01front.pdf - ResearchSpace - The University of Auckland

http://researchspace.auckland.ac.nz

ResearchSpace@Auckland

Copyright Statement

The digital copy of this thesis is protected by the Copyright Act 1994 (New Zealand).

This thesis may be consulted by you, provided you comply with the provisions of the Act and the following conditions of use:

• Any use you make of these documents or images must be for research or private study purposes only, and you may not make them available to any other person.

• Authors control the copyright of their thesis. You will recognise the author's right to be identified as the author of this thesis, and due acknowledgement will be made to the author where appropriate.

• You will obtain the author's permission before publishing any material from their thesis.

To request permissions please use the Feedback form on our webpage.

http://researchspace.auckland.ac.nz/feedback

General copyright and disclaimer

In addition to the above conditions, authors give their consent for the digital copy of their work to be used subject to the conditions specified on the Library Thesis Consent Form.

lII

EuPrRrclr, STUDY oF NEw ZBAND uAlrUFecTItRrNo ^pEAlfTg

Donald George S1uti A

thesis

_{subnitted in}

the requirements

for

fulfillnent of the degree of

DOCTOR OF PHTIOSOPHY

[n the

DEPARTI,IENT OF I.iANAGEMENT SCTENCE

AND TNFORMATTON SYSTEMS

THE UNIVERSITY OF AUCKIAND

L992

Advisers:

Dr.

I(anbiz Maani

Senior Lecturer

Management Science & fnformat.ion Systens

Dr.

lIartin putterill

Associate professor Accounting & Finance

.lillvB9ly ^{oF AUCKLAND LTBRARY}

_.,.,:

illlHilq

?.t--

l6L

((tt, L t-. _tr,

ACKITOWLEDGET.TENTS

During the process of conducting this research of the impacts of trqualityrr _on performance , I ^{have had} the pleasure of dealing with a number of people who have been only too witling to assist me in my endeavour. r wish to acknowledge _rny thanks to these ^people.

I express appreciation to my two committee members who spent

long hours and great efforts on my behalf. Dr. Kanbiz Maani was

especially helpful in guiding me during the initial stage of the research. His feedback concerning the construction of the research model and the development of the guestionnaire _helped to avoid some pitfatls _which rnay have hindered the success of this research. Associate Professor Martin putterill was of great assistance throughout the process and gave especiar herp concerning the structure _and presentation of the dissertation.

My committee members also demonstrated an aerareness of me as an

individual with needs, frustrations and goars. r wish to thank thern for this.

A debt of gratitude and appreciation is expressed to those manufacturing _{managers who} gave of their time to provide the empirical data used in this study.

r wish to thank some of the other people who assisted me

along the way. professor craig Ansley and Dr. shoreh Maani for their advice _on statistical procedures. Dr. Brian Murphy for his helpful commentary on questionnaire construction and presentation of resurts. Dr. Thomas Rohrer for his efforts to bring me to a

tl

competent understanding of the structural equations _modelring methodorogy. Mr. Michaer Ford and Mrs. Lorri o'Brien for assistance in mastering sAS procedures. Mr. Edward orNeirr for help in the preparation and distribution of guestionnaires.

Margaret Tibbles and peter _Beyer for their help in the final preparation of this manuscript. Mr. Bruce Hardie for general assistance- Dr. Lech Janczewski and Mr. rvan Farac for moral support.

r also wish to acknowledge the support provided to me during this research from grants frorn the University of Auckland _Higher

Deqrees committee and the financial help given by the Department

of Management Science and fnformation Systems.

Fina1ly, a speciar message of rove and appreciation goes to ny family. Eraine, thanks for arl of the support, patience and

understanding which you gave to me during this important time of

my life and for shouldering the entire burden of having to deal

with the rrreal world'r during these past _few years. Al_so , ^a special thanks from dad to Tom and Anne for being such wonderful children.

l't'l

ABSTRACT

This study was conducted to assess the inpacts of quality on

operational and business performance in manufacturing firms.

Data were provided by 184 diversified New zealand manufacturing plants- Quality is defined as the degree of conformance to specifications.

The first phase of the research was the construction of a

theoretical model to incorporate the impacts of. quarity on

nanufacturing performance, manufacturing productivity _and business performance. _The relationships of the model are based

on the guality managrement literature.

The second phase of the research was the design and

administration of a survey instrument for the collection of empirical performance data. The data were then used to evaluate the relationships represented in the model.

