpful to minority small business owners, but the transaction costs of a separate assessment program are prohibitively high for most firms. This article examines the quality management practices used in one such program to evaluate 1690 small manufacturing enterprises (SMEs) that applied to become suppliers for the national mass merchandising market.

Spekman 1988). Their responses were compared with current research and with responses from academics from various disciplines (accounting, marketing, and so on) to further refine the criteria to be used in the program. The instrument implemented in this program was constructed of action-specific questions across multiple disciplines. For each question, there were five possible levels of conformity, typically ranging from “not at all” to “complete.” For example, to assess the extent of a firm’s marketing plan, the following question was asked: “Does your firm have a marketing plan for this project? 1. We do not need a marketing plan for this project. 2. We have an informal, unwritten marketing plan. 3. We have an informal, written plan.

SUPPLIER ASSESSMENT PROGRAM Program Development A Midwest regional university developed a supplier selection and development program targeted at SMEs wanting to enter the mass merchandising market. This program was designed for two purposes. First, it screened potential suppliers to reduce the cost and workload for LBOs associated with an in-house assessment program. Second, the program served as a post-assessment educational tool for SMEs to improve their general management practices and help them become more attractive as suppliers. Dollinger, Enz, and Daily (1991) found that low-level buyers are negatively predisposed toward unsolicited products from unknown manufacturers. A program such as this could help bring together SMEs and LBOs and reduce the quality perception gap. The 34 questions used in the assessment instrument for this program were developed through an evolutionary process that began with retail buyers. Buyers were asked to submit a list of specific management practices that they considered critical for their suppliers. This method followed a type of focus group format to elicit suggestions from practitioners as proposed by other work in the area (for example,

4. A formal, written marketing plan is in progress. 5. We have a formal, written marketing plan.” In the original instrument, the responses were scrambled to reduce respondent bias and ensure that the preferred answer was not clear. The least-preferred answer was assigned a value of 1, and the mostpreferred answer was assigned a value of 5. Firm owners were asked to complete all 34 items of the self-assessment instrument, and respondents were advised that falsifying information was cause for immediate removal from the program. The overall management score was calculated by aggregating the scores from all 34 items, with each one weighted equally. A firm typically had to score at the 80 percent level (136 points) to pass minimum buyer requirements. Critical weaknesses in any area (a score of 1), however, were reported to the firm and were addressed immediately. All 34 management assessment areas are shown in the appendix.

Program Participants All participating SMEs contacted a mass merchandiser regarding their potential retail product, and the retailer in turn referred the SMEs to the assessment program. Study participants were required to submit a final, packaged version of the retail product along with documentation regarding the firm itself (financial

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Selected Quality Practices of Small Manufacturers Figure 2 Management practice statistics by forwarded (success) status. Management practice areas

Forwarded (successful) (n=539)

Not forwarded (unsuccessful) (n=1151)

Mean

Std. dev.

Mean

Std. dev.

Finance and accounting management

4.11

0.66

3.57

0.99

Production management

3.87

0.65

3.42

0.72

Strategic direction

3.87

0.59

3.36

0.74

Marketing management

3.61

0.66

3.17

0.69

Technology management

3.53

0.88

2.97

0.91

Note: Forwarded firm means are significantly greater than unforwarded firm means at the p < 0.001 level.

statements, quality reviews, and so on). The firm and product data were then reviewed and evaluated by an independent organization affiliated with the program but not with any retail firm or buyer. Of the more than 2100 SMEs that initially began the evaluation process, 1690 completed both the firm self-assessment and product evaluation. These firms make up the sample for this study. These 1690 firms met the basic definitions of small firms (less than 500 employees, not dominant in their industry, low capitalization relative to larger firms, and so on), but the level of development varied greatly from firm to firm. The SMEs were geographically distributed throughout the United States and Canada with no one region dominating the sample. While some products could be useful for B2B sale or for use by a retailer as an internally used product (for example, paper towels), the consumer-oriented retail use of a product was the primary focus for the evaluation program. Participation in the program was voluntary, but the SMEs understood that a positive program evaluation was necessary for the product to receive subsequent review by the mass merchandiser. Success for firms in this study meant getting their product forwarded to a retail buyer of the firm for review.

