FACULTY OF SCIENCE AND TECHNOLOGY

SEM JAN 2017

SMQS5203

SUPPLIER QUALITY MANAGEMENT

MATRICULATION NO :
IDENTITY CARD NO. :
TELEPHONE NO. :
E-MAIL : peggy_lee_schee@oum.edu.my
LEARNING CENTRE : MIRI LEARNING CENTRE
 SUPPLIER QUALITY MANAGEMENT SMQS5203

TABLES OF CONTENT

ANSWER TO QUESTION 1:..............................................................................................3

1.0 INTRODUCTION..........................................................................................................3
1.1. Literature Review on Issues on Supplier Management.........................................3
1.2 Importance of Supplier Management.........................................................................4
1.2.1 Improve Product and Service Quality.................................................................4
1.2.2 Cost Optimization................................................................................................4
1.2.3 Create Understanding through Communication..................................................5
1.2.4 Promote Suppliers’ Loyalties in Long Term Business Support..........................5
ANSWER TO QUESTION 2:..............................................................................................6
2.0 INTRODUCTION (AIRASIA BERHAD - 284669-W)...............................................6
2.1 Organization Background......................................................................................6
2.2 Current Organization Development & Product, Services Offered........................6
2.3 Literature Review on Supplier Management & Development..............................7
2.4 Proposed Initiative to Improve Supplier Performance...........................................8
2.4.1 Conduct Survey on Food Quality feedback....................................................9
2.4.2 Develop Scorecards for Supplier.......................................................................10
2.4.3 Communicate with Supplier..............................................................................10
2.4.4 Discuss with the Stakeholder.............................................................................11
2.4.5 Launch Free Food Taste Campaign and Offers.................................................11
2.5 Supplier Performance Assessment Checklist.......................................................12
3.0 REFERENCES.............................................................................................................15

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ANSWER TO QUESTION 1:
1.0 INTRODUCTION

According to D. Kumar et, al., (2011), the supplier management system was initially
started with manufacturing industry in the early 80’s. During those days purchasing was a
norm and highly demanding marketing trend in the 80’s era to ensure business
sustainability.

1.1. Literature Review on Issues on Supplier Management

According to a conducted survey from D. Kumar et, al., (2011), majority respondents
agreed to proposed fuzzy logic system in enhance supplier selection process. Supplier
Selection process is a challenging task and requires careful consideration and comparison
analysis in the selection of the most suitable supplier that meets the criteria in term of
lower cost of supplies but not jeopardize in terms of quality of the product and service to
be deliver (Fonseca & Lima 2015). All selected supplier shall undergo performance
review evaluation occasionally through review on their problem-solving skill, feedback
and their product development.

Another issue topic that had been concerned and brought attention in all organization are
supplies quality issues. The supplies quality issues shall affect the overall operation and
business performance and profitability. Therefore, internal audit and external audit shall
be carried out for regulatory compliance inspection regularly. However, according to the
findings of A. J. Singer et, al., (1989), too frequent in audit execution may lead to
supplier’s stress and frustration. Moreover, quality management role was still lacking on
accountability issues which leads more quality training skills courses are still need to be
attended by the senior management to create the quality awareness of the organization.

An argument from J. Jayaram et. al,.(2011) stated that supplier performance needed to be
monitor and review to ensure quality standards system is being practice to well guard its
quality performance of the material supplies. A. W. Joshi (2009) suggested that rewards
and incentive program to supplier are capable to sustain supplier performance, likewise
also to improve supplier productivity.

Asides, defects or errors on supplies are one of extra cost that causes business

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abnormalities and delay in production lead time. However according to R. D. Shapiro
(1985), the trend has inclined to product and service quality and its reliable delivery,
buyer is not accepting any defective batch to ensure quality assurance met.

1.2 Importance of Supplier Management

There are several reasons to define the importance of supplier management. In general,
good supplier management helps in continuous business growth for an organization in
terms of quality supplies. The following are some of the main reason that explains the
importance of supplier management.

1.2.1 Improve Product and Service Quality

The enforcement of Quality Management system is crucial systematic approach to control

organization’s product and service quality.

