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Int J Production Economics 133 (2011) 518–529 Contents lists available at ScienceDirect Int J Production Economics journal homepage: www.elsevier.com/locate/ijpe Quality management practices and competitive performance: Empirical evidence from Japanese manufacturing companies Anh Chi Phan a,b,n, Ayman Bahjat Abdallah c, Yoshiki Matsui b a University of Economics and business, Vietnam National University, Hanoi, 307-E4, 144 Xuan Thuy, Cau Giay, Hanoi, Vietnam Faculty of Business Administration, Yokohama National University, 79-4 Tokiwadai, Hodogaya-Ku, Yokohama 240-8501, Japan c Faculty of Economics and Administrative Sciences, Applied Science Private University, Amman 11931, Jordan b a r t i c l e i n f o a b s t r a c t Article history: Received August 2009 Accepted 29 January 2011 Available online March 2011 This paper presents the results of an empirical study on the relationship between quality management practices and competitive performance in Japanese manufacturing companies The data was gathered from two surveys including the common sample of twenty-seven Japanese manufacturing companies in the 1990s and the 2000s Statistical techniques are used to compare the degree of implementation of the eleven quality management practices and their impact on different dimensions of competitive performance between two periods Findings of this study highlight the stability and consistency of the Japanese quality management, which can be used as one of the strategic weapons for maintaining competitive advantage of Japanese manufacturing companies & 2011 Elsevier B.V All rights reserved Keywords: Japanese quality management Competitive performance Manufacturing Empirical study Introduction During the 1990s, the Japanese economy has suffered from a long recession The growth rate has markedly declined Many companies have suffered from low profits or financial losses However, some well-managed Japanese manufacturing companies still continue to hold their strong competitive power in the global market The survival and prosperity of Japanese manufacturers are achieved by their Japanese way of management such as total quality management (TQM), just-in-time (JIT) production, total productive maintenance (TPM), and concurrent engineering, and their ability to create horizontal linkage structure throughout the communication network Those are real strengths of Japanese manufacturers, besides of their technological advantages as demonstrated by Morita et al (2001) and Matsui (2002a) Quality management has been recognized as single most critical success factor in Japan’s manufacturing (Imai, 1986; Ohno, 1988) Quality management in Japan is characterized as company-wide participation, emphasis on employees training, quality circles, quality diagnoses, statistical methods, and national-wide campaign People from all levels of management and workers are involved in the company-wide quality management or total quality management (Schroeder and Flynn, 2001; Matsui, 2002b; Schonberger, 1986, 2007) This concept intends to not only control quality levels of products by applying statistical methods and other analytical techniques, but also manage all kinds of work properly centered n Corresponding author Tel.: 84 3754 7506; fax: + 84 3754 6765 E-mail address: anhpc@vnu.edu.vn (A.C Phan) 0925-5273/$ - see front matter & 2011 Elsevier B.V All rights reserved doi:10.1016/j.ijpe.2011.01.024 on quality While the emergent trends in Japanese management are studied and presented in several academic papers and articles regarding manufacturing strategy (Fujimoto, 2004), business restructuring by vertical and horizontal alliances (Kono and Clegg, 2001), supplier involvement in product development (Takeishi, 2001), and transforming individual skills to organizational capability (Sako, 1999), there is a little evidence on how Japanese quality management is longitudinally maintained for enhancing the efficiency and effectiveness of manufacturing companies which are coping with fierce competition from other developed countries or emergent economies In order to address this need, this paper presents results of an empirical study on the relationship of quality management practices and competitive performance in Japanese manufacturing companies This objective is accomplished by analyzing a set of data gathered from two surveys, which includes the common sample of twenty-seven Japanese manufacturing companies conducted in 1993–1994 and 2003–2004 Eleven measurement scales are utilized to measure different aspect of quality management Findings of this study highlight the robustness, stability, and consistence of Japanese quality management and its positive relationship to the competitive performance in manufacturing plants This study provides empirical evidence that Japanese manufacturing companies explore quality managements as a strategic weapon for improving competitive advance during the 1990s and the 2000s The remaining of this paper presents the analytical research framework, which is followed by description of data collection, measurement testing, and hypothesis testing The last three sections discuss the important findings, limitations, and final conclusions A.C Phan et al / Int J Production Economics 133 (2011) 518–529 Analytical framework The evidence of outstanding performance of Japanese manufacturers in the late 1970s and the 1980s led to the development of world-class manufacturing (WCM) and high performance manufacturing (HPM) perspectives (Hayes and Wheelwright, 1984; Schroeder and Flynn, 2001) These perspectives suggest that the ability to develop simultaneously different competitive advantages is achieved through development of an infrastructure of practices focused on designing, controlling, and continuously improving processes to produce high-quality product Excellent quality is regarded as a platform for achieving other competitive edges such as cost, delivery, cycle time, and flexibility For successful implementation of quality management, several daily practices should be conducted in manufacturing plants such as process management, customer focus, supply quality involvement, and small group activity (Flynn et al., 1995) Characteristics of Japanese quality management have been analyzed in several empirical studies Matsui (2002b), using survey data from fortysix manufacturing plants in the 1990s, found the similarity in quality management practices among machinery, electrical & electronics, and automobile in Japan and significant contribution of customer involvement, cleanliness and organization, and supplier quality involvement on performance indicators such as fast delivery, inventory turnover, and cycle time Schroeder and Flynn (2001) comparatively studied quality practices in 164 plants located in the Unites States, Japan, German, Italy, and United Kingdom during the 1990s and found that Japanese manufacturers took advantage of quality management over other countries in term of shop floor activities such as process control, information feedback, and small group activities It was also detected that US plants more emphasized on customer satisfaction and relationship than Japanese plants To continue the previous studies of Schroeder and Flynn (2001) and Matsui (2002b), this paper empirically analyzes the relationship between quality management and competitive performance based on the relevant measurement scales and data collected from Japanese manufacturing plants through extensive questionnaires The aims of this study is to identify the stability of Japanese quality management between the 1990s and the 2000s and to examine Quality Management Practices 519 whether Japanese quality management significantly impacted on the competitive performance in manufacturing plants in the new context of manufacturing environment at the beginning of the 21st century The framework of this study is presented in Fig The first component of our simple analytical framework is Japanese quality management