Scope of the Study Both firm management practices and product characteristics were critical to the final evaluation score,

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but this study is limited to examining behaviors exhibited by management to control the operations of the firm. Additionally, as shown in the appendix, factors such as marketing and financial management were also a part of the firm’s self-assessment. This study, however, focuses on those management behaviors that were characteristic of the firm’s orientation toward a quality management philosophy. For this reason, the authors will only be concerned with a subset of quality-related questions from the 34-item management assessment instrument.

SELECTED QUALITY PRACTICES This section presents a profile of selected quality management questions used in the evaluation program. The standards used in this study were set through extensive discussions with retailers with respect to their expectations and needs. The gradedscale nature of the questions was the basis for scoring the firm’s readiness to enter the mass merchandise market; each question offered five alternatives, with the middle alternative (3) meeting the average buyer’s minimum requirements. Two unacceptable responses and two above-minimum (including the preferred) responses were constructed. While not all possible responses were included, buyers considered them to be representative of actual SME behaviors. This scaling departs from other quality surveys in the literature such as Powell (1995) or Spencer and Loomba (2001).

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Selected Quality Practices of Small Manufacturers Because the program evaluated SMEs on the basis of the buyer-determined ratings, it would be disingenuous to “discover” that a significant proportion of the firms with low ratings were not forwarded to the retail buyers. As shown in Figure 2, the means for forwarded firms were significantly higher in all management practice areas than for nonforwarded firms. The successful firms in this program were more likely than unsuccessful firms to meet buyer expectations in all areas. The authors’ perspective in this study, however, is to explore the nature of the quality management expectations of buyers in large retail organizations, the extent to which small manufacturers in this program were prepared to meet these expectations, and possible reasons for gaps in this scenario. Of the 34 practices examined for participating SMEs, a few (quality commitment, quality control measures, in-process inspection system, first-piece approval, continuous improvement, and manufacturing technology upgrades) are relevant to quality management. The behaviors can be categorized by the following research questions: 1. To what extent is management committed to the use of quality management practices? 2. To what extent has management adopted industrystandard quality control practices? 3. To what extent has management internalized product inspection systems? 4. To what extent is management committed to planning for continuous improvement? 5. To what extent is management committed to using modern manufacturing technologies? To examine each research question, the authors first present literature on the quality practice. Then they state the research question, present their results, and discuss the findings in the context of the SME responses. Each table that is presented lists the assessment statement, its accompanying standard answer choices (in ascending preference order), and the number of forwarded and unforwarded firms that fell into the answer categories. Forwarded firms were those that met the basic management specifications in all fields (quality, marketing, finance, and so on) as well as met product specifications.

These firms had their buyer review applications sent on to a mass merchandiser. Buyers then examined each product for adoption based upon firm- and marketrelated criteria. Buyer adoption of a product for retail sale was not assured simply because the SMEs product had been forwarded on for review. In fact, only 93 of the forwarded products (17.6 percent) eventually passed all evaluation levels and made their way onto a mass merchandiser’s shelves.

Quality Commitment Research shows that small firms do not readily adopt total quality management (TQM) (Powell 1995). Powell explains that the full TQM philosophy entails 10 to 12 factors, some of which managers avoid through resistance to change, risk aversion, or the expectation that current methods are sufficient. Financial success for TQM firms appeared most related to the factors of management commitment, open communication, and employee empowerment rather than the more tangible and measurable factors, including those related directly to quality measurement. Yusof and Aspinwall (2000) also linked employee involvement in quality to success. In SMEs, however, quality control is often vested in a single individual who may have other duties (Sun and Cheng 2002). Powell (1995) concluded that while a firm may still be successful without adopting a TQM ideology and vocabulary, a potential customer might impose this requirement on the manufacturer. Greiner’s (1972) model of organizational growth describes the smallest stage of a firm as having a simple structure, with decision making done by the ownermanager with an informal communication pattern. At this stage, SMEs view leadership and people as more important than TQM (Rahman 2001). With continuously close control of the business, managers tend to resist cumbersome structures, especially when research finds that informal and formal quality control systems lead to similar rates of success (Chittenden, Poutziouris, and Mukhtar 1998). Unfortunately for these firms, LBOs may not share the same perspective. To explore the use of quality management practices in this study, research question 1 is proposed.

