Manufacturing Service Quality: An Internal Customer Perspective

Transcription

1 International Conference on E-business Management and Economics IPEDR vol. () () IACSIT Press Hong Kong Manufacturing Service Quality: An Internal Customer Perspective Gyan Prakash ABV-Indian Institute of Information Technology and Management Gwalior Gwalior India Abstract- We conceptualize the role of service quality in manufacturing organizations present a model that proposes and validates that internal and eternal service quality initiatives lead to loyalty and satisfaction of employees which in turn are determinants of organization s competitive advantage and performance. This study would be of interest to manufacturing industry practitioners interested in internal and eternal service quality improvements. Keywords- Service Quality Manufacturing Internal Customers I. INTRODUCTION Conventionally employee performance has been viewed in terms of productivity improvement rather than understanding the specific needs of employees and serving them. Focal organizations (i.e. manufactures) are beginning to recognize the value of viewing the net operation as customer as a competitive weapon to improve intraorganizational as well as interorganizational service []. It has been argued that a high level of internal service quality leads to employee satisfaction and results in higher level of performance lower waste lower costs thereby resulting in improved eternal service quality [ ]. Enhanced level of internal and eternal service quality include overall organizational quality and competitive performance []. This underlines the importance of a customer-driven system that matches internal service with users needs []. II. METHODOLOGY A. Survey Design It emerges from the review of literature that service quality is not universally applied - it is contet specific [ ].The various dimensions along with their literature sources which are used for measurement of service quality are depicted in Appendi I. We collected data using snowball approach from three automobile companies in North India (Maruti Suzuki India Limited Gurgaon; Hero Honda India Limited Gurgaon; and Tata Motors Lucknow). % respondents had engineering % had management while % had both engineering and management qualifications. Around % had less than five years of work eperience % had between - years of work eperience and remaining had more than years of work eperience. We approached internal employees and were able to elicit data from of them thereby achieving a response rate of % which was quite encouraging. A total of questionnaires were found to be complete and were used for further analysis. We have used SPSS v and LISREL v. for data analysis. B. Model Conceptualization A model is conceptualized to understand the relationships among latent constructs of internal service quality (service quality offered by focal organization) and eternal service quality (service quality of offered by employees to each other) satisfaction loyalty competitive advantage and organizational performance. Fig. depicts structural representation of the model and shows the relationships among aforementioned constructs and their manifest Eogenous latent variable internal service quality (ISQ) is measured through four factors of ISQ scale. Endogenous latent variable eternal service quality (ESQ) is measured through si factors of ESQ quality scale. Among other endogenous latent variables satisfaction is measured through two observed variables loyalty is measured through three observed variables competitive advantage is measured through three observed variables and organizational performance is measured through two observed δ ISQ ISQ ISQ ISQ ESQ δ δ δ ISQ ESQ ESQ ESQ ESQ Abbreviations: ISQi: Internal service quality ESQi: Eternal service Quality i: Competitive advantage OPi: Organizational performance S S L L Organizational Performance Fig.: Organizational Service Quality in Supply Chain: A Structural Representation III. L Competitive Advantage 9 OP OP Legend: : ISQ- Focal organization working towards employees 9 i : Endogenous variables : Path coefficients between eogenous and endogenous variables : Path coefficients between endogenous variables : Factor Loadings in measurement part of eogenous variable δ : Residual errors in eogenous variables : Residual errors in measurement part of endogenous variable ς i : Residual error in endogenous variable RESULTS A. Specification of the Model The structural model [ 9] as depicted in fig. relating the five endogenous variables with one eogenous latent variable internal service quality can be epressed as:

