Managing Quality in a Global Supply Chain

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MANAGING QUALITY IN A GLOBAL SUPPLY CHAIN

To appear in:

Euro Asia Journal of Management (EAJM), July 2002

Author: Affiliation: Adress:

Prof. Peter Neergaard Copenhagen Business School CBS Solbjerg Plads 3 2000 Frederiksberg Denmark +45 38 15 24 04 pn.om@cbs.dk

Telephone: E-mail:

MANAGIN QUALITY IN A GLOBAL SUPPLY CHAIN

ABSTRACT Based on literature in corporate citizenship, quality is defined as related to the product itself as well as to the environmental and social impact of the production in the whole value chain. Environmental-friendly labels, or eco-labels, which are appearing on a number of products, are a testimony to that. This is particularly the case for textiles where e.g. 'organic cotton' is increasingly perceived by consumers as attributes of quality. In the global economy many of the core activities of a company are outsourced to suppliers, often resulting in a long supply chain. Supply chain management becomes an important task for companies devoted to quality management. This is particularly evident for the textile industry. Companies in the West design and market their products, whereas the production of goods takes place in a long chain of independent companies scattered all over the world. But how can quality be managed in a long complex supply chain? The mainstream quality literature has not much to offer in this respect. The paper reports three different case studies and ways to manage quality in the supply chain. The paper attempts to contribute to theory development by explaining the choice of controls used in the supply chain by drawing on contingency theory. The paper concludes that much more research has to be devoted to the issue. 1.0 THE DEFINITION OF QUALITY What is quality? Crosby (1980) defines quality as "conformance to requirements", Juran (1988) as "fitness for purpose or use", whereas most of the recent literature advocates "quality is whatever the customers say it is, and the quality… is whatever the customers perceive it to be" (Buzzell & Gale, 1987: 111). However, is quality only related to the product itself or to the way the product is produced as well? We shall argue the latter position. In an increasingly health- and environmental-conscious world, a product, which is better for the environment and health, will be perceived by the consumer as having a higher quality. The eco-labeling in general and in the textile industry in particular is a testimony to that. Eco-labeling is a way for companies to differentiate their products from those of their competitors particular from the Far East. We shall take the argument a bit further by integrating the fast growing literature on corporate citizenship, which seems to be one of the big issues of the 21st century. Corporate citizenship can be defined as "strategic investment in the firm’s social and natural environments for sustainable corporate growth and profitability…" (Andriof & McIntosh, 2001: 41). It embraces an understanding that everything a company does has some flow-on effect either inside or outside the company. The implications are that a company is not only responsible for the environmental impact of its own production but

for the production of its suppliers as well. The social impact relates to the working environment in the company itself as well as with the suppliers and it includes issues such as health, empowerment, human rights and social exclusion. The Nike child labor case from 1996 is an example to illustrate that the suppliers’ working conditions matter to consumers. The implications of the argument is that perceived quality by the consumer is related to the product itself as well as to the environmental and social impact of the production in the whole value chain. 2.0 A GLOBAL SUPPLY CHAIN – THE TEXTILE INDUSTRY Much has been said about the globalization of the world economy and the competition from the fast-growing Asian markets. This is particularly relevant for the textile industry. Much of...
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