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Selected Quality Practices of Small Manufacturers Table 1 Quality commitment: “In our company…”. Response

Not forwarded

Forwarded

Total

1. No formal system is in place to assure quality.

26 (2.3%)

4 (0.8%)

30 (1.8%)

2. Employees are expected to produce quality without reward.

128 (11.4%)

47 (8.9%)

175 (10.6%)

3. Management is primarily responsible for product quality.

379 (33.8%)

86 (16.3%)

465 (28.2%)

4. Management and hourly employees meet regularly to discuss quality.

463 (41.3%)

290 (55.1%)

753 (45.7%)

5. We have a formal employee reward system to promote quality.

126 (11.2%)

99 (18.8%)

225 (13.7%)

Total

1122 (100.0%)

526 (100.0%)

1648 (100.0%)

RQ1: To what extent is management committed to the use of quality management practices? The forwarded firms in this study exhibited a statistically higher level of commitment to quality programs than the unforwarded firms. Table 1 shows that almost three-fourths of forwarded firms adopted quality systems that involved all employees, while unforwarded firms were more likely to rely on management control of the quality process. A chi-square procedure performed on these data showed that the responses of forwarded firms were more likely to meet buyer expectations than those of unforwarded firms (p<0.01; X 2 =75.57). These results reflect buyer expectations that SMEs should enhance their own commitment to quality by empowering employees to participate in a TQM environment (Ahire, Golhar, and Waller 1996; Powell 1995). Unforwarded firms were more likely than forwarded firms to put control of the quality process with management and not with employees (Sun and Cheng 2002).

Quality Control Measures A formalized quality management program tends to be an important factor for manufacturing success (Roth and Miller 1992). Smaller firms, however, may use more informal means of quality assessment, such as inspection rather than statistical control methods, because these firms lack personnel skilled in more sophisticated techniques (Abdul-Aziz, Chan, and Metcalfe 2000). These firms tend not to adopt formal quality programs without powerful external pressure

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(McAdam and McKeown 1999; Sturkenboom, Van der Wiele, and Brown 2001; Sun and Cheng 2002). Guilhon, Martin, and Weill (1998) describe this attitude as a restrictive, short-lived, and rarely used approach toward quality. Sun and Cheng (2002) illustrate the attitude clearly by noting that small manufacturers tend to view attaining certification as the end of their quality responsibilities. Many SMEs indicate that the quality of the product or service they produce is very important, but shun formal programs (Sun and Cheng 2002). This reluctance is due to concerns such as time, cost, appropriateness, resources, relevance, and bureaucracy, among others (Chittenden, Poutziouris, and Mukhtar 1998; McAdam and McKeown 1999; Sturkenboom, Van der Wiele, and Brown 2001). Small firm ownermanagers find that formal standards stress conformity and deemphasize other quality factors (Roper, Hewitt-Dundas, and McFerran 1997). The standards are not so much irrelevant as insufficient to meet their customers’ needs. The 1994 ISO 9000 standards, for example, were designed to document processes, but did not assure the production of a quality product (Sun and Cheng 2002). The implication is that this certification process is more form than substance. Newer ISO standards incorporate customer needs and leadership, but the drastic change may scare small firm managers into believing that the goal continues to be elusive and expensive. Guilhon, Martin, and Weill (1998) found that SME managers think that SMEs view these standards as documentation oriented, and Hodgetts, Kuratko, and Hornsby (1999) noted that they believe leadership is

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Selected Quality Practices of Small Manufacturers Table 2 Quality control measures: “We or our contract manufacturer(s)…”. Response

Not forwarded

Forwarded

Total

1. Do not need quality control measures in our firm.

57 (5.1%)

8 (1.5%)

65 (3.9%)

2. Use our employees to monitor quality control.

723 (64.5%)

274 (52.0%)

997 (60.5%)

3. Use statistical process control for product inspection.

163 (14.5%)

94 (17.8%)

257 (15.6%)

4. Use standard MIL statistical process control.

47 (4.2%)