The final phase of the research used structural eguations nodelling in order to evaluate the relationships of the model.

Quality ^was found to have significant and positive irnpact,s on

operational performance measures for process utilization, process

output, production costs, work-in-process inventory levels and

on-time delivery rate. The anarysis found that change in quarity level was most strongly associated with change in ^process utilization. The findings for the irnpacts of quarity on

operatj-onal performance were cornpatibre with the guarity

management literature.

The impacts

of quarity

on business performance given by

structurar

_{eguations anarysis}

were significant

and positive

the for

lv

productivtttr'-lndueed l,nproveslents

of quatlty.

GenEralllr, the sup-port f:et Che iupacts

of quality

on businergs petfornanoe v-hich_

occur through

otlier

a,speets of,

olrerational

performance

was

not siguriftcairt.

Ttre LinLtatl.sns of tl,re

study,

were speclftred.

The

implicatLons of,. the :findirqrs

of tbe

stud11 f,or manufasturerrg $er€

rrevi.ewed, atrong'wlth

the

directLslrs

for future

res-earch.

TABIJ OF CONTETTS

ACKNOWLEDGEMENTS ... "..""

page

ii vi iv

ABSTRACT

TABLE OF

LIST ^OF LIST ^OF LIST ^OF

NOTE ^ON CHAPTER

1. INTRODUCTTON AND PROBLEM STATEMENT .... ^t

1. 1. A Very Cornpetitive Global ^Economy

L.2. ^{consumers Demand} Quality in the ^{Global Market} L.3. Introduction to the RoIe of Quality in

Manufacturing 1.4. What is _Quality?

L.5. The fmpact of i'gualityrr in the ^{Emerging View} 1.5. Delays in Adopting a 'rQualityrr ^Focus

1-.7. The Research Environment: Manufacturing in

New Zealand ^L2

1.8. Research Objectives and Procedures ^L5

1.9. Outline of Dissertation ^L5

L. l-0. Contribution of Research ¹⁹

2. THE IMPACTS OF "QUALITYn ON PERFORMANCE: A REVIEW OF

THE LTTERATURE ²²

2.L. A Search for the Evidence of the Irnpacts of ItQualityt'

2.2. Empirical

2.3 . Ernpirical

CONTENTS

TABLES .,... ix

ILLUSTRATIONS ... ^X

ABBREVIATIONS ^Xi

PRESENTATION FORMAT AND COMPUTER SOFTWARE Xii

Studies Based on PIMS Data

Studies that Ernploy Data from Several

1 2 3

3 7

tL

Ll-

23 25

Firms

Evidence from ^{Case Examples}

Ernpirical Evidence from Large-Scale Studies Theoretical Impacts of Improved rrQualitytt

other Related Quality Managernent Literature

Need for Further ^Research

3. A MODEL OF REI,ATIONSHIPS BETWEEN ''QUALTTYII ^AND

PERFORMANCE ⁵⁷

3. L. Introduction . ⁵⁸

3.2. Foundations of the rrQuality"-Performance Model ⁵⁹ 3.3. Integration of the ^{Chain Reaction and Cost}

Savings Models ⁶⁴

3.4. Developnent of the |tQualityt,-Performance Model ⁶⁶ 3.5. Antecedent Expectations of Operational Links with

Business Unit, Performance ⁷³

3.5. SummarY and Transition ' ⁷⁵

3L

2.4.2.5.

2.6.2.7 ^.

2.8.

34 40 42 53 54

\/I

4. SELECTTON OF OPERATIONAL _{MEASURES AND} page DATA COLLECTION

76 77 79 89 92 96 97 L00 LO2 L03 L03 105 L06 l.0B L10 r.L1 1,2L ]-27 L29 t 31 136

PROCEDURES

4.L. A Need for Empirical Data

4.2. Operational Measures Considered

4.3. Data Collection _Technigue 4.!. Design of euestionnaire

4.5. Ensuring Respondent Confidentiality 4.6. Data Collection

4.7 . ^Summary

s.

A vrEw 5. t_.

5.2.5.3 .

5.5.5.4.

5.6.5.7 .

5. 8.

5. 10.5.9.

5. 1L.

5.L2.

OF THE EMPIRICAL DATA: SUMMARY AND TESTS

Rgsumd .. o.. .. o...