2 = Β + Γ + ς : is a () column vector of five endogenous latent : is () column vector of eogenous latent variable internal service quality. Β : is a () matri of structural coefficients amongst the endogenous latent Γ : is a () column vector of structural coefficients from eogenous to endogenous latent : is () column vector of error terms associated with endogenous latent The hypothesized structure among the si latent variables as depicted in fig. is represented as = + [ ] + This implies the following five structural equations: Eternal service quality = + = + = + + Competitive advantage = + Organizational performance = + + The measurement model [9] relating the one eogenous latent variable represented by to four eogenous observed variables represented as ISQ to ISQ is: Χ = Λ Χ is a () column vector of observed Λ is a () matri of structural coefficients from eogenous latent variables to their observed For identification first loading element is fied to. is a () column vector of eogenous latent variable. δ is a () column vector of measurement error terms associated with observed eogenous The measurement model is represented as ISQ δ ISQ = [ ISQ ] + δ δ ISQ δ This implies the following four measurement equations Reliability ISQ = Competence ISQ = Friendliness ISQ = Credibility ISQ = The measurement model relating endogenous observed variables to five endogenous latent variables is: Υ = Λ y Υ is a () column vector of observed Λ y is a () matri of structural coefficients from endogenous latent variables to their observed For identification purpose ) is fied to. ( 9 is a () column vector of endogenous latent is a () column vector of measurement error terms associated with observed endogenous The measurement model is represented as ESQ ESQ ESQ ESQ ESQ ESQ S S L L L OP OP = This implies the following structural equations representing five endogenous latent constructs. Measurement of Eternal Service Quality Credibility ESQ = Friendliness ESQ = Internal communications ESQ = Tangibles ESQ = Professionalism ESQ = 9 9 Knowing the customer ESQ = Measurement of Will not change employee S = Getting desired service quality for the salary paying S = Measurement of Would continue with employee L = Recommend employee L =

3 Would not change employee for cost while compromising on quality L = Measurement of competitive advantage Employees deliver ecellent quality = Employees deliver products on time = Employees accommodate changing requirement = Measurement of organizational performance Employees help in achieving market share OP = 9 9 Employees help in achieving profit OP = In addition to these Φ is a variance of eogenous latent variable. Φ = Ψς is a () variance matri of error terms associated with the model implied five structural equations. Ψ ς = ς ς ς ς ς Θδ is a () variance matri of measurement errors of the observed eogenous latent δ Θ = δ δ δ δ Θ is a () variance matri of measurement errors of the observed endogenous latent variables representing si elements of ESQ two elements of satisfaction three elements of loyalty three elements of competitive advantage and two elements of organizational performance. Θ =... The sum of the direct and total indirect effect components is given by following () matri: And the sum of direct and total indirect effect components is given by the following () matri: TE = B. Analysis of the Model In the model there are free parameters and non redundant variances. Units of measurement are assigned to the latent variables in the model by specifying reference One fied element in ( ) in Λ matri implies units of measurement for the eogenous latent variable. Similarly ( 9 ) in Λ y matri assign units of measurement to the endogenous latent Moving from conceptual level structural representation to empirical level following hypotheses are tested. H : Path coefficient between ISQ and ESQ is positive H a: Path coefficient between ESQ and satisfaction is H b: Path coefficient between ESQ and loyalty is H : Path coefficient between satisfaction and loyalty is H a: Path coefficient between loyalty and competitive advantage is H b: Path coefficient between competitive advantage and is organizational performance is H c: Path coefficient between competitive advantage and organizational performance is The chi-square statistics for the model is.9 with degree of freedom. The ratio of chi-square per degree of freedom is. which represents a good fit [ ]. Given the sensitivity of chi-square statistics for sample size researchers have proposed a variety of alternative fit indices []. Root mean square residual (RMSR) value of. and root mean square error of approimation (RMSEA) value of.9 indicates a reasonable fit. The goodness-of-fit inde (GFI) is.9 and adjusted goodness-of-fit inde (AGFI) is.9 and these values are above the recommended threshold of.9 therefore reflecting overall fit of the model. The normed fit inde (NFI) value of.9 and comparative fit inde (CFI) value of.9 indicate a reasonable fit. Various goodness of fit statistics vis-à-vis their recommended values as given by various scholars is depicted in Table I. From these values it is inferred that model represent an acceptable fit. Various path estimates among latent variables of the model are depicted in table II. The positive signs of the parameters representing the paths between the latent variables are in line with hypothesized relationships. The magnitude of the estimated parameters provides information on the strength of the