According to Fonseca & Lima (2015), to sustain the quality system that pursue by
supplier, supplier need to produce more quality products and service that can earn more
customer retention and to meet market competitive demand. This can be done by business
innovation and strategy for product and service enhancement. Supplier must get ready to
adapt changes and be resourceful in technology information to helps in product and
service development in future.

1.2.2 Cost Optimization

Overhead cost is one of the expenditures that had always been highlighted by the financial
analyst. To pursue business operation efficiency, where overhead cost is to be minimized
or reduced, so that it will generate more profits for the organization in near future. One of
the cost incurred in supplies is the material cost.

However, according to R. E. Spekman et. al., European Journal of Purchasing & Supply
Management (1999), in consideration on the total cost incurred, it is recommended that to
narrow down considering the individual specific costs before any improvement decision
made. The author leverage the balance consequences between purchasing cost and the
material quality, considering the importance of both factor in managing supplier
effectively.

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1.2.3 Create Understanding through Communication

‘The creation of long term alliances that bind suppliers to customer is necessitating more
communication and interactions between purchasing managers and suppliers.’
The Journal of personal selling & Sales Management (2000)

From the above statement, communication either verbal or nonverbal and mutual
interaction connection between supplier and buyer are of crucial factor contributes to
prosper a long-term relationship that inherent a consistency in a profitable business
generation for both parties. Furthermore, a mutual understanding shall reach upon several
issues negotiation for both parties can resolve supplies issues. Therefore, in near future,
supplier shall be having some prior ideas of what buyers intend to buy, the expectations
and familiarity with their general requirements, therefore ease in deliver product and
services that request from the buyer.

1.2.4 Promote Suppliers’ Loyalties in Long Term Business Support

J. Jayaram et. al,.(2011) emphasize on proper supplier management system shall promote
a long term relationship with supplier and discourage the act on change of supplier. A
long-term supplier relationship shall create trust and confidence to build up revenue
together for both parties in terms of business support.

Frequent change of supplier shall affect the reputation to the organization in terms of
lacking efficiency in manage supplier effectively. Therefore, more development plan and
rewards incentive program should be introduced to supplier in order to foster a longer and
better buyer- supplier relationship.

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ANSWER TO QUESTION 2:
2.0 INTRODUCTION (AIRASIA BERHAD - 284669-W)

2.1 Organization Background

AirAsia is an Asia’s leading airline that established in year 2001 that creates opportunity
for everyone with the dream of making flying route possible. AirAsia was founded by Tan
Sri Anthony Francis "Tony" Fernandes, with the ‘no frill’ concept low cost airline that
renown to the Asia of its tagline "Now everyone can fly".

Initially on 2 December 2001, the company was bought over from a heavily indebted
airline DRH-Hicom, a subsidiary of Malaysian government-owned conglomerate
company for just only RM1 (One Ringgit Malaysia only) with a condition bearing a
negative debt of US$11 million (RM40 million), with assets of two Boeing 727-300 jet
aircraft. After a year of operating, the company has transformed the highly-indebted
company into a profit driven company that generating revenue and launched new routes
from its first hub in Kuala Lumpur, Malaysia. AirAsia Berhad is incorporated in Malaysia
and its registration number is 284669-W.

2.2 Current Organization Development & Product, Services Offered

And further to expansion its network in Asia together with the associate companies,
AirAsia X, AirAsia Philippines, AirAsia Japan, Thai AirAsia and Indonesia AirAsia,
AirAsia has become a largest low cost carrier in Asia in terms of jet fleet and the numbers
of passenger flown.

AirAsia is an airline service provider that provides passenger with the choice of
customizing travelling destination and with service recovery options on baggage missing
or delays and during flights delays or cancellation without compromising on quality of
services.

Asides, AirAsia also provides inflight service such as meals and merchandise sales on
board. One of the most critical outsourcing of services and products is the choices of
variety meals that supplied onboard. To ensure the quality of food met, hygiene and food
safety standards met, AirAsia undergo several food and drinks sampling to be tested and
consumed by the inflight catering crew first before to be ready to sell on board.
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Furthermore, food handling process are also a crucial process taken place to ensure
hygiene and food safety standard met. AirAsia continues to provide the best and value
food for all passenger on boards and looking forward to introducing a variety of meals
that affordable to all.

