EFFECT OF TQM PRINCIPLES ON

PERFORMANCE OF INDIAN SMES: THE CASE OF

AUTOMOTIVE SUPPLY CHAIN

Presented By:
 INTRODUCTION
• Organizations worldwide have recognized TQM as a means of business excellence
• Growing trend of global integration of automotive supply chain has induced Indian suppliers
to adopt TQM to improve organizational performance
• Many of them have secured the Deming award and Japan quality Medal: coveted
appreciations in the area of TQM
• Expectation: Indian automotive industry would grow to $115 billion by 2020 with exports
contributing to around 25% at $29 billion
• Challenges faced by the Indian auto component sector:
Stiff competition from the ASEAN countries
Growing demand from the global OEMs and Tier1 suppliers with regard to cost,
quality, delivery and productivity
Quality and reliability of Indian automotive subcontractors
• Qualities to imbibed by this sector in order to survive: cost competitiveness, customer
orientation, lead time
 RESEARCH OBJECTIVE & HYPOTHESES
• Process Approach positively impacts organizational performance

• Mutually Beneficial supplier relationship positively impacts organizational

performance

• Factual approach to Decision-Making positively impacts organizational

performance

• Involvement of people positively impacts organizational performance

• Customer focus positively impacts organizational performance

• Leadership positively impacts organizational performance

• Continual improvement positively impacts organizational performance

 RESEARCH METHODOLOGY
• Population: 480 members of the ACMA
• Sample: 120 quality heads of the Indian auto component SME registered under
SME
• Methodology used: Survey
• Response rate: 25%
• Pilot study conducted: Yes, on 30 auto Indian SME
• Questionnaires sent to corporates for checking the clarity, content and overall
structure and revised accordingly
• Questionnaire consisted of 53 questions out of which responses to first 36 questions
were factor analysed with varimax rotation which gave 7 factors
• Reliability through Cronbach’s alpha had come to 0.956
• Organizational performance was conceptualized using 3 variables: customer
results, process results and employee results, measured using 17 performance
indicators.
• The Cronbach’s alpha for the above computation was 0.941
 RESULTS & DISCUSSIONS
• The descriptive analysis computed the mean scores and standard deviation
and ranked the 7 variables in descending order
• Pearson’s coefficient was calculated which concluded that all the 7
independent variable were significantly and positively associated with
dependent variable
• The correlation coefficient between the independent variables is less than
0.9 i.e, there is no collinearity problem
• Problem with correlation: significant correlation coefficient might indicate a
common linkage between the independent and dependent variables
which can be corrected by multiple regression analysis
• The multiple regression analysis shows that 3 predictor variables were found
significant with an R2 value of 0.64
• As can be seen from the β value Process Approach is the largest contributor
followed by Mutually beneficial supplier relationship followed by factual
approach to decision making
 RECOMMENDATIONS
• SMEs must implement key principles of TQM to improve their performance
and enhance global competitiveness
• Hard TQM factors which pertain to production and work process control
measures have been found significant
• One soft factor which emphasizes defect prevention and reduction of
variation and waste in supply chain has been found significant
• Results of this study are consistent with the earlier studies
• Study by Wilkinson suggest that managers want a quick fix to satisfy short
term goals which may emphasize the hard measurement and control
aspects of TQM, leading to a neglect of the soft side
• There is a difference between the findings of the impact of some of the
factors in this industry. These factors are the soft factors like the involvement
of people, customer focus, leadership etc.
• These differences are because the SME’s deploy a large number of contract
workers and do not spend a lot of effort towards employee empowerment.
• Additionally, the increased focus on the supplier’s performance through regular
audits which again is linked to the plant performance vouch for the fact that
“customer focus” which is not linked to plant performance is found weak
• The importance of “Process approach” can in turn lead to an increase in the
performance in the processes and in turn increase in the quality of shop floor
activities
• Factual Approach to Decision making means that the effective decisions on quality
management are based on the analysis of sufficient data and information
• The soft factor “Mutually beneficial supplier relationship” results in reduced defective
incoming supplies, reduces in house rejections, lower waste generations etc.
• It also highlights the fact that the focus on hard TQM factors in order to meet the
cost and delivery demands of the OEMs are also a cause of the recent unrest in the
automotive sector
• It also raises a question: why the soft TQM factors which are essential for TQM
implementation have not been found significant
 LIMITATIONS

• Views of CEOs and COOs have not been taken into consideration
• More research needs to be done to draw a comparison between the
members of the ACMA and the large number of SMEs in the unorganized
sector