38 (7.2%)

85 (5.2%)

5. Use ISO 9000 or equivalent standards.

131 (11.7%)

113 (21.4%)

244 (14.8%)

Total

1121 (100.0%)

527 (100.0%)

1648 (100.0%)

deemphasized, while operations results are stressed too significantly. Small manufacturers find that flexibility is an important part of their ability to take advantage of entrepreneurial opportunities (Kuratko, Goodale, and Hornsby 2001), and the formality of these quality programs often restricts that ability to adapt. Indeed, Chittenden, Poutziouris, and Mukhtar (1998) found an inverse relationship between formalization of the quality system and satisfaction with that system in SMEs. Sun and Cheng (2002) suggested that awards models have operationalized quality and that some SME managers see positive aspects of formal quality systems. Hodgetts, Kuratko, and Hornsby (1999) comment that even though Baldrige (and other awards) applicants often do not succeed on their first attempt, the feedback they receive is invaluable. McAdam and McKeown (1999) found that SMEs did like the emphasis on achieving quality standards, and other research has found that managers are aware of the existence of formal quality assessment programs, but think that self-assessment of quality is for large organizations that are applying for a major award (Wilkes and Dale 1998). In sum, SMEs tend to disregard acronym-based quality programs (Sturkenboom, Van der Wiele, and Brown 2001). Research question 2 examines the adoption of quality control measures. RQ2: To what extent has management adopted industry-standard quality control measures? In this study, both forwarded and unforwarded firms were unlikely to make general use of more advanced

quality standards; however, forwarded firms were almost twice as likely to adopt standards like ISO 9000 or MIL processes (28.6 percent to 15.9 percent). Table 2 shows the results of the firms’ responses to this question. A chi-square test confirmed that forwarded firms were statistically more likely to adopt advanced quality control programs than unforwarded firms (X 2 =52.70, p<0.01). Even so, fewer than half of the firms in this program met the minimum expectations of buyers for this area. These results seem to support the Sturkenboom, Van der Wiele, and Brown (2001) conclusion that SMEs are more reluctant than large firms to adopt formal quality programs. They also seem to support the conclusions of Sun and Cheng (2002) and Kuratko, Goodale, and Hornsby (2001) that these smaller firms shun formality and embrace flexibility concerning quality standards.

Internalized Product Inspection Systems Although small firms may avoid formal programs, they do not ignore quality. They tend to employ Zipkin’s (1991) selective “toolbox” approach rather than embracing the entire philosophy of any particular program. For example, Abdul-Aziz, Chan, and Metcalfe (2000) found that use of an in-process inspection system (along with pre- and post-process inspection) was critical for success. Yusof and Aspinwall (2000) noted such quality practices as process improvement, statistical process control (SPC), and employee involvement in the TQM program were

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Selected Quality Practices of Small Manufacturers

Response

Not forwarded

Forwarded

Total

1. No in-process inspection systems in use at this time.

59 (5.2%)

8 (1.5%)

67 (4.1%)

2. An informal in-process inspection system in use part of the time.

52 (4.6%)

8 (1.5%)

60 (3.6%)

3. An informal in-process inspection system in use all of the time.

492 (43.8%)

157 (29.8%)

649 (39.3%)

4. A formal in-process inspection system in use some of the time.

36 (3.2%)

15 (2.8%)

51 (3.1%)

5. A formal in-process inspection system in use at all times.

485 (43.1%)

339 (64.3%)

824 (49.9%)

Total

1124 (100.0%)

527 (100.0%)

1651 (100.0%)

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Table 3a In-process inspection system: “We or our contract manufacturer(s) have…”.