Picture 1: a
picture

showing a variety of AirAsia Inflight meals that sell on board flight

2.3 Literature Review on Supplier Management & Development

The first process, supplier sourcing and selection in supplier management is a crucial
stage that shall affect the later entire process of the supplier management stages. And
therefore, P. Pitchipoo et. al., (2015) presented a grey decision model to helps purchasing
managers to decide on the selection of suppliers with the analysis of all the related criteria
such as cost, delivery, capacity, and warranty factor. From this model, it has illustrated a
clear comparison on the factor analysis that optimized the decision in choosing the
suitable supplier.

Whereas, E. Xie et. al.. (2013) had made a contrast on the supplier selection strategy, i.e.
market-focused selection and relationship-focused selection strategy to review the
effectiveness on each of the selection strategy. Proven results that market-focused

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selection strategy produced more opportunities for improvement in developing strength of
the suppliers from more product and services development offered. As such from the
development, supplier performance shall be rewarded accordingly. This will ensure a
prolong relationship with supplier that assures products and services sustainability.

In terms of supplier relationship management, S. Moeller et. al., (2006) defines the three
phases in supplier relationship management, i.e. Out supplier management, In supplier
management, and In-dissolution management. These three phases were input as
framework to picturized the consequences conflict issues that endanger the relationship
and the alternatives solutions in nurture the supplier relationship as a precautious to
maintain a good relationship with suppliers.

Furthermore, implementation on supplier development activity and program are

encourage for the supplier performance improvement. This proven by the research J.Cai
et. al. (2014), supplier tend to have more development opportunities through service
engagement. Through the program, supplier shall be rewarded by giving incentives and
thus supplier perception of trustworthy and determination are strengthened.

Contracting/ Supplier
Sourcing Supplier Process Supplier
Supplier Performance
Supplier Selection Monitoring Development
Registration Assessment

Figure 1: A typical Supplier Management Process Flow

2.4 Proposed Initiative to Improve Supplier Performance

To sustain the food quality and striving for more variety of choices of meals selling on
board, methods to evaluate food quality and initiatives to learn from past inflight meals
experience is to improve the experience in meals and beverage that are served on board.
This shall take a good step to encourage supplier to be innovative and improve their
performance in supplying all the food and beverage that helps the company to generate
more ancillary revenue with selling of superior quality food and beverage.

Some of the ways to improve suppliers’ performance and capability are:

i. Conduct Survey on Food Quality feedback

ii. Develop Scorecards for suppliers
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iii. Communicate with suppliers
iv. Discuss with Stakeholders

2.4.1 Conduct Survey on Food Quality feedback

Under this context, there are two types of survey to be conducted that is internally and
externally. For internal survey, it refers to the survey conducted within the organization
and hence all staff are willing to share their on-board meals experience during their last
travels. For external survey, this refers to the mystery flyer which are being conducted
through distribution of survey links by emails to passenger who are frequent flyers.

The accumulated feedback from the surveys shall then review by the procurement team
and the group inflight ancillary team. The motive to conduct this typical survey is to
accumulate various behavior of the consumers in consume the meals on board.

From the perspective of understanding their character and desires on the meals selection.
Procurement team able to analyses and feedback to supplier in any chances of promotes
and increase in repetitive food orders from the demand on the consumer on board. For
instance, from the accumulated survey feedback, Pak Nasser’s Nasi Lemak is the most
favorite on board meal of all times, maybe a chance to notify supplier to increase volume
of orders per day to fulfil the needs of catering on board.

2.4.2 Develop Scorecards for Supplier

The reasons in developing a scorecard for suppliers are to evaluate the performance of the
supplier in supplying the product. Furthermore, the evaluation on the supplier scorecards
serves as the criteria in selection of suppliers and the continuity business attached to the
right supplier for a long run business.

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The most concerned factors of all is the cost and the pricing of the meals supplies, budget
control for the meals without compromising the food quality to be served on board. To
assess further, there are the four keys term that should be included in the scorecard that is
meals quality assess, meals development and innovation, meal delivery time, and meals
costing.

From the vendor/ supplier scorecard, the information that has plotted are generating a
review sets of considerations on the strength and weakness of the supplier, whether the
supplier is capable to deliver on time without compromising the food quality compliances.