4 hypothesized relationships. The parameter values reveal that they are significantly different from zero which is indicated t-values greater than. 9 at % level of significance. The squared multiple correlations (R ) for the structural equations indicate the amount of variation in each endogenous latent variable that is accounted for by the independent latent variables that impact upon it (i.e. reflect the joint eplanatory power of the hypothesized antecedents). Table I Goodness-of-Fit Measure for Model B Goodness-of-Fit Measure Indices Criteria Values Scholar(s) Chi-square/df. Bollen (99). Root mean square residual (RMSR). Kelloway (99). Root mean square error of approimation. Browne and Cudeck (99).9 (RMSEA) Goodness of fit inde (GFI).9 Jöreskog and Sörbom (99).9 Adjusted goodness of fit inde (AGFI).9 Jöreskog and Sörbom (99).9 Normed fit inde (NFI).9 Bentler and Bonett (9).9 Comparative fit inde (CFI).9 Bentler (99).9 Table: II Results for Structural Relationship in the Model B Values Obtained from the Model Relationships Parameter Estimate t value * Conclusion GAMMA ISQ ESQ.. Supported BETA ESQ ESQ Competitive Advantage Organizational Performance OP.. Supported.. Supported.. Supported.. Supported..9 Supported..9 Supported SQUARED MULTIPLE CORRELATIONS FOR STRUCTURAL EQUATIONS ESQ OP..... ISQ: Internal service quality ESQ: Eternal service quality : Competitive advantage OP: Organizational performance * -.9 < t <.9 indicate that parameter is not significantly different from zero at % level of significance. The values of (R ) are in the range of. to. which can be termed as moderate and acceptable []. The remaining variation might be eplained by other variables which are not included in this study. About % variation in the ESQ can be accounted for by the variability in the ISQ. About % variation in the satisfaction can be accounted for by the variability in the ESQ. About % variation in the loyalty can be accounted for by the variability in the ISQ and satisfaction. About % variability in competitive advantage is eplained by loyalty and % variability in organizational performance is eplained by competitive advantage and loyalty. Table III depicts the path estimates of the manifest The relations between latent and manifest values are significant which is indicated by corresponding t-values. The parameter values reveal that they are significantly different from zero which is indicated by t-values greater than. 9 at % level of significance. Signs of the parameter estimates are consistent with the hypothesized relationships among the latent The squared multiple correlations (R ) of the manifest variables are moderate to high (ranging from. to.) indicating that these variables are successful measures of the latent variables in the model. We find that there is a positive relationship between ISQ and ESQ satisfaction loyalty competitive advantage and organizational performance. The directional relationship among these latent variables is in line with structural representation as depicted in fig.. Therefore we accept the hypotheses H H a H b H H a H b and H c. Table IV depicts the direct indirect and total effects of endogenous latent variables amongst each other. Effects of endogenous latent variables amongst each other demonstrate that employee service quality has a positive relationship with satisfaction loyalty competitive advantage and organizational performance. Indirect effect of eternal service quality on loyalty is substantial and together with direct effect emerges as a key determinant of loyalty. Table III Results for the Measurement Portion of the Model B Model Parameter Estimates t value * R Estimates t value * LAMDA-X THETA- DELTA ISQ to Reliability -... ISQ to Competence ISQ to Friendliness ISQ to Credibility LAMDA-Y THETA- EPS ESQ to Credibility y -... ESQ to Friendliness y ESQ to Internal Communications y ESQ to Tangibles y..... ESQ to Professionalism y ESQ to Knowing the Customer y with partner organization y with benefits y to continue to work together y to recommendation y to quality of service y to quality y -... to delivery y to fleibility y OP to market share y OP to financial gains y..... ISQ: Internal service quality ESQ: Eternal service quality : Competitive advantage OP: Organizational performance * -.9 < t <.9 indicate that parameter is not significantly different from zero at % level of significance. Table IV Effects of Endogenous Latent Variables amongst Each Other On Path Competitive Organizational Effect of Advantage Performance Eternal Service Quality Direct Indirect Path :. Path:. Path :. Path :. Path :. Path:. Total.... Direct Indirect ---. Path :. Path :. Total...9 Direct.. Indirect ---. Total..9 Competitive Advantage Direct. Indirect --- Total. IV. DISCUSSION Analysis of data provides empirical evidence suggesting that model of the study might be a viable representation of the true relationship between observed and latent The direct and indirect effects of these variables on each other provide meaningful results. The service quality approach may indirectly improve an organization s financial and market performance in the long run. Service quality as offered by the focal organization to its employees has a direct impact on satisfaction and loyalty of its employees. The implementation of the service quality approach may provide the organization a competitive advantage on quality

5 delivery and fleibility dimensions. Service quality offered by the focal organization has a direct impact on satisfaction and loyalty of its employees. Employees realize that their ability to provide good service quality to each other reflects in their enhanced level of satisfaction which inspires their loyalty to each other. There are many ways to obtain loyalty; however the common denominator is employee friendliness their competence credibility and reliability. These findings are in line with those of [] who conducted their study in a small engineering organization and found that employee loyalty results not only in serving internal customers but also serving eternal customers and is one of the enablers of competitive advantage. This study finds a link between service quality and loyalty through an intervening variable of satisfaction. This could be true because the three automobile organizations from which data have been collected are situated in National Capital Region (NCR) in North India and these organizations are top organizations in their segment of industry and follow best in class processes and practices. Employees of these organizations value the locational advantage of these organizations have faith in these organizations and would like to continue to work in these organizations. The results also indicate that higher levels of competitive advantage may lead to improved organizational performance. Based on the effects service quality may have a direct impact on satisfaction and loyalty than on competitive advantage and organizational performance. This could be true because competitive advantage and organizational performance is usually influenced by several factors and it is difficult to surmise whether any factor such as service quality will dominantly determine the competitive advantage and overall performance of an organization. V. CONCLUSION In the manufacturing contet the role of ISQ and its relationship with ESQ competitive advantage and organizational performance has not been conceptualized previously. Future researchers can take a cue from this research and empirically test this model at other interfaces in a manufacturing setup to demonstrate the strength and direction of the proposed linkages. This study should be of interest to manufacturing industry practitioners interested in developing internal customer orientation- in a form of ISQ and ESQ. Managers should assess internal and eternal relationships with employees and take action necessary. Employees should be developed to identify their primary customers and then assess the level of service and product quality. A single manufacturing setting with three automobile organizations under investigation a small sample size and snowballing based sampling preclude much of the generalizability of the study findings. Organizations across various industries may differ in organizational structures roles and responsibilities business processes and organizational structures and the conceptualization of service quality may be moulded accordingly. REFERENCES [] L. L. Stanley J.D.Wisner The determinants of service quality: issues for purchasing European Journal of Purchasing and Supply Management vol. no. pp.9-9. [] C. Hart The power of internal guarantees Harvard Business Review vol. no. pp [] J. L. Heskett T. O. Jones G. W. Loveman W. E. Sasser L. A. Schlesinger Putting the service profit chain to work Harvard Business Review vol. no. pp [] R. J. Varey Internal marketing: a review and some interdisciplinary research challenges International Journal of Service Industry Management vol. no. pp [] S. Vandermerwe D. Gilbert Making internal services market driven Business Horizons vol. no. pp [] J. J. Cronin S. A. Taylor Measuring service quality: a reeamination and etension Journal of Marketing vol. no. pp [] F. Buttle SERVQUAL: review critique research agenda European Journal of Marketing vol. no. pp [] J. S. Long Covariance Structure Models: An Introduction to LISREL Sage Publications. Beverly Hills 9. [9] R. O. Mueller Basic Principles of Structural Equation Modelling Springer-Verlag New York NY 99. [] J. S. Tanaka How big is big enough?: sample size and goodness of fit in structural equation models with latent variables Child Development vol. no. pp.