Table 3b First-piece approval: “At our firm or at our contract manufacturer’s facility…”. Response

Not forwarded

Forwarded

Total

1. We have no first-piece approval system.

118 (10.5%)

17 (3.2%)

135 (8.2%)

2. Only rarely do we conduct first-piece inspections.

32 (2.9%)

5 (1.0%)

37 (2.2%)

3. First-piece inspection is done only with a difficult setup.

79 (7.1%)

32 (6.1%)

111 (6.7%)

4. First-piece inspection occurs every other production cycle.

65 (5.8%)

27 (5.1%)

92 (5.6%)

5. Each production cycle has a first-piece approval system.

825 (73.7%)

445 (84.6%)

1270 (77.2%)

Total

1119 (100.0%)

526 (100.0%)

1645 (100.0%)

characteristic of successful smaller manufacturers. Hodgetts, Kuratko, and Hornsby (1999) found that Baldrige Award applicants tended to use Six Sigma, a process control program with exceptionally rigorous statistical standards, allowing no more than 3.4 defective parts per million. St. John and Heriot (1993) found that some firms used an informal control system initiated by ownership rather than SPC and/or control charts. These firms were less likely to be bypassed entirely than those with no quality system at all. Small firms often place an emphasis on quality information rather than the quality assurance prized by large manufacturing firms (Sun and Cheng 2002). They also tend to measure customer satisfaction with traditional methods such as customer surveys, along with nontraditional approaches such as counting the number of customer complaints and counting the number of items returned under warranty (Kuratko et al. 2001). Another qualitative control technique, firstpiece approval, reflects the tendency of firms to

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inspect the initial output of their production cycles. Research question 3 examines the use of both inprocess inspection and first-piece approval in an internalized quality control system. RQ3: To what extent has management internalized product inspection systems? Table 3a displays the tendency of this study’s participating firms to use an in-process control system. The results of this study show that more than two-thirds of the forwarded firms used a formalized in-process inspection system, while fewer than half of the unforwarded firms admitted to having such a system. In fact, more unforwarded firms used informal systems than formal systems (48.4 percent to 46.3 percent), but both sets of firms were unlikely to admit to using no in-process inspection system at all. A chi-square test on these data showed that forwarded firms had a statistically higher response level to this question than unforwarded firms at the p<0.01 level (X 2 =72.07).

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Selected Quality Practices of Small Manufacturers Table 4 Continuous improvement: “We have…”. Response

Not forwarded

Forwarded

Total

1. No continuous improvement program (CIP) at this time.

228 (20.2%)

38 (7.2%)

266 (16.1%)

2. An informal CIP, but it is not yet comprehensive.

254 (22.5%)

109 (20.8%)

363 (21.9%)

3. An informal but comprehensive CIP.

417 (36.9%)

207 (39.4%)

624 (37.7%)

4. A formal CIP, but it is not yet comprehensive.

42 (3.7%)

28 (5.3%)

70 (4.2%)

5. A formal CIP with a comprehensive plan.

189 (16.7%)

143 (27.2%)

332 (20.1%)

Total

1130 (100.0%)

525 (100.0%)

1655 (100.0%)

Table 3b shows the results of firms’ responses to having a first-piece approval system. While a chisquare test showed that forwarded firms had a statistically higher usage of this quality system ( X 2 = 35.39, p < 0.01), both sets of firms reported having formalized first-piece approval processes as the norm. Almost 80 percent of unforwarded firms and almost 90 percent of forwarded firms reported using first-piece approval at least every other cycle, and most of these firms reported using the system for each cycle. However, only 10 percent of forwarded firms were unlikely to use this system regularly, and that same percentage of unforwarded firms reported having no system at all. The results of this study strongly support the findings of Abdul-Aziz, Chan, and Metcalfe (2000) in that the successful firms in this program were more likely to use in-process inspection than unsuccessful firms. However, all firms tended to use a first-piece approval system even though the percentage of forwarded firms using this technique was statistically higher than the percentage of unsuccessful ones. Perhaps Zipkin’s (1991) toolbox approach is supported by this method because some techniques were used by all firms, but no consistent pattern was found.