The assessment on the meals supplier scorecards is to be execute quarterly just in line
with the four seasons (Spring, Summer, Autumn and Winter) and the climate temperature
change on board in meals serving. In such ways, it will be a method to evaluate the
supplier whether the delivery lead time of meals affected regardless to typical weather
climate change.

2.4.3 Communicate with Supplier

Any issues and complaints arises regarding to meals served shall be addressed
accordingly to the supplier. In a state of negotiation and resolution, supplier must come
out with ideas to solve the issues.

To foster a good relationship with the supplier, communication part serves as a significant
role to understand both parties needs and requirement to achieve mutual buyer and
supplier agreement.

For instance, concluded feedback from consumers conducted from survey and
questionnaires are to let supplier know, so that supplier can think of ways to make any
meals enhancement and improvement. Or in a positive thought, positive feedback from
consumer also encourage a good buyer- supplier relationship.

Keep in touch with the supplier by pay visit to the kitchen to understand the meals – food
handling process. Conduct meals inspection and audit at supplier workplace so that to
ensure food quality served are not under compromising level.

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2.4.4 Discuss with the Stakeholder

Conduct meeting with stakeholders to create alertness on new meals to be launch. Gather
feedback from the stakeholders to earn their approval of new food and beverage to be
introduce on board. In such ways, ideas and support from the stakeholders motivates
procurement team to allocate the right budget cost to select the right suppliers.

After all stakeholders are the decision maker who allows or disapprove the project. All
discussion had to be in real stage in meeting an agreement to approve said supplier to
supplies meals and beverage stock in long run. Therefore, in this condition, convincing
suppliers shall stand a chance to win the bid from the stakeholder to cater the business in
long run.

2.4.5 Launch Free Food Taste Campaign and Offers

The initiative of launching food tasting campaign is same as conducting meals survey
from consumer. The only difference is that the campaign is a prior food assessment
launch before it is to be sell on board. From this free food tasting, the company gains
reputation from publicize the brand from various social medias.

The campaign and offers serves as a strategy to pursue a power of return repurchasing for
the meals that generates ancillary revenue for the company. Hence increase in repetitive
orders for meals to be served on board and likewise strengthened the relationship between
the company and the suppliers in such ways from the promotions for a long run business.

This kind of campaign incurred high investment cost, requires approval from the
management. However, a positive mindset blown off that the return shall covers all the
cost incurred ensuring the right and correct supplier have met the expectation of the meals
consumer to produce a favorite choice of all selections meals. Furthermore, this also
serves as an encouragement for supplier in building up their confidence level to serves the
company better.

2.5 Supplier Performance Assessment Checklist

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No Activity/ Particulars/ Confor Non- Corrective Action/
. Requirements m Conform Recommendation

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A. Survey from Food Quality
Feedback

1 Does the quality of food served

meet passenger satisfaction?

2 Are there adequate food supplies

on board to cater the inflight
service’s needs?

3 Are the food packaging pack in

order and ease to wrap off for food
consuming?

4 The food served on board is well

cooked and fresh.

5 Is there any improvement areas

that can improve meals serving on
board?

B. Scorecards for Supplier

1 The supplies’ price quoted is

acceptable and within budget cost
range.

2 The supplier has adequate

knowledge on food process and
handling procedure.

3 The supplier has been certified by

quality management system
(QMS).

4 The supplier had ensured a high

standard hygiene and cleanliness
maintain at their facility and
office.

5 The supplier had deliver the food

product according to the general
specifications and on schedule.

6. The payment and other general

terms and condition offer is
acceptable.

C. Communication & Support

1 The personnel in charged can

convey message in firm and

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concise as delivered.

2 The supplier is supportive and

tactful to handle issues and
problems, with execution a prompt
action in resolutions.

3 The supplier shown interest in

product development and training.

4 Supplier seeks clarity on product

requirement and willing to seek
improvement through innovation.

D. Discussion with Stakeholders

1 Is the supplier overall performance

acceptable by the stakeholders?

2 The supplier has delivered the

requirement as per expectations of
the stakeholders.

3 The stakeholder willing to

continue financial support for the
existing supplier.

4 The supplier willing to accept

critics and comments of
stakeholders to promote quality
food product.

E. Free New Food Tasting

Campaign feedback

1 Is the new food product/offer

launch in conformity to food
quality standard?

2 Does the new food product/ offer

acceptable by public?

