Supply Chain Quality Management Based on Information Asymmetry

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1 Supply Chain Quality Management Based on Information Asymmetry Jianhua Zhao 1, Yue Hu 2, Yi Wang 3 College of Economic and Management, China Three Gorges University, Yichang Hubei Province, China Abstract With the continuous economical development, the market competition of corporations tends to be that of supply chain. The quality management of supply chain is quite important for effective supply chain. This essay explores issues in supply chain quality management by 4MEX model and presents cases to study Quality Bullwhip Effect which is caused by the information asymmetry in supply chain. Keywords Supply Chain Quality Management; Information Asymmetry; Quality Bullwhip Effect; 4MEX A supply chain is a system of organizations, people, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials, and components into finished products that are delivered to customers. The quality management of supply chain is the significant component of supply chain management that attracts great attention. In recent years, there are numbers of product quality problems in markets. Therefore, corporations need to continuously enhance the quality management of supply chain to meet the demands of customers and markets by providing high quality products and services. Study Review Supply chain quality management originates from supply chain management and quality management. Kuei ad Madu clearly defined SCQM by the equation SCQM=SX+Q+M. SC refers to a production manufacturing and commercial network, while Q refers to timely providing customers satisfactory productions, and M refers to boosting product s quality to acquire trust. Robinson and Malhotra indicated that SCQM is to integrate partners business in supply chain by analyzing, evaluating and improving the services and processes to achieve ultimate customer satisfaction. Foster believed that SCQM is a way to enhance performance by using suppliers and consumers to establish relationship between upstream and downstream. Domestic researchers have also studied the concept of supply chain quality management. Shucheng Ma and Xiaoqing Tang indicated that SCQM is a management of emergence, information and realization of production quality, in order to achieve quality control and quality assurance in the supply chain. Qi Wu and Tongbang Xu pointed out that SCQM is the management of every link in supply chain quality which includes not only product quality but also the management of cooperative enterprises. The supply chain quality management is the significant factor to influence corporation performance and it needs cooperation of every link between the upstream and downstream in supply chain. The quality problem in one link will lead to quality risk just like Bullwhip Effect reaches the consumer terminal. Researchers have explored the influences of Bullwhip Effect to the amount of SCQM recently. Ma, Li and He presented that price and dealer data forecast may decrease the influence of Bullwhip Effect on supply chain quality management. Li Chen believed capacity limitation would weaken the Bullwhip Effect. As mentioned before, the present research on the conception of SCQM has not reached a consensus, the majority of researchers tend to draw on or copy traditional quality management factor according to their demands. The impact of the information asymmetry on SCQM needs further research. The Bullwhip Effect refers to changes in consumer demands at the end of the supply chain that lead to upstream supply volatility; most scholars generally pay attention to analyze the end of the supply chain, focusing on the quantity change caused by the Bullwhip International Journal of Sociology Study, Vol. 3 No. 1 June /15/ , 2015 DEStech Publications, Inc. doi: /ijss