Continuous Improvement While large firms use training to support continuous improvement, small firms tend to rely on traditional incentive and suggestion programs (Sun and Cheng 2002). Yusof and Aspinwall (2000) found that few

small firms use continuous improvement tools and techniques. In addition, employees may not recognize the difference between continuous improvement and productivity improvement programs; they are often wary of efforts that may result in the loss of jobs (Townsend and Gebhardt 1990). Even managers may be disillusioned by improvement efforts, as the results may diminish over time (Lillrank, Shani, and Lindberg 2001). Wilkes and Dale (1998) suggest that SMEs need continuous improvement training and a development guide that outlines critical practices. To examine management’s commitment to continuous improvement, research question 4 is proposed. RQ4: To what extent is management committed to planning for continuous improvement? Formal continuous improvement programs (CIPs) were unlikely to be used by either set of firms, but chi-square analysis showed that forwarded firms in this program reported a statistically higher level of usage than unforwarded firms (X 2 =60.39, p<0.01). About one-third of forwarded firms reported using a formalized CIP, while fewer than 20 percent of unforwarded firms reported similar usage. However, similar percentages of both types of firms used informal programs, although unforwarded firms were twice as likely to have no CIP at all. Table 4 shows the results of the firms’ responses to this question. These results strongly support Yusof and Aspinwall (2000) showing that CIPs were uncommon for both forwarded and unforwarded firms. While the differences between forwarded and unforwarded firms are

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Selected Quality Practices of Small Manufacturers Table 5 Manufacturing technology (MT) upgrades: “We…”. Response

Not forwarded

Forwarded

Total

1. Have no plans to upgrade our MT.

77 (6.9%)

11 (2.1%)

88 (5.4%)

2. Hold informal reviews when the need arises.

590 (52.9%)

195 (37.1%)

785 (47.8%)

3. Perform informal reviews of our MT annually.

181 (16.2%)

115 (21.9%)

296 (18.0%)

4. Conduct formal reviews every two years or so.

36 (3.2%)

16 (3.0%)

52 (3.2%)

5. Have a formal review of our MT annually.

232 (20.8%)

188 (35.8%)

420 (25.6%)

Total

1116 (100.0%)

525 (100.0%)

1641 (100.0%)

statistically significant, the results are still disappointing. Wilkes and Dale’s (1998) suggestion for a quality-training program for SMEs is probably justified. The program discussed in this study could be the first step in a development guide for continuous improvement.

Manufacturing Technology Upgrades

technology, firms must also allocate resources toward quality programs, training, and technically literate workers. These costs may cause SMEs to gamble the life of the firm on a specific technology choice (Schroeder, Gopinath, and Congden 1989). As in the case of quality certification, SMEs tend to invest only when required by customer demands and market forces (Schroeder, Congden, and Gopinath 1995). Research question 5 explores the use of advanced technology by small manufacturers.

Successful firms are more likely than unsuccessful firms to update their production technology (Steiner and Solem 1988). Steiner and Solem found that 50 percent of the successful firms in their study updated production technology, while only 13 percent of unsuccessful firms did. Both sets of firms acknowledged technology changes in their industry, but unsuccessful firms did not have the resources to change. Ariss, Raghunathan, and Kunnathar (2000) echoed the importance of advanced technology in assisting manufacturing designers in maintaining higher quality production levels; interestingly, few of the firms in their study found that advanced manufacturing technology (AMT) was influential in design quality, despite the existence of CAD/CAM. Small-firm managers may perceive that AMT (like quality programs) has more benefits for large firms than for SMEs (Ariss, Raghunathan, and Kunnathar 2000). Schroeder, Gopinath, and Congden (1989) found that AMT led to greater precision but not higher quality; in fact, improving quality was actually a prerequisite to AMT. In addition to the large investment in

RQ5: To what extent is management committed to using modern manufacturing technologies? More than three-fourths of the unforwarded firms in this study reported either having no plans to upgrade their manufacturing technology or having only informal periodic reviews (76 percent). Forwarded firms, on the other hand, had a much higher rate of adopting formal review programs (38.8 percent), with more than one-third of these firms performing this review annually. A chi-square test on the data showed that the responses of forwarded firms were significantly higher than those of unforwarded firms ( X 2 = 71.73, p < 0.01). However, about one-third of the forwarded firms chose to review their management technology informally on an ad hoc basis. Table 5 shows the results of firms’ responses to this question. While these results seem to support Steiner and Solem’s (1988) contention that successful firms update their production technology regularly, they also seem to echo Schroeder, Congden, and Gopinath

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Selected Quality Practices of Small Manufacturers (1995) in that even successful firms may not change their technology until the market warrants it. Perhaps as Ariss, Raghunathan, and Kunnathar (2000) found, these smaller firms thought that the benefits to change were minimal.