3 Does the packaging of the food

impressed the public?

4 Does the food tasting campaign

launch effectively to create
awareness to the public?

5 Are there any improvements areas

highlight from the campaign?

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Ratings Total
Conformance
Non-Conformance

FINAL COMMENTS:
________________________________________________________________________
________________________________________________________________________

3.0 REFERENCES

Agus, A. (2011). The significant effect of information sharing and strategic supplier
partnership on supplier performance. International Journal of Business and Management
Science, 4(1), 75.

Bemelmans, J., Voordijk, H., Vos, B., & Buter, J. (2012). Assessing Buyer-Supplier
Relationship Management: Multiple Case-Study in the Dutch Construction
Industry. Journal of Construction Engineering & Management, 138(1), 163-176.
doi:10.1061/(ASCE)CO.1943-7862.0000418

Buyer-Seller Relationships--Purchasing--Supplier Issues. (2000). Journal of Personal

Selling & Sales Management, 20(1), 66-67.

Cai, J., Smart, A. U., & Liu, X. (2014). Innovation exploitation, exploration and supplier
relationship management. International Journal of Technology Management, 66(2/3),
134-155. doi:10.1504/IJTM.2014.064589

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Fonseca, L. M., & Lima, V. M. (2015). Impact of Supplier Management Strategies on the
Organizational Performance of ISO 9001 Certified Organizations. Quality Innovation
Prosperity / Kvalita Inovácia Prosperita, 19(2), 32. doi:10.12776/QIP.V19I2.592

Kumar, D., Singh, J., & Singh, O. P. (2011). Analysis of supplier related issues with
implementation of fuzzy logic for Indian textile organizations. International Journal Of
Logistics Systems And Management, 10(3), 313-339.

Jayaram, J., Xu, K., & Nicolae, M. (2011). The direct and contingency effects of supplier
coordination and customer coordination on quality and flexibility
performance. International Journal Of Production Research, 49(1), 59-85.
doi:10.1080/00207543.2010.508935

Joshi, A. W. (2009). Continuous Supplier Performance Improvement: Effects of

Collaborative Communication and Control. Journal Of Marketing, 73(1), 133-150.
doi:10.1509/jmkg.73.1.133

Liang, C., Ellis, S., & Holsapple, C. (2015). Supplier Development: A Knowledge
Management Perspective. Knowledge & Process Management, 22(4), 250-269.
doi:10.1002/kpm.1478

Mettler, T, & Rohner, P 2009, 'Supplier Relationship Management: A Case Study in the
Context of Health Care', Journal of Theoretical & Applied Electronic Commerce
Research, vol. 4, no. 3, pp. 58-71.

Moeller, S., Fassnacht, M., & Kiose, S. (2006). A Framework for Supplier Relationship
Management (SRM). Journal of Business-To-Business Marketing, 13(4), 69-94.
doi:10.1300/J033 vi 3n04̱03

Pitchipoo, P., Venkumar, P., & Rajakarunakaran, S. (2015). Grey decision model for
supplier evaluation and selection in process industry: a comparative
perspective. International Journal of Advanced Manufacturing Technology, 76(9-12),
2059-2069. doi:10.1007/s00170-014-6406-2

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Shapiro, R. D. (1985). Toward effective supplier management: international
comparisons. Working Paper.

Singer, A. J., Churchill, G. F., & Dale, B. G. (1989). SOME SUPPLIER QUALITY
ASSURANCE ASSESSMENT ISSUES. Quality & Reliability Engineering
International, 5(2), 101-111.

Towards more effective sourcing and supplier management. (1999). European Journal of

Purchasing & Supply Management, 5(2), 103.

Ying, H., Sternquist, B., Chun, Z., & Calantone, R. (2011). A Mixed-Method Study of the
Effects of Guanxi Between Salespersons and Buyers on Retailer-Supplier Relationships in
China. Journal Of Marketing Channels, 18(3), 189-215.
doi:10.1080/1046669X.2011.584300

Xie, E., Peng, M., & Zhao, W. (2013). Uncertainties, resources, and supplier selection in
an emerging economy. Asia Pacific Journal Of Management, 30(4), 1219-1242.
doi:10.1007/s10490-012-9321-9

(Total words count: 2912 words)

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