2 2 JIANHUA ZHAO, YUE HU, YI WANG Effect in supply chain quality management. This essay analyzes the initial link of supply chain to reveal that the problems of the initial link will enlarge quality risk step by step, eventually resulting in heavy losses to the company and consumers. It is indicated that the improvement of enterprise performance can be achieved, only if the overall optimization of quality and quantity in supply chain management is realized. Model Analysis: From 4M1E to 4MEX The following presents the influence factor model by analyzing the supply chain management of San Lu Company. Total Quality Management Total quality management (TQM) consists of organization wide efforts to make a permanent climate in which an organization continuously improves its ability to produce and deliver high quality products and services to customers. TQM efforts typically draw heavily on the previously developed tools and techniques of quality control. In the TQM, the main factors which include men, machines, materials, methods and environment should be continuously modified to secure the competitiveness of the products and services. With the development of market economy, corporations tend to focus on their core business and outsource non core business, forming the service system that is based on the large scale modern manufacturing enterprise. The peripheral service organizations are outsourcing again to reduce costs or maintain sizes, which forms the supply chain system of large enterprises. In such a system, 4M1E model cannot adapt to the requirements of enterprise quality management due to the limitations of the model. The quality problems of outsourcing will evolutes and amplify step by step due to certain oversight on rules and standards. The dangers vary due to the specific characteristics of outsourcing. Supply Chain Quality Analysis Based on Developed Model 4MEX In order to indentify the potential external factors to influence the stability of the business system, 4M1E model needs perfection by adding an unknown factor x to analyze quality issue caused by the products and services in the supply chain. Elements of the external factors have variable characteristics, potentials and industries, represented by x, 4MEX supply chain quality management model is proposed. Preliminary understanding of the raw materials such as stability, software quality and testing standards, as opposed to traditional analysis of fixed elements of the external factors has variable characteristics, potentials and industries, represented by x, 4MEX supply chain quality management model is proposed. 1) The Human Factor FIGURE 1.SUPPLY CHAIN QUALITY MANAGEMENT 4MEX The TQM system needs all its members and all processes of quality management. The human factor is the core factor in supply chain quality management.

3 Supply Chain Quality Management Based on Information Asymmetry 3 The quality of supply chain lies on the products and services of every link between upstream and downstream. As the core factor, the practitioner is important to secure the efficiency of supply chain quality management. Corporations should enhance the quality awareness of employers, controlling the supply chain management from the origin and improving the business process of supply chain. It is difficult for the staff to cooperate because they belong to independent manufacturing unit, so the cooperation of quality management is difficult. Information asymmetry, tighter market discipline, lower profit and cost reduction lead to the quality dangers. In San Lu case, the lack of awareness of quality among dairy suppliers which are in the upstream impels them to add melamine. But the processing companies which are in the downstream did not find the quality problem, which dramatically has harmed the enterprise image. 2) Machine Factor The machine factor of supply chain quality management means whether the material or equipment used when raw material is transported complies with the rules. The supply chain logistics system is of complexity. Chinese logistic infrastructure is backward. The production should be packed normatively according to the nation s transportation safety regulations of produced goods from the upstream to downstream. For instance, the storage condition and packaging during transportation of dairy products are quite important to its quality, so the quality of the freezing equipment and the packaging material are significant to maintain the quality of the products. 3) Material Factor The quality of the original material is important to the supply chain quality management. In San Lu case, the poisonous substance, which reduced the quality of the diary, was added to the raw dairy product due to incomplete and small scale infrastructure. In supply chain management of dairy product, the quality of raw dairy has a direct effect on the quality and safety of products. Therefore, the dairy industry should pay more attention to the quality management of suppliers in upstream and cooperate with suppliers using sophisticated quality management system and quality detection technology. 4) Method Factor The method factor refers to the operation rules and detection standard system which the enterprises should comply with. The supply chain quality management connects independent corporations by standardizing their behaviors using common quality agreement, and ensures their profits at the same time. The cause of San Lu case is mainly the detection method. The raw dairy processing is in core position of the supply chain management. 5) The Environment Factor The environment factor of supply chain quality management focuses on temperature and humidity. Chinese logistics infrastructure is rather backward. The domestic refrigerated transport rate is only 40%, and mainly in the main line. The logistics preservation processes of dairy products are relatively lime limited. Chinese cold chain logistics development is in the initial stage. The changing external environment has negative effects on the controlling of temperature and humidity, resulting in lower products quality. Improving cold chain logistics and transport conditions will ensure the every link of supply chain management in strict accordance with the regulations; ensure the optimum temperature and humidity, so as to ensure the product quality. The source of raw materials and the processing environment is also the key issue the essay concentrates. The present serious pollution circumstances can affect the quality of dairy source and the site s compliance, the enterprise should choose other places, which in turn supply chain will also adjust to changes. 6) The Non traditional Factor X The services quality of supply chain quality management is significant to the sufficiency of supply chain logistics. The dispersed geography of companies in upstream and downstream, a wide range of personnel and different stakeholders quality demands increase the difficulty of supply chain quality management control. There is non traditional factor X in the quality management system. The individual workload, cooperation of