that represents company-wide activities to improve the quality level of products and works through customer orientation, continuous quality improvement, and employee involvement to establish and sustain competitive advantage The second component includes the different aspects of competitive performance of manufacturing plants: quality, cost, delivery, and flexibility As observed by consumers and researchers, Japanese manufacturers are routinely producing extreme highquality products at very low cost with short production cycle time and new product development time Thanks to the foolproof process and utilization of statistical process control, the variation of process is identified and eliminated Minimization of process variance results in a reduction of scraps and reworks; thus, reduce the production cost The reduction of defected product also leads to a reduction of time delay for rework, inspection, and time for machine stop These allow the production run faster with shorter consuming time from material receiving to customer delivery High conformance quality product, short cycle time, and multiskill workers allow the plant having abilities to change volume mix and product mix In summary, high product quality is associated with the low cost, on-time delivery, and high flexibility Then, we would like to propose the hypotheses on the consistency and stability of quality management in Japanese plants and its contribution to competitive performance as described as follows Firstly, it is expected that Japanese manufacturing companies share the similar characteristic and structure of their quality management Quality management movement was raised in Japan during the 1950s with high commitment of top management leadership to quality, quality-based strategy development, strong focus on human resource management, process management, and customer and supplier relationships Between the 1990s and the 2000s, as mentioned in the cited literature, Japanese manufacturers made a lot of efforts on restructuring Competitive Performance Top management leadership Unit cost of manufacturing Formal strategic planning Conformance to product specifications Training On-time delivery performance Small group problem solving Fast delivery Employee’s suggestions Flexibility to change product mix Cross-functional product design Flexibility to change volume Housekeeping Inventory turnover Process control Cycle time Information feedback Speed of new product introduction Customer involvement Product capability and performance Supplier quality involvement Customer support and service Fig Framework of study on Japanese quality management 520 A.C Phan et al / Int J Production Economics 133 (2011) 518–529 and reengineering their business processes, searching for vertical and horizontal alliances, changing employment system, and anticipating new technologies to overcome their business problems (Kono and Clegg, 2001) It is expected that, during the 1990s–2000s, quality management has been well maintained and focused through the daily activities as a weapon for competition in Japanese manufacturing plants The first hypothesis could be presented as follows Hypothesis H1 There is no difference in quality management practices in Japanese manufacturing plants between the 1990s and the 2000s Next is the linkage between quality management and competitive performance of Japanese manufacturing plants Manufacturing is a central part of the Japanese economic engine for over a hundred years It has been discussed that the excellent quality is a success factor for global competition of Japanese manufacturers Despite the problems after the burst of the financial bubble during the 1990s, the Japanese manufacturing organizations continue to maintain their competitive position with large profit, high productivity, and the skilled artisanship that foreign firm could not easily intimate Using the updated survey data, this study would like to test whether the Japanese quality management in the 2000s maintains its positive contribution to competitive performance as it did in the 1990s The next hypothesis is stated as follows: Hypothesis H2 There is no difference in the impact of quality management practices on competitive performance of Japanese manufacturing plants between the 1990s and the 2000s To test the hypotheses, a set of eleven scales is constructed to measure the degree of implementation of different quality management practices in Japanese plants The selection of this set of quality management practices is based on the suggestion from recent empirical quality management studies such as Anderson et al (1995), Flynn et al (1995), Choi and Liker (1995), Forza and Flippini (1998), Dow et al (1999), Samson and Terziovski (1999), Das et al (2000), Cua et al (2001), Matsui (2002b), Kaynak (2003), Yeung et al (2005), and Parast et al (2006) The main characteristics of these studies are summarized in Table The results of these studies identified the key elements of quality management: leadership commitment, human motivation and development, new product design, process management, quality information, and customers and supplier relations, which significantly impact on different dimensions of competitive performance of manufacturing plants Previous quality management studies demonstrated that the establishment of leadership commitment, which consists of top management leadership and strategic planning, is critical for achieving superior product quality because it creates the environment and direction for continuous quality improvement (Anderson et al., 1995; Flynn et al., 1995; Samson and Terziovski, 1999; Das et al., 2000; Kaynak, 2003) Two measurement scales are used to evaluate leadership commitment as follows: the labor force with quality-minded and working skills, leading to better product quality Top management leadership: This scale measures top manage- The positive impact of relationship with customers and suppliers on performance was reported in many empirical studies such as Flynn et al (1995), Samson and Terziovski (1999), Cua et al (2001), Kaynak (2003), Yeung et al (2005), and Parast et al (2006) These studies suggested that managers should focus on customer and supplier involvement because it would allow manufacturing plants to improve quality performance, reduce associated cost, and achieve customer satisfaction Our study adopts this approach and constructs two scales to measure the relationship of manufacturing plants and their customers and suppliers as follows: ment commitment and personal involvement in pursuing continuous improvement Formal strategic planning: This scale measures whether the plants develop, review and update the strategic planning Human resource is critical factor for producing quality products This study focuses on three aspects of human resource management: skill training for employees and participation of employees in continuous improvement activities through small group activities and suggestion scheme Flynn et al (1995), Choi and Liker (1995), and Samson and Terziovski (1999) demonstrated that implementation of these practices would develop Training: This scale determines if employees’ skill and knowl edge are being upgraded in order to maintain workforce with cutting edge skills and knowledge Small group problem solving: This scale evaluates how the plant uses the teamwork activities to solve quality problems Employee suggestion: This scale measures whether the plant implement and feedback the employees’ suggestions Flynn et al (1995) found the evidence that the cooperation between product designers and manufacturing people significantly improve product quality We adopt this approach and use one measure to evaluate cross-functional product design effort as follows Cross-functional product design: This scale evaluates whether plant develop new product by cross-functional cooperation Process management contributes to quality performance by the reduction in process variance, which leads to less scraps and reworks This argument