CONCLUSIONS AND IMPLICATIONS This article explored the nature of the quality management expectations of buyers in large retail organizations, the extent to which small manufacturers in this program were prepared to meet these expectations, and possible reasons for gaps in this scenario. The quality management practices the authors examined were expectations specified by the mass retailer marketers themselves and are indicative of current quality techniques. Both large and small manufacturers were expected to meet these standards to be suppliers. The successful firms in this study — those that were forwarded on to buyers — were significantly more likely to meet these standards than unsuccessful firms. While forwarded firms adopted a higher level of quality commitment than unforwarded firms, this does not mean that they met buyer expectations across the board. In some cases, even successful firms only met minimal qualifications for buyer acceptance. Unsuccessful firms, however, consistently failed to meet buyer expectations in multiple quality areas, and a failing performance in the quality area mirrored a failing performance in each of the other management assessment areas. Overall, successful firms met expectations in all areas, and unsuccessful firms did not. The literature seems to indicate that there are several reasons why firms do not embrace formal quality programs and practices, including scarce resources, poorly perceived benefits, and weak management commitment. Any or all of these could explain why firms in this study chose not to adopt certain quality practices. However, there were some positive findings. While even successful firms found it difficult to adapt to higher standards (for example, ISO 9000), both successful and unsuccessful firms made use of practices

that seemed more within their grasp (in-process inspection and first-piece approval). Perhaps future research should examine the standards needed for success in a particular market segment and in developing guidelines to help SMEs meet those particular standards. This study looked at quality standards that were deemed critical to success in the mass merchandising market. These and other standards may or may not be critical to international, regional, or local markets or for niche or industrial customers. Future research could also examine the usefulness of development programs that identify quality weaknesses and help SMEs adapt to market expectations. ACKNOWLEDGMENT The authors would like to thank Dr. Gerald G. Udell, director of the Center for Business & Economic Development at Southwest Missouri State University, for his valuable contributions to this article. REFERENCES Abdul-Aziz, Z., J. Chan, and A. Metcalfe. 2000. Quality practices in the manufacturing industry in the UK and Malaysia. Total Quality Management 11 (December): 1053-1065. Ahire, S. L. 1996. An empirical investigation of quality management in small firms. Production and Inventory Management Journal 37 (2nd quarter): 44-50. Ahire, S. L., and D. Y. Golhar. 1996. Quality management in large vs. small firms. Journal of Small Business Management 34 (April): 1-13. Ahire, S. L., D. Y. Golhar, and M. A. Waller. 1996. Development and validation of TQM implementation constructs. Decision Sciences 27 (Winter): 23-56. Ariss, S., T. Raghunathan, and A. Kunnathar. 2000. Factors affecting the adoption of advanced manufacturing technology in small firms. SAM Advanced Management Journal 65 (Spring): 14-20. Black, S. A., and L. J. Porter. 1996. Identification of the critical factors of TQM. Decision Sciences 27 (Winter): 1-21. Burt, D. N., D. W. Dobler, and S. L. Starling. 2003, World-class supply management. Boston: McGraw-Hill, Irwin. Chittenden, F., P. Poutziouris, and S. M. Mukhtar. 1998. Small firms and the ISO 9000 approach to quality management. International Small Business Journal 17 (October): 73-88. Dollinger, M., C. A. Enz, and C. M. Daily. 1991. Purchasing from minority small businesses. International Journal of Purchasing and Materials Management 27 (April): 9-14.

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Selected Quality Practices of Small Manufacturers Ellram, L. 1990. The supplier selection decision in strategic partnership. Journal of Purchasing and Materials Management 26 (Fall): 8-14.

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Hills, G., and C. Narayana. 1990. Profile characteristics, success factors and marketing in highly successful firms. In Frontiers of Entrepreneurship Research. Wellesley, Mass.: Babson College.