4 4 JIANHUA ZHAO, YUE HU, YI WANG every link, information feedback and the determination of quality management activity of the management level all affect the product s and services quality. With the development of market economy, modern enterprises focus on their core business and outsource non core business, forming a large scale enterprise supply chain system. Therefore, there is a new challenge to the quality management of all staff and process. The quality problems of outsourcing will transfer step by step, so enterprises should consider the uncertainties implicit and variability and improve the demand of TQM. The quality management of outsourcing should also be supervised to reduce the unknown quality elements. In San Lu case, the group enterprise ignored the product quality management of suppliers and manufacturers when acquired and processed products, which led to serious losses. Under the supply chain environment, modern enterprise management will be more dependent on the stability of information transmission and software system. Supply chain coordination operation based on the sharing and transferring of information, otherwise, it could easily lead to information distortion in supply chain management, resulting in the Bullwhip Effect. The information collaboration is an effective method to solve the Bullwhip Effect. The high degree of information shared in supply chain enterprises enables enterprises to understand each other and share risks and interests, so the firms could enhance the quality of service through effective management of supply chain quality management. Conclusions Based on the analysis of challenges the conventional quality management and supply chain quality management face, this essay explores and redefines the concept of supply chain quality management, and builds a supply chain management model 4MEX, which focuses on the factors that affect supply chain quality management. The further concern of supply chain management is finally raised. REFERENCES [1] Kuei C, Madu C, Lin C. Developing Global Supply Chain Quality Management Systems. International Journal of Production Research,49(15): , [2] Robinson C J, Malhotra M K. Defining the Concept of Supply Chain Quality Management and its Relevance to Academic and Industrial Practice. International Journal of Production Economics, 96(3): , [3] Foster,S.T. Towards an Understanding of Supply Chain Quality Management. Journal of Operations Management, 26(4): ,2008. [4] Shucheng Ma, Xiaoqing Tang. Supply Chain Quality Management Features and Strategies. Computer Integrated Manufacturing Systems, 7(9):32 35,2001. [5] Qi Wu, Tongbang Xu. The New Ideas of Quality Management in 21 st Century supply Chain Quality Management. China Quality, [6] Yungao Ma, Nengmin Wang, Nengqian Jiang. Predict Consumer Behavior Affect the Bullwhip effect and Retailer Inventory Analysis. Operations Research and Management Science,21(5):22 27,2012. [7] Wenli Li, Lechao Wang. The Historical Order Information Impact on the Bullwhip Effect. Operations Research and Management Science,21 (1): ,2012. [8] Yi He, Zhixue Liu.Reverse. Logistics Management Influence on the Supply Chain of Bullwhip Effect. Forecasting,1 (7): 59 63,2007. [9] CHEN L,LEE H L. Bullwhip Effect Measurement and Its Implications. Operations Research,60(4): ,2012. [10] Xiuping Zhang, Qiushi Wang. Supply Chain of Food Safety Quality Management. Enterprise Development Forum, [11] Lijun Chen. The Raw Dairy Production and Quality Control. Beijing: Light Industry Press, [12] San Lu case presented Northen animal husbandry, [13] Peopleʹs Republic of China Ministry of Health. GB Determination of Protein in Foods. Beijing: China Standard Press, 2010.

5 Supply Chain Quality Management Based on Information Asymmetry 5 Jianhua Zhao, male, was born in September 1966 in Yunnan Province, and he obtained a doctor s degree in He is a professor of China Three Gorges University. Prof. Zhao s research field is based on Economics, especially System Resource Constraint Theory (SRCT). He has published many papers in International Conference and core journals, such as Research on Regional Development Based on System Resource Constraint Theory(SRCT), paper presented at the meeting for ICPEM2009, Statistic Analyze on Jiangxi Provincial Quality Competitive Index(QCI) in 2009 and so on. Yue Hu, female, was born in September 1988 in Hubei Province. Now she is a master of China Three Gorges University, and her research field is Logistics Engineering.

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