has been empirically supported by the works of Flynn et al (1995), Choi and Liker (1995), Cua et al (2001), Matsui (2002b), Kaynak (2003), and Yeung et al (2005) In more detail, Flynn et al (1995), Cua et al (2001), and Matsui (2002b) suggested that process control and housekeeping should be implemented to facilitate production flow and these practices significantly relate with quality performance To measure process management in Japanese plants, this study uses two scales to measure the implementation of 5S activities and utilization of statistical process control in order to identify and eliminate process variations Housekeeping: This scale evaluates whether plant management has taken steps to organize and maintain the work place in order to help employees accomplish their jobs faster and instill a sense of pride in their work place Process control: This scale measures the use of statistical process control in production and in office support function, in designing ways to ‘‘foolproof’’ process and self-inspection Quality charts, graphs, and tables are widely used on the shop floor of Japanese plants They are effective tools to raise quality awareness of the employees and identify and eliminate the sources of quality problems This argument has been supported by the empirical studies of Flynn et al (1995), Choi and Liker (1995), Kaynak (2003), and Yeung et al (2005) One measurement scale related with shop floor information feedback is used in this study Information feedback: This scale measures whether the plant provides its shop-floor personnel with the information regarding their performance (including quality and productivity) in a timely and useful manner Customer involvement: This scale assesses the level of customer contact, customer orientation, and customer responsiveness A.C Phan et al / Int J Production Economics 133 (2011) 518–529 521 Table Summaries of studies on relationship between quality management and organizational performance Author Operationalisation of quality management Operationalisation of performance Anderson et al (1995) Multidimensional construct: Operating performance (1) Visionary leadership (2) Internal and Customer satisfaction external cooperation (3) Learning (4) Process management (5) Continuous improvement (6) Employee fulfillment Flynn et al Multidimensional (1995) Operating performance: (1) Quality (1) Process flow management, market outcomes, (2) Percent-passed (2) Product design process, (3) SPC/ final inspection with no rework feedback, (4) Customer relationship, (5) Supplier relationship, (6) Work attitudes, (7) Workforce management, (8) Top management support Data collection method and analysis – Questionnaires – Data collected from 41 manufacturing plants in US – Path analysis – Questionnaires – Data collected from 42 manufacturing plants in US – Path analysis Competitive advantage: (1) Unit cost (2) Fast delivery (3) Volume flexibility (4) Inventory turnover (5) Cycle time Main findings Employee fulfillment has a significant direct effect on customer satisfaction No significant relationship exists between continuous improvement and customer satisfaction Process flow management and the product design process have positive effects on perceived quality market outcomes while internal measure of the percent that passed final inspection without requiring rework is impacted by the process flow management Both perceived quality market outcomes and percent-passed final inspection with no rework have significant effects on competitive advantage TQM practices have a stronger effect on customer satisfaction than they on plant performance Plant performance fails to show significant impact on customer satisfaction Choi and Liker, 1995 Plant performance: (1) Quality, (2) Cost, Single TQM construct practices is (3) Delivery Customer satisfaction summarized from: (1) Process quality, (2) Human resource, (3) Strategic quality planning, (4) Information and analysis – Questionnaire – Data collected from 339 manufacturers in US – Structural equation modeling Forza and Flippini (1998) Multidimensional construct: Two dimensions of competitive performance: (1) Orientation towards quality, (2) TQM Quality conformance Customer satisfaction linked with customer, (3) TQM links with supplier, (4) Process control, (5) Human resource – Questionnaire – Data collected from 43 manufacturers in Italy, US, Germany, and France – Structural equation modeling Process control has a significant effect on quality conformance, and TQM links with customers has a significant effect on customer satisfaction Samson and Terziovski (1999) Multidimensional construct (1) Leadership, (2) People management, (3) Customer focus, (4) Strategic planning, (5) Information and analysis, (6) Process management Operating performance (1) Product quality, (2) Customer satisfaction, (3) Employee morale, (4) Productivity, (5) Delivery performance – Questionnaire – Data collected from 1024 manufacturing sites in Australia and New Zealand – Multiple regression analysis Leadership, human resources management, and customer focus (soft factors) are significantly and positively related to operating performance Dow et al (1999) Multidimensional construct (1) Workforce commitment, (2) Shared vision, (3) Customer focus, (4) Use of teams, (5) Personnel training, (6) Cooperative supplier relations, (7) Use of benchmarking, (8) Use of advanced manufacturing systems, (9) Use of JIT principle Quality outcome (1) The percentage of defects at final assembly (2) The cost of warranty claims (3) The total cost of quality (4) An assessment of the defect rate relative to competitors – Questionnaire – Data collected from 698 manufacturing sites in Australia and New Zealand – Structural equation modeling Employee commitment, shared vision, and customer focus in combination has a positive impact on quality outcomes Das et al (2000) Multidimensional construct: Financial performance: (1) Market share, (2) ROA, (3) Market share increase (1) Supply chain management practices, Customer satisfaction (2) Quality resources and evaluation, (3) Quality training, (4) Customer commitment – Questionnaire – Data collected from 290 companies in US – Structural equation modeling Quality practices are positively correlated with customer satisfaction Customer satisfaction is positively correlated with firm performance Cua et al (2001) Multidimensional construct: (1) Cross-functional product design, (2) Process management, (3) Supplier quality management, (4) Customer involvement Operating performance (1) Quality (2) Cost (3) Delivery (4) Flexibility – Questionnaire – Data collected from 163 manufacturing plants in US, UK, Italy, Germany, and Japan – Multiple discriminant analysis The results of study indicate strong link between quality management practices and operating performance Integration of quality management, JIT, and TPM should be adopted for better performance Matsui (2002b) Multidimensional construct: (1) Cleanliness and organization, (2) Continuous improvement, (3) Customer involvement, (4) Customer satisfaction, (5) Feedback, Competitive performance: (1) Unit cost of manufacturing, (2) Quality of product conformance, (3) Delivery performance, (4) Fast delivery, (5) Product mix flexibility, (6) Volume flexibility, – Questionnaire – Data collected from 46 manufacturing plants in Japan – Canonical analysis Quality management is strongly influenced by certain organizational characteristics, human resource management, information systems, and manufacturing strategy, and that 522 A.C Phan et al / Int J Production Economics 133 (2011) 518–529 Table (continued ) Kaynak (2003) Yeung et al (2005) Parast et al (2006) it plays an important role in determining the competitive performance of the manufacturing companies, partly through the impacts upon just-in-time production, information systems, and technology development Quality management depends on commitment, coordination of decisionmaking, task-related training for employees, small group problem solving, multi-functional