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Kuratko, D. F., J. C. Goodale, and J. S. Hornsby. 2001. Quality practices for a competitive advantage in smaller firms. Journal of Small Business Management 39 (October): 293-311. Li, C., Y. Fun, and J. Hung. 1997. A new measure for supplier performance evaluation. IIE Transactions 29 (September): 753-758. Lillrank, P., A. B. Shani, and P. Lindberg. 2001. Continuous improvement: exploring alternative organizational designs. Total Quality Management 12 (January): 41-55. McAdam, R., and M. McKeown. 1999. Life after ISO 9000: An analysis of the impact of ISO 9000 and total quality management on small businesses in northern Ireland. Total Quality Management 10 (March): 229-241. O’Neill, H. M., and J. Duker. 1986. Survival and failure in small business. Journal of Small Business Management 24 (January): 30-37. Piercy, N. F., C. S. Katsikeas, and D. W. Cravens. 1997. Examining the role of buyer-seller relationships in export performance. Journal of World Business 32 (Spring): 73-86.

Steiner, M. P., and O. Solem. 1988. Factors for success in small manufacturing firms. Journal of Small Business Management 26 (January): 51-56. St. John, C. H., and K. C. Heriot. 1993. Small suppliers and JIT purchasing. International Journal of Purchasing and Materials Management 29 (Winter): 11-16. Sturkenboom, J., T. Van der Wiele, and A. Brown. 2001. An action-oriented approach to quality management self-assessment in small and medium-sized enterprises. Total Quality Management 12 (March): 231-242. Sun, H., and T. Cheng. 2002. Comparing reasons, practices and effects of ISO 9000 certification and TQM implementation in Norwegian SMEs and large firms. International Small Business Journal 20 (November): 421-442. Tan, W., and S. Tay. 1994. Factors contributing to the growth of SMEs: The Singapore case. Fifth ENDEC world conference on entrepreneurship proceedings. Singapore: NTU-Entrepreneurship Development Center. Townsend, P., and J. E. Gebhardt. 1990. The quality process: Little things mean a lot. Review of Business 12 (Winter): 3-8.

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Selected Quality Practices of Small Manufacturers Wilkes, N., and B. G. Dale. 1998. Attitudes to self-assessment and quality awards: A study in small and medium-sized companies. Total Quality Management 9 (December): 731-739. Yusof, S. M., and E. M. Aspinwall. 2000. Critical success factors in small and medium enterprises: Survey results. Total Quality Management 11 (July): 448-459. Zipkin, P. H. 1991. Does manufacturing need a JIT revolution? Harvard Business Review 69 (January/February): 4-11.

APPENDIX: Management Assessment Items Content area

Management practice

Marketing

Marketing plan Marketing organization Price determination Market demand Competitive product analysis Promotional plan Company orientation

Strategic direction

Mission statement Job description Employee input Management experience *Quality commitment Firm’s primary objective Use of consultants Business plan Board of directors Board involvement

Technology

Product testing Research and development *Manufacturing technology (MT) upgrades

Production

Planning and control systems Delivery schedule reliability *Quality control measures Maintenance program Cost containment *First piece approval *In-process inspection system *Continuous improvement

Finance and accounting

Use of cash flow analysis Budgetary planning cycle Budget update cycle Cost accounting General accounting functions Financial planning

BIOGRAPHIES Stephen C. Jones is an assistant professor of management at Southwest Missouri State University. He received his doctorate in organizational theory from the University of North Texas. Jones has published in the Journal of Vocational Education Research, the Journal of Business & Entrepreneurship, and the New England Journal of Entrepreneurship. His research interests include small business management and business ethics and social responsibility. He can be reached by e-mail at [email protected] . Tami L. Knotts is an assistant professor of management at Southwest Missouri State University. She received her D.B.A. in management from Louisiana Tech University. Knotts has published in the Employee Responsibilities and Rights Journal, Psychological Reports, and the New England Journal of Entrepreneurship. Her research interests include small business management and religious involvement in the workplace. Knotts can be reached by e-mail at [email protected] . Karen L. Brown is an assistant professor of management at Southwest Missouri State University. She received her D.B.A. in management from Louisiana Tech University. Brown has published in OMEGA: The International Journal of Management Science, The International Journal of Operations and Production Management, and Project Management Journal. Her research interests include operational performance measures and supply management. Brown can be reached by e-mail at [email protected] .

Note: (*) Signifies quality areas discussed in this article.

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