- 9. [] K. A. Bollen Structural Equations with Latent Variables. Wiley New York 99. [] P. Barrett Structural equation modelling: adjudging model fit Personality and Individual Differences vol. no. pp. -. [] R.P. Bagozzi Y. Youjae On the evaluation of structural equation models Academy of Marketing Science vol. no. pp [] P. Maclaran P. McGowan Managing service quality for competitive advantage in small engineering firms International Journal of Entrepreneurial Behaviour and Research vol. no. pp [] W. Boulding A. Kalra R. Staelin V.A. Zeithamal A dynamic process model of service quality: from epectations to behavioral intensions Journal of Marketing Research vol. no. pp Anneure I Table V: Items for Measurement of Internal Eternal Service Quality and Consequence of Organizational Service Quality in manufacturing Supply Chain. Measurement on five-point Likert Scale Eternal Service Quality: Service Quality Offered by Internal Service Quality: Service Quality Offered by Consequence of Service Quality Manufacturer Employees Credibility (Ghobadian et al. 99; Reliability (Parasuraman et al. 9) and ( Heskettet al. 99) Grönroos 9; et al Parasuraman. 9) Employees in your organization are reliable You are committed towards your employees Employees are consistent in delivering high quality products and You are consistent in working towards your employees You are satisfied with your organization. services Employees are prompt in action You take fast decisions You are satisfied in terms of salary and other benefits that Employees deliver correct quality at right time You show respect and positive attitude towards your employees you receive from your organization. Employees are trustworthy Competence ( et al Parasuraman. 9; You would continue to work in this organization. Ghobadian et al.99 ; Johnston 99) Employees maintain confidentiality in operations You show willingness to work towards organizational goals You would recommend your organization to others. Competence of employees You possess required skills and knowledge You would like to change your organization if other organizations offer higher salary but offer moderate service conditions/service quality. Friendliness (Haywood and Farmer 9; Johnston 99) You maintain proper communication with subordinates You would continue to work in this organization. Employees have willingness to work for the organization Friendliness Haywood ( and Farmer 9; Johnston 99) Achieving Competitive Advantage et al. (McGinnis 999 Tracey 999) Employees do their work on time You are helpful in solving employees problems Quality Employees understand the requirements of the organization You have faith and trust in working of employees Your employees deliver ecellent service quality Employees have positive attitude towards organization You protect your employees in case of emergency Responsiveness Employees are courteous You help your employees in getting required equipment and tools Your employees deliver products/ service on time Employees understand their work Credibility et al. (Ghobadian 99; Fleibility Grönroos 9; Parasuraman et al. 9) Internal communications (Ghobadian et al. 99; You are accepted by all in your department Your employees accommodate your organization s changing Haywood and Farmer 9; Parasur aman et al. 9) requirements. Employees are prompt in informing about progress/feedback Employee share relevant information among colleagues You care for training needs of employees You can be easily contacted Achieving Organizational Performance Market Share Use of ICT based tools Your employees help your organization in achieving its target market share Tangibles (Parasuraman et al. 9) Financial Gains Employees possess right tools and equipments Your employees help your organization in achieving profit Employees possess needed knowledge epertise and skills Professionalism (Grönroos 9) Employees demand just salary and allowances Employees maintain a positive work environment Employees demand ecellent service terms and conditions Knowing the customer (Grönroos 9) Employees are prompt in handling complaints Employees understand the impeccable reputation of your organization