employees, distinctive competence, and anticipation of new technology, among others Quality management gives positive Questionnaire impact on financial and market Data collected from performance through operating 214 manufacturers in performance Process management US positively relates with quality Structural equation performance Supply quality modeling management and quality information positively relate with inventory performance Study indicated the chain effects on Questionnaire organization performance of four Data collected from 225 electronics firms in quality management modules Quality constructs are context dependent In Hong Kong and China electronic industry, process mainland management and customer focus are Path analysis more important than other elements (6) Maintenance, (7) Process control, (7) Quality in new products, (8) Rewards for quality (9) Supplier quality involvement, (10) Supplier quality involvement, (11) Top management leadership for quality, (12) TQM link with customers (7) Inventory turnover, (8) Cycle time, (9) Speed of new product introduction, (10) Customer support and service, (11) Product capability and performance Multidimensional construct (1) Management leadership, (2) Training, (3) Employee relation, (4) Quality data& report, (5) Supplier quality management, (6) Process management, (7) Product design (1) Financial & market performance, (2) Competitive performance, (3) Inventory performance Multidimensional construct: (1) Top management leadership, (2) Cultural elements, (3) Operational support systems, (4) Process control and improvement Operational Performance (1) Time-based operational efficiency, (2) Customer satisfaction, (3) Costrelated operational efficiency Business results: (1) Financial performance, (2) Marketing performance – – Quality results Customer satisfaction – Questionnaire – Data collected from 250 companies in US and 113 companies in Mexico – Analysis of variance Multidimensional construct: (1) Quality leadership, (2) Quality information analysis, (3) Strategic planning, (4) Human resource, (5) Quality assurance of product and service, (6) Supplier quality (7) General matters – – – Supplier quality involvement: This scale assesses the amount and type of interaction regarding quality concerns, which occurs with vendors Competitiveness generally refers to the ability of a business organization to survive in a competitive marketplace by offering products or services that attract and satisfy customers (Fujimoto, 2004) For manufacturing organizations, quality, cost, delivery, flexibility, and time are recognized as the core of manufacturing capabilities that leads to their competitiveness (Schroeder and Flynn, 2001) This study uses eleven competitive performance indicators to evaluate the competitiveness of each manufacturing plant as: unit cost of manufacturing, conformance to product specifications, on-time delivery performance, fast delivery, flexibility to change product mix, flexibility to change volume, inventory turnover, cycle time, speed of new product introduction, product capability and performance, and customer support and service These indicators have been widely use in HPM framework and other quality management studies to measure whether implementation of quality management practices can simultaneously improve different dimensions of competitive performance (Flynn et al., 1995; Cua et al., 2001; Matsui, 2002b; Kaynak, 2003) The first step of the analysis is to check the reliability and validity of each measurement scale Hypotheses H1 and H2 are tested by using analysis of variance (ANOVA) techniques, correlation analysis, and regression analysis – Stepwise regression analysis The study indicated the differences between critical success factors of quality management practices within the United States and Mexico In both countries social responsibility and supplier quality were found that significantly explain variability of quality results Similarities on effect of quality management practices on customer focus and satisfaction were found Data collection and measurement analysis Data used for the subsequent analyses were gathered through the international joint research initiative called High Performance Manufacturing Project (HPM) started in the 1980s by researchers at the University of Minnesota and Iowa State University The overall target of this project is to study ‘‘best practices’’ in manufacturing plants and their impact on plant performance in the global competition The first round of the survey was conducted in 1989 gathering information from forty-six US manufacturing plants In 1992, the project was expanded to include researchers from Germany, Italy, Japan, and the UK The second round of the survey gathered data from one hundred and forty-six manufacturing plants from those countries In 2003, the project was further expanded to include other researchers from Korea, Sweden, Finland, Austria, and Spain The total number of manufacturing plants participated in the third round of the survey is 266 Within each country, surveyed are plants with more than 100 employees belonging to one of three industries—electrical & electronics, machinery, and automobile Based on business and trade journals and financial information, the researchers identified and selected manufacturers as having either a ‘‘World-Class Manufacturer (WCM)’’ or a ‘‘Non WorldClass Manufacturer (NWCM)’’ reputation Each manufacturing company selected one typical plant for participating in the project This selection criterion allowed for the construction of a A.C Phan et al / Int J Production Economics 133 (2011) 518–529 sample with sufficient variance to examine variables of interest for the research agenda Some of the significant results of studies conducted based on this project are shown in Sakakibara et al (1993), Flynn et al (1994) Flynn et al (1995), Schroeder and Flynn (2001), (Matsui, 2002a,b, 2007); Phan and Matsui (2009) These results concern with some important aspects of manufacturing plants: quality, JIT production, information systems, information technologies, and technology development, manufacturing strategy, improvement, and performance In this research, we acquire the data from twenty-seven Japanese manufacturing companies that are included in both two surveys in 1993–1994 and 2003–2004 Those data are extracted from the sample of forty-six companies participated in the first survey during 1993–1994 and thirty-five companies participated in the second survey in 2003–2004 (in each company, one typical manufacturing plant is selected to response to the survey) Twenty-seven plants belong to three industrial fields: electrical & electronics (9 plants), machinery (11 plants), and automobile (7 plants) The first data gathered from survey in 1993–1994 reflects the degree of use of quality management in Japanese plants during the 1990s The second data gathered from the latest survey in 2003–2004 illustrates the situation of quality management in the 2000s In both periods, the implementation of quality management practices is evaluated by fifteen and sixteen individuals in the same nine positions from managers to direct labor for each period as summarized in Table The measurement scales are constructed by four to seven question items evaluated on a seven-point Likert scale (1¼strongly disagree, 4¼neither agree nor disagree, 7¼strongly agree) Individual question items are shown in the appendix Finally, eleven competitive performance indicators are judged by the plant manager Each plant manager is asked to indicate his/her opinion about how the plant compares to its competitors in the same industry on a global basis on a five-point Likert scale (1¼poor or low end of the industry, 2¼ below average, 3¼average, 4¼ equivalent to competitor, 5¼superior or top of the industry) The first step of analytical process is the analysis of reliability and validity which is performed to evaluate the measurement properties of the individual scales Reliability is an estimate of