Questionnaires Returned Creati.on of the Dataset

Sanple Representativeness _Evaluated

coefficient _Alpha Test of rnstrument and Data

Reliability

Adjustrnent of Response Scale Values

A Summary View of the Empirical Data

T Tests of Response Differences Factor Analysis Results

Operational Measures Rejected

An Initial View of the Association of leuality with Performance ...

Usefulness of the Data Confirmed

OF ANALYSIS OF Q-P MODEL VARIANTS

Introduction

6. ANALYSIS METHODOLOGY: 6.1. 6.2. serection Methodological and Advantages Requirements _SELECTTON of structural AND DTscUsSIoN Eguations. 138¹³⁹

Modell j.ng ₁₄₁

5.3- coinposition of structurar Eguations Models , r45

6.4. Procedure for Moder construction and Testing 151_

6.5. Sample Size Requirernents of SEM Llrz

5.6. Description of EeS Software . 153

5.7. Summary . 161

7. RESULTS

7.t.

7 .2.

I62

l_63

165

t73

Description _Functions

Functions of

Variants Focused on

-

^Operations

...

7

-3.

conditions

for

the use

of structurar

Equations Modelling

7.4.

Evaruative

criteria of Fit for

structural

_ Pguations Models . ¹⁷⁶

!-5. Findings: operations _Functions Variants 1g3

7.6. Q-P Model performance Variants _Linked to Business . Lg4

7.7. Findings: Confirmed Business performance

Variant

_zoo

7.8. Results for Unconfirmed ROS Variants ZOz

7.9. Summary of Findings _2o4

vll

8. DTSCUSSTON page₂₀₆

8.1. fntroduction ... . ZO7

8.2. Review of e-p ^Model Links _2O7

8.3. EeS Findings for Confj-rmed Variants ... ZLO

8.4. EeS Findings for Unconfirmed Variants . ZL4

8.5. consideration of Lirnitations to the Findings of

the Study o... zL7

8.6. Directions for Further Research ... Z2Z

8-7. contribution of the study to the understanding of the rnpact of "eualityr ^on performance ₂₂₄

APPENDICES

APPENDIX 1: SUPPLEMENTARY MATERIAL To CHAPTER 4

Questionnaire and Attachments

Pilot Test Materials

Manufacturer Newsletter Article

229 230 237 240 APPENDIX 2: SUPPLEMENTARY MATERTAL To CHAPTER 5 . 24L

Chi-Square Test Results . ^Z4Z

Coefficient _Alpha Test Results ₂₄₄

Factor Analysis Test Results . ²⁴⁶

APPENDTX 3: SUPPLEMENTARY MATERIAL To CHAPTER 7 247 EQS Test Results for e-p ^Model Variants 24g APPENDTX 4:

REFERENCES

SUPPLEMENTARY MATERTAL TO CHAPTER 8 .. 324 327

vf-J-a

Table 2.L2.2 2.35.1 5.25.3 5.4 5.5a5.5b

8.2

LIST OF TABLES

Findings of a Study of Quality ^{and Market Share} Findings of a Study of Quality ^and Quality ^Costs Findings of a Study of Quality ^and Productivity Position Title of Respondents

Comparison by Ernployment Size

Comparison by Organizational Legal Status Comparison by Standard Industrial ^Code

Classification ...

Adjusted Distribution of Interval Sca1e Responses

Adjusted Distribution of Responses to Estinated

page 28 33 33 105

LO7 LO7

108 LL2

Percentage Change ¹¹³

5.6 ^Use of Preventive and Appraisal Practices ... 119

5.7 Implernentation Barriers to Quality Improvement :... ¹¹⁹ 5.8 T Tests Conparing Categories of Plants ^L24 5.9 ^OLS Results - Relationship of ^{Scrap And Rework}

with Measures of Perforrnance ¹³³

5.L0 Comparison Based on Reduction of Scrap and Rework:

Most Reduction versus A11 others ^L34 5.1-L Comparison Based on Use of Preventive Quality

Management Practices ... 136

7.L Preliminary Fit Criteria of operations Functions

Variants ^L7A

7.2 Goodness-of-Fit of Operations Functions Variants ^1.79 7.3 Fit of Internal Structure of Operations Functions

Variants

7.4 Prelinrinary Fit Criteria of ^RoS Variants ^L98 7.5 Goodness-of-Fit of ROS Variants L99

7.6 Fit of fnternal Structure of RoS Variants ^2OO

8. L lmpacts of "Qualityrt ^on Performance

(Estinated Parameter Values of Confirmed Variants ^2L3 Impacts of ttQualityrr on Business Performance

