Relationship Impact of Pressure on Suppliers to Improve Quality: An Abstract

Abstract

Superior Product Quality is generally considered a competitive advantage. Yet literature on quality improvement and new product development have recognized the existence of impediments in the successful practice and implementation of Quality Improvement. In an uncertain and highly competitive business environment, it is not uncommon for organizations to pass on Quality Improvement tasks to supply chain partners. This is often the case in the manufacturing supply chain with powerful OEMs (Original Equipment Manufacturers). We seek to determine whether such “Quality Improvement Pressure” is conducive to good Supplier-OEM Relationships and how this compares with price pressure exerted similarly by OEMs. Overall supplier-OEM relationship is specified as the final dependent variable. Recognizing the role of a set of relationship constructs in influencing overall supplier-manufacturer interactions, communication and information sharing is posited as a crucial variable in enabling good supplier-(OEM) relationship. Commitment by the OEM reflected in the help and assistance provided to the supplier in meeting price targets and willingness to work together are essential for the success of the relationship. Successful profit partnership, a logical outcome of inter-organizational trust is considered a reflection of a high degree of sophistication in cooperation. The specified model has two exogenous variables – one representing price pressure and the other representing pressure to improve quality. After following a multi-stage scale development procedure, data were collected from suppliers in the automotive light vehicles industry and the electronics industry and were analyzed using structural equation modeling. The results of this research advance the understanding of B2B relationship management by demonstrating that OEM pressure to improve quality can coexist with good supplier-OEM relationship. The influence of pressure to improve quality on supplier-OEM relationship takes place through a set of moderating variables which are within the control of management. Unlike price pressure which may be treated by some suppliers as adversarial, pressure to improve quality is likely to be viewed by suppliers more favorably. Analysis shows differences in the impacts of the two initial variables on the outcome variable. Quality Improvement pressure has substantially more positive links with the intermediate relational variables as well as the dependent variable than has price pressure.