measurement consistency In this study, Cronbach’s alpha coefficient is calculated for each scale to evaluate the reliability Table shows the alpha values for all scales exceeded the minimum 523 acceptable alpha value of 60 for both samples collected in the 1990s and the 2000s (Nunnally, 1967; Flynn et al., 1990) Most of the scales have alpha value above 70 indicating that the scales are internally consistent Next, the validity of measurement scales is tested against content and construct Content validity: An extensive review of the literature on the empirical study of quality management practices, production management and organization performance is conducted to ensure content validity This study continues the works of Flynn et al (1995), Schroeder and Flynn (2001), and Matsui (2002b) that developed and tested a set of measurement scales of quality management in the framework of HPM Project Construct validity: Construct validity test is tested to ensure that in a scale, all question items measure the same construct Within scale factor analysis is conducted with the three criteria as follows: (a) uni-dimensionality, (b) a minimum eigenvalue of 1, (c) item factor loadings should be greater than 40 The results show that all scales have good construct validity Table show that the eigenvalue of the first factor is all more than 2.00 for each scale The factor loading for each item (shown in the appendix) is more than 40, mostly ranged between 70 and 90 indicating the high validity of the measurement scales Hypotheses testing In this section, we explore the time effect (the 2000s vs the 1990s) upon quality management practices and its relationship with competitive performance in Japanese manufacturing plants The description of each quality management practice in both periods is presented in Table It is observed that top management leadership and formal strategic planning are the most important aspects in both periods The less important aspects can be attributed to customer involvement (the 1990s) and process control (the 2000s) In order to identify the similarity and difference in Japanese quality management practices between two periods (the 1990s vs the 2000s), analysis of variance (ANOVA) technique is applied and the results are shown in Table If we set the significant level at 5% as suggested in cited literature, the results indicate that significant differences between two periods existed in four practices named as customer involvement, process control, supplier Table Measurement analysis of individual scales for Japanese sample Survey respondents DL Top management leadership Formal strategic planning Training Small group problem solving Employee suggestions Cross-functional product design Housekeeping Process control Information feedback Customer involvement Supplier quality involvement a QM PE 1 5(4) 5(4) 1 1 1 SP PD HR IM 1 1 5(4) 5(4) 5(4) 5(4) 5(4) PS 4 4 1990s Data 2000s Data PM Alpha Eigenvalues (Percentage of variance) Alpha Eigenvalues (Percentage of variance) 1 79 87 77 69 71 71 3.19 3.41 2.67 2.28 2.44 2.19 (46) (60) (53) (46) (45) (55) 78 72 76 75 80 71 3.17 2.25 2.31 2.48 2.61 2.13 (53) (56) (58) (50) (26) (53) 80 78 77 66 69 2.89 2.62 2.85 2.11 2.17 (58) (52) (47) (43) (45) 84 87 76 69 77 3.10 3.26 2.62 2.17 2.98 (62) (62) (52) (54) (43) 1 1 DL, Direct Labor; QM, Quality Manager; PE, Process Engineer; PS, Plant Superintendent; SP, Supervisor; PD, Member of Product Development Team; HR, Human Resource Manager; IM, Inventory Manager; PM, Production Manager a The number of the direct labor answering the questionnaire is different between surveys in the 1990s and the 2000s The figure in parentheses shows the number of the direct labor answering the questionnaire in the 2000s 524 A.C Phan et al / Int J Production Economics 133 (2011) 518–529 Table Quality management practices in Japanese manufacturing companies between 1990s and 2000s Quality management practices 1990s Mean Top management leadership Formal strategic planning Training Small group problem solving Employee suggestions Cross-functional design Housekeeping Process control Information feedback Customer involvement Supplier quality involvement 5.621 5.519 4.877 5.126 5.311 4.950 5.232 5.062 4.881 4.687 5.218 2000s Std .551 873 655 467 530 667 723 546 671 543 513 Mean 5.562 5.297 4.797 4.797 5.189 4.991 5.234 4.570 4.764 5.108 4.852 Paired differences Std .519 617 564 564 454 652 551 692 634 393 372 Mean difference 059 222 081 330 122 À 040 À 003 492 117 À 421 367 Std .566 803 693 513 644 700 687 661 598 619 610 t Sig (2-tailed) 544 1.436 604 3.337 986 À 299 À 022 3,869 1.015 À 3.529 3.125 591 163 551 003 333 767 982 001 320 002 004 t Sig (2-tailed) À 1.570 À 618 À 1.030 À 319 À 514 700 642 795 473 À 1.671 À 795 129 542 313 753 612 490 527 434 640 107 434 Std error 95% Confidence mean interval of the difference 109 154 133 099 124 135 132 127 115 119 117 Lower Upper À 165 À 096 À 194 127 À 133 À 317 À 275 231 À 120 À 666 125 283 539 355 533 377 237 269 754 353 À 176 608 Table Competitive performance in Japanese manufacturing companies between 1990s and 2000s Quality management practices 1990s Mean Unit cost of manufacturing Conformance to product specifications On-time delivery performance Fast delivery Flexibility to change product mix Flexibility to change volume Inventory turnover Cycle time Speed of new product introduction Product capability and performance Customer support and service 3.407 4.222 3.963 3.704 3.778 3.704 3.185 3.444 3.481 4.333 3.778 2000s Std 1.047 751 706 993 801 669 962 974 1.087 679 801 Mean 3.192 4.115 3.769 3.692 3.640 3.846 3.346 3.654 3.577 4.000 3.615 Paired differences Std .939 588 815 884 995 881 936 797 1.137 800 941 quality involvement, and small group problem solving Among them, only customer involvement shows higher score in the 2000s while the last three exhibits lower scores in the 2000s comparing with the 1990s The largest difference between two periods occurs on process control that becomes less important in the 2000s Customer involvement, which exhibits the lowest score in the 1990s, becomes more important in the 2000s, just behind top management leadership, formal strategic planning, and housekeeping Other seven practices appear similarly between two periods: training, top management leadership, formal strategic planning, employee suggestions, cross-functional product design, housekeeping, and information feedback This indicates that Hypothesis H1 could not be rejected and we could state that our analysis could not prove any difference on practicing quality management in the Japanese manufacturing plants Next, we examine the linkage between Japanese quality management practices and competitive performance As depicted in Table 4, the competitive performance of Japanese manufacturing companies is evaluated similar way between two periods Japanese managers highly evaluate their product quality in terms of both conformance to product specifications and product capability and performance In contrast, manufacturing unit cost and inventory turnover lay in the bottom Pair-sample t-test is conducted and we could not find out any significant difference between two periods (the significant level is 5%) Mean À 269 À 115 À 231 À 077 À 120 154 154 192 115 À 346 À 192 Std .874 952 1.142 1.230 1.166 1.120 1.223 1.234 1.243 1.056 1.234 Std error 95% Confidence mean interval of the difference 171 187 224 241 233 220 240 242 244 207 242 Lower Upper À 622 À 500 À 692 À 574 À 601 À 299 À 340 À 306 À 387 À 773 À 691 084 269 231 420 361 606 648 691 618 080 306 We further test primary relations between individual quality management practices and performance indicator by conducting simple correlation analysis for two samples The binary correlation coefficients between eleven practices and eleven performance indicators are presented in Table It appears that quality practices are significantly associated with every performance measure in both periods if we set the significant level at 5% The number of significant pair could