(Estirnated Parameter Values of Unconfirmed Variants.. ^2L6

IX

Figure L.1L.2 1.32.L 2.2 2.3 2.42.5 3.L3.2 3.33.4

4.r4.2 4.3 5. ^l_

5.2 5.35.4 5.56.L 6.26.3 6.46.5 7.L7.2 7.37.4 7.57.6 7.7 7.87.9 7. L0 7 .LL

7 .12 7.L3

7.1,4

7.L5 7.168.L 8.28.3

LIST OF Illustrations

Traditional View of Manufacturing objectives Traditional View of Desired Quality Level ...

Energing View of Manufacturing Objectives

PIMS Based Quality ^Research

Studies of Manufacturing Quality (Data from Several Firns)

page

4 5 6 27 32

82 9l_

94 115 115 L22 L28

1,3 0

L45 L49 150 L54 155 L64 L67 L67 158 158 169 L74 184

1"84

185 L97 L97 t-98 20L 243 203 208 2LL 2L4

Studies

of

Manufacturing Quality

(Data from Many

Firrns) ...

^41"

Aspects

of

Manufacturing

Performance

⁴⁷

Conponents

of

_Quality

costs

⁴⁹

The Chain Reaction

Mode1

^5L

The Cost Savings Model

A Transitional Model

The 'rQualitytt - Performance Model Proposed Operational Measures

Comparison of Survey Data Collection ^Methods Questionnaire ^Reference for Proposed Measures

Product Line ^Size

Manufacturing Process Employed

Groups Tested for Response Difference

Factors, Latent Constructs, and Observed Measures.

Operational Measures of Q-P Model Constructs Structural Portion

Measurement Portion

An fntegrated Structural Equations ^Model

EQS Software ^Package

Evaluation Criteria of Model Fit Structural Equations Mode1 Elements

Inventory Variant of the Q-P ^Model

Delivery Variant of the Q-P ^Model

Manufacturing Cost Variant l- of the Q-P ^Model

Manufacturing Cost Variant 2 of the Q-P ^Model

Flexibility Variant of the Q-P ^Model

Conditions Pertaining to Appropriateness of Theoretical Models for Confirmatory Analysis

EQS Results fnventory Variant

EQS ResuLts - Delivery ^Variant

EQS Results - Manufacturing Cost Variant 2 ..

Inventory-ROS Variant of the Q-P ^Model

Delivery-Ros Variant of the _Q-P Model

Manufacturing Cost-ROS Variant of the Q-P ^Model EQS Results Delivery-ROs Variant

EQS Results Inventory-ROS Variant

EQS Results - Manufacturing Cost-ROS Variant

rrQual itytt -Performance ^ModeI

Q-P Model Links Supported by Findings Q-P Model Links NoT Supported by Findings

63 55 67

AGPS

dfCN EQs

JIT

LISREL usA oLs

PFC PIMS ROA ROr

ROS SEM

SIC sMcc sQcTFI

TQc WIP

I.TST OF ABBREVTAETOIIs

Australian covernment publishing _Sewice

Critical

N

Degrees

of

Freedom

A Structural Eguations Modelling _Softtrare

Package

Just-in-Tirne

A Structural Equations Modelling Softerare

Package

Measure

of

Sampling Adequacy

Ordinary _{Least Squares} Prelininary

Fit criteria

Profit

Inpact

of

Marketing Strategy Return on Assets

Return on InvesLment

Return on Sales

Structural

Eguations Modelling Standard

fndustrial Classificition

Standard

Multiple

Correlation Coefficient

Statisticat

_{euaLity Controt}

Total

Factor Indexes

Total

_{Quality Control}

Work-in-process

xl-

NOTE OTT PRESEIITATION FORITAT AIID COUPUTER COFIrARE

The presentation fonnat followed in this

dissertation follows Turabian's

(L973)

recommendations.

Text is in

courier

type-style.

_Oxford Dictionarv

spelling is

used.

Text and tables use

the

IBM Displaywrite

4 (1986)

software package- _Graphics

in figures

are obtained by use

of the

Harrrard

Graphics

(1990) and Lotus L.2.3.

(r.985)

software

packages.

carculations are made using sAS (r.9g5) and Ees

(Bentler,

1989)

softvare packages.

xll