be used to evaluate the relationship between practices and performance indicators In the 1990s sample; top management leadership, training, formal strategic planning, small problem group solving, and process control are the most influential factors to performance In other side, speed of new product introduction, product capability and performance, cycle time, manufacturing unit cost, and conformance to product specifications are strongly connected to quality practices In contrast, housekeeping, employee suggestions, on-time delivery, and flexibility to change product mix have few significant pair with performance In the 2000s sample; small problem group solving, employee suggestion, information feedback, and training have strong connection to performance while flexibility to change volume, manufacturing unit cost, speed of new product introduction, and customer support and service have strong connection to quality practices In contrast, fast delivery, product capability and performance, and flexibility to change product mix have only few significant pairs with performance Comparing the correlation coefficient between two periods, we can obtain mixed result The number A.C Phan et al / Int J Production Economics 133 (2011) 518–529 525 clearly exhibits higher mean value than the low performance group for every quality practices In detail, the results of F-test clearly indicate the significant difference existed in quality practices of the 1990s sample excluding employee suggestion and information feedback which own marginal difference only For the 2000s sample, the differences between two groups appear clearly in five practices: small group problem solving, employee suggestion, cross-functional product design, housekeeping, and process control In addition, the marginal difference between two groups exhibit in other four practices: top management leadership, training, information feedback, and customer involvement There is no significant difference between two groups for formal strategic planning and supplier quality involvement even though the mean value of the high performance group is higher than the lower performance group The results of correlation analysis and ANOVA analysis indicate Hypothesis H2 could not be rejected and we could state that our analysis could not prove any difference in the relationship of quality management practices and competitive performance in Japanese manufacturing plants of significant pair in the 2000s exhibits rather higher than the number in the 1990s (75 vs 67) Some practices like employee suggestion, housekeeping, small problem group solving, and information feedback become more correlated with performance indicators while other practices such as top management leadership, formal strategic planning, and training slightly become less correlated with performance indicators We find the same phenomenon occurred with performance where some indicators significantly become more correlated with quality practices such as on-time delivery, flexibility to change volume, and customer support and service while product capability and performance become no longer significantly correlated with any quality practices In summary, the correlation analysis indicates that quality practices significantly correlate with a large portion of competitive performance indicators Table To test Hypothesis H2 formally, further ANOVA analysis is conducted Japanese companies are spitted into two sub-groups depending on their competitive performance, which is delivered by summing-up the individual performance indicators for each period: the high performance group (above average score) and low performance group (under average score) The numbers of companies classified into high performance group are 14 and 13 in the 1990s and the 2000s, respectively, while the numbers of companies in the low performance group are 13 and 14 Table presents the mean value of each quality practices by two groups and the results of F-test In general, the high performance group Implications and discussions The previous sections presented the results of an empirical analysis on relationship between quality management and Table Correlation analysis of quality management and competitive performance in Japanese manufacturing companies Constructs 1990s (1) Top management leadership Formal strategic planning Training Small group problem solving Employee suggestions Cross-functional product design Housekeeping Process control Information feedback Customer involvement Supplier quality involvement (2) 2000s (3) (4) (5) (6) (7) (8) (9) (10) (11) (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) 242 488 224 339 443 370 335 337 433 490 437 394 360 159 À 070 169 428 594 410 637 323 204 323 501 171 038 482 505 516 357 149 273 098 311 134 479 464 338 246 285 À 071 405 444 441 334 592 346 283 146 211 322 209 504 595 719 552 237 354 480 684 583 327 353 593 381 182 150 508 415 360 045 213 504 365 404 589 243 464 616 573 601 653 140 399 277 574 217 116 216 393 497 283 À 033 456 371 457 418 235 599 192 339 419 015 083 372 395 507 434 235 441 216 093 À 008 360 470 340 391 623 113 513 163 381 287 142 012 À 054 375 340 214 278 236 438 467 373 390 206 401 136 486 652 161 À 059 À 007 123 146 304 284 268 257 451 201 468 138 371 034 260 283 438 106 153 258 429 120 176 288 162 259 291 287 293 653 719 457 720 756 483 526 334 514 621 378 411 023 531 377 445 538 494 346 429 452 551 483 360 254 381 439 479 363 350 265 293 206 235 117 390 210 108 085 065 589 587 600 610 619 157 376 447 237 298 133 299 308 195 176 229 299 525 012 510 490 075 467 576 À 008 382 454 197 474 333 À 084 298 (1) Unit cost of manufacturing; (2) conformance to product specifications; (3) on-time delivery performance; (4) fast delivery; (5) flexibility to change product mix (6) Flexibility to change volume; (7) inventory turnover; (8) cycle time; (9) speed of new product introduction; (10) product capability and performance; (11) customer support and service Table Japanese quality management practices classified by high and low performance 1990s Top management leadership Formal strategic planning Training Small group problem solving Employee suggestions Cross-functional product design Housekeeping Process control Information feedback Customer involvement Supplier quality involvement 2000s High Low F Sig High Low F Sig 5.949 5.994 5.255 5.367 5.474 5.209 5.364 5.319 5.105 4.921 5.425 5.267 5.008 4.470 4.867 5.136 4.672 5.088 4.785 4.639 4.435 4.995 16.479 12.349 14.792 10.539 2.947 5.070 981 8.295 3.573 4.995 5.563 000 002 001 003 098 033 331 008 070 017 026 5.789 5.479 5.326 5.169 5.413 5.340 5.533 4.886 5.054 5.265 4.947 5.471 5.234 4.963 4.516 4.995 4.775 5.015 4.369 4.605 4.947 4.793 3.818 1.202 3.361 12.704 6.435 6.552 7.088 4.280 4.158 3.891 1.109 062 284 079 002 018 017 014 050 053 060 303 526 A.C Phan et al / Int J Production Economics 133 (2011) 518–529 2000s to produce extreme high-quality product with consumerfriendly features We further find the evidence of the shift in how the Japanese manufacturing companies specifically utilize quality management practices to improve specific performance indicators It is identified that the determinants for high performance is moderately changed in the 2000s The influence of small group problem solving, employee suggestion, information feedback, and training is significantly increased This indicates that quality management information became more critical for achieving high competitive performance during 2000s than before Other important finding is the change of determinants for design quality By the time, product capability and performance become less dependent on quality management practices at plant level It indicates that Japanese high design quality may be defined by other factors than common quality management practices used in this study They might be high technology, advanced manufacturing methods, or Six Sigma-oriented techniques The relationship between quality practices and performance is illustrated in more detail in Fig that shows the level of eleven quality management practices for two groups based on their overall competitive performance As shown in this figure, a similar pattern occurs in both groups in each period with parallel distance between the groups in term of implementation level of the practices This indicates the positive inter-relationship between quality management practices where the higher level of implementation of one practice is achieved through mutual supportive relationship among practices Naming this as ‘‘levered linkage’’, Morita et al (2001) discusses that one of the most important characteristics of successful Japanese manufactures is their ability to create a ‘‘levered linkage structure’’ through the communication network The ‘‘communication and action’’ process is viewed as an underlying force that made Japanese quality management so successful An empirical evidence to support this argument is found in our study Our finding is that competitive performance becomes more dependent on the shop-floor communication and information sharing (employee suggestion, small group problem solving, and information feedback) in the 2000s, while Japanese manufacturing companies maintain their focus on the cross-functional communication and information sharing (cross-functional design, customer involvement, and supplier quality involvement) The effective communication and information sharing improve the effectiveness of statistical process control, allow people to share and capture necessary information, and lead to the behaviors that continuously improve the competitiveness of competitive performance in Japanese manufacturing plants The main findings and implications derived from a series of statistical analyses are summarized as below During the 1990s and the 2000s Japanese manufacturing companies explore quality management as a strategic weapon for improving their competitive advance Along with other factors such as information technology and manufacturing technology, quality management can considerably explain the high performance in terms of conformance quality, manufacturing cost, dependability, flexibility, time, and customer service During the 1990s and the 2000s Japanese manufacturers maintain a consistent structure of quality management system which characterized by top management leadership for quality, close customer relationship; sharp focus on process management, employees’ training and participation, and information feedback This allows the Japanese manufacturing maintain the competitive position in the global market as illustrated in Fig 2, where we can observe that the level of competitive performance appears in similar pattern in both periods Quality performance (both conformance and design quality), delivery, flexibility are rated in high in both periods while the bottoms are two indicators concerning with manufacturing cost and inventory which can be evaluated internally only These indicate the confident of Japanese managers about their quality performance while manufacturing cost and inventory remain as serious concerns for them The stability of Japanese quality management practices and quality performance over the time can be explained by the fact that quality management concepts are deeply instilled into people in most Japanese manufacturing companies regardless of their products and processes The superior performance is achieved by long-term efforts involving several strategic and human factors: company-wide participation, emphasis on employees training, quality circles, quality diagnoses, statistical methods, and nationalwide campaign which could not be easily graded down in a decade So, what have been considerably changed between the 1990s and the 2000s? A few practices become more or less important over the time For example, Japanese plants turn to more focused on how to satisfy the customer by managing closed relationship with customers and improving the responsiveness to customer’s requirements Japanese market is uniquely characterized by the strong demand of Japanese consumers on quality and refinement The concept of ‘‘economical defective rate’’ is not allowed in Japanese plants This explains the reason why the Japanese manufacturers have increased their attention on involving the customers in their product quality improvement programs in the 4.5 3.5 2.5 Competitive Performance in 1990's Competitive Performance in 2000's 1.5 0.5 10 11 Fig Competitive performance in Japanese manufacturing companies between the 1990s and 2000s 1: Unit cost of manufacturing 2: Conformance to product specifications 3: On time delivery performance 4: Fast delivery 5: Flexibility to change product mix 6: Flexibility to change volume 7: Inventory turnover 8: Cycle time 9: Speed of new product introduction 10: Product capability and performance 11: Customer support and service Note: Vertical axis shows the level of competitive performance on a five-point Likert scale (1¼ Poor or low end of the industry, 2¼ Below average, ¼Average, 4¼ Equivalent to competitor, ¼Superior or top of the industry) A.C Phan et al / Int J Production Economics 133 (2011) 518–529 527 High Performance in 1990's Low Performance in 1990's 1 10 11 High Performance in 2000's Low Performance in 2000's 1 10 11 Fig Quality management practices in Japanese manufacturing companies between the 1990s and 2000s classified by high and low performance 1: Top management leadership 2: Formal strategic planning 3: Training 4: Small group problem solving 5: Employee’s suggestions 6: Cross-functional product design 7: Housekeeping 8: Process control 9: Information feedback 10: Customer involvement 11: Supplier quality involvement Note: Vertical axis shows the degree of implementation of quality management practices on a seven-point Likert scale (1¼ Strongly disagree, 4¼ Neither agree nor disagree, ¼Strongly agree) manufacturing companies From this analysis, researchers and practitioners can recognize the toughness of competition in Japanese market where the manufacturing organizations must compete in every aspect of manufacturing management in order to survive competitively Beside the long term emphasizing on process management, Japanese manager also seek for other breakthrough solutions (to achieve superior design quality, for example) and sometime to return to the basic techniques (good housekeeping, for example) Limitations and further research It is important to view this study in the context of its limitations Methodologically, this study is based on the cross-sectional survey data gathered via self-reported questionnaires, and individual bias in reporting may exist Although we addressed the issue of common method bias through the use of multiple respondents in the same positions at the companies in both surveys, the study still heavily relies on the use of perceptual data The other issue is small sample size Because of time and resources constraints, it is impossible to involve more manufacturing companies into the survey In addition, the sample is limited to three industries These restricted the scope of the studies and the utilization of some data analysis techniques For example, we could not use the path analysis technique to examine interrelations among quality management and competitive performance with industry effect To overcome these limitations, a future research should be conducted with larger size which allows the researchers to use more comprehensive techniques for investigating the relationship among quality management practices and competitive performance for specific industries, such as path analysis or structural equation modeling The researchers should explore both objective and subjective performance measures in their studies, particularly when studying a specific industry This study indicates several questions for future research on Japanese quality management For example, is there any trade-off between quality performance and cost performance? What are determinants for Japanese high design quality? Future study should develop new measurement construct to capture current situations and new trends of Japanese quality management beside the existing eleven scales used in this study Conclusions The Japanese economy has encountered several crises during the 1990s and the 2000s Japanese companies still face with the problems caused by the burst of the bubble economy and the fierce competition from other developed countries or emergent economies But it is believed that they overcome these problems successfully because the manufacturing sector still remains competitive As a core of Japanese production system, quality management is now almost half-of-century old and seems built to endure This study suggests the stability of most quality management practices, which have been still utilized to maintain the competitive advantage of Japanese manufacturing companies Focusing on a set of eleven quality management practices, this study reveals their general contribution to competitive performance in Japanese manufacturing companies in both periods In addition, the evidence of evolution on Japanese quality management is detected By the time, the Japanese manufacturing plants become more focused on the interaction with customers and involving customers in quality improvement activities The influence of shop floor communication and information sharing on the competitive performance of the plants has been also increased We observe that the high performance manufacturing plants give strong focuses on implementation of small group problem solving, employee suggestions, and information feedback The results of analysis indicate the linkage between quality management practices and competitive performance in terms of on-time delivery and volume flexibility in the 2000s The findings of this study suggest that such components of quality management as leadership commitment, process management, and communication and information sharing should be explored to achieve high competitive performance 528 A.C Phan et al / Int J Production Economics 133 (2011) 518–529 Acknowledgments The authors gratefully thank the anonymous reviewers for making constructive comments and suggestions for improving the original draft The remaining errors must be attributed to the authors only, nevertheless The authors also appreciate the financial support for this research from the Japan Society for the Promotion of Science by Grant-in-Aids for Scientific Research, Nos 19330082 and 2008317 Appendix Question items of quality management scales Values show factor loading of each question item in the 1990s and the 2000s samples Measurement scales Top management leadership All major department heads within the plant accept their responsibility for quality Plant management provides personal leadership for quality products and quality improvement The top priority in evaluating plant management is quality performance Our top management strongly encourages employee involvement in the production process Our plant management creates and communicates a vision focused on quality improvement Our plant management is personally involved in quality improvement projects Formal strategic planning Our plant has a formal strategic planning process, which results in a written mission, long-range goals and strategies for implementation Plants management is not included in the formal strategic planning process It is concluded at higher levels in the corporation This plant has a strategic plan, which is put in writing Plant management routinely reviews and updates a long-range strategic plan The plant has an informal strategy, which is not very well defined The plant manager is part of the business strategy planning process for business unit(s) at the plant Training Our plant has a low skill level, compare with our industry At this plant, some employees lack important skill Our plant employees receive training and development in work place skills, on a regular basis Management at this plant believes that continual training and upgrading of employee skills is important 1990s 2000s 638 836 823 851 580 432 477 544 692 759 720 831 783 797 748 - 848 845 771 589 822 747 668 - 829 - 592 - 759 821 677 715 Employees at this plant have skills that are above average, in this industry Our employees regularly receive training to improve their skills Our employees are highly skilled, in this plant Small group problem solving During problem solving sessions, we make an effort to get all team members’ opinions and ideas before making a decision Our plant forms teams to solve problems In the past three years, many problems have been solved through small group sessions Problem solving teams have helped improve manufacturing processes at this plant Employee teams are encouraged to try to solve their own problems, as much as possible We don’t use problem solving teams much, in this plant Employee suggestion Management takes all product and process improvement suggestions seriously We are encouraged to make suggestions for improving performance at this plant Management tells us why our suggestions are implemented or not used Many useful suggestions are implemented at this plant My suggestions are never taken seriously around here Cross-functional product design Direct labor employees are involved to a great extent before introducing new products or making product changes Manufacturing engineers are involved to a great extent before the introduction of new products There is little involvement of manufacturing and quality people in the early design or products, before they reach the plant We work in teams, with members from a variety of areas (marketing, manufacturing, etc.) to introduce new products Housekeeping Our plant emphasizes putting all tools and fixtures in their place We take pride in keeping our plant neat and clean Our plant is kept clean at all times Employees often have trouble finding the tools they need Our plant is disorganized and dirty Process control Customer requirements are thoroughly analyzed in the new product design process 771 658 – 841 – Removed 513 Removed 748 755 772 627 773 783 536 Removed – 846 640 827 783 657 684 705 596 788 770 761 819 652 828 777 535 753 738 732 645 669 857 839 764 660 871 685 850 840 654 - A.C Phan et al / Int J Production Economics 133 (2011) 518–529 Processes in our plant are designed to be ‘‘foolproof’’ A large percent of the processes on the shop floor are currently under statistical quality control We make extensive use of statistical techniques to reduce variance in processes We use charts to determine whether our manufacturing processes are in control We monitor our processes using statistical process control Information feedback Charts showing defect rates are posted on the shop floor Charts showing schedule compliance are posted on the shop floor Charts plotting the frequency of machine breakdowns are posted on the shop floor Information on quality performance is readily available to employees Information on productivity is readily available to employees My manager never comments about the quality of my work Customer involvement We frequently are in close contact with our customers Our customers seldom visit our plant Our customers give us feedback on our quality and delivery performance Our customers are actively involved in our product design process We strive to be highly responsive to our customers’ needs We regularly survey our customers’ needs Supplier quality involvement We strive to establish long-term relationships with suppliers Our suppliers are actively involved in our new product development process Quality is our number one criterion in selecting suppliers We use mostly suppliers that we have certified We maintain close communication with suppliers about quality considerations and design changes We actively engage suppliers in our quality improvement efforts We would select a quality supplier over one with a lower price 675 761 Removed 840 739 823 654 713 675 884 714 664 752 706 660 673 724 813 529 748 729 - 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