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Quality management in logisticsservices: A comparison of practicesbetween manufacturing companies andlogistics firms in AustraliaShams-Ur Rahman aa School of Management, RMIT University , Melbourne, AustraliaPublished online: 29 Apr 2008.

To cite this article: Shams-Ur Rahman (2008) Quality management in logistics services: Acomparison of practices between manufacturing companies and logistics firms in Australia, TotalQuality Management & Business Excellence, 19:5, 535-550, DOI: 10.1080/14783360802018202

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Quality management in logistics services:A comparison of practices betweenmanufacturing companies and logisticsfirms in Australia

Shams-ur Rahman�

School of Management, RMIT University, Melbourne, Australia

This study investigates the status of quality management practices in logistics and compares the extent ofquality practices between manufacturing and logistics companies in Australia. Using a sample drawnfrom two published databases, Australia’s Top 500 companies and firms enlisted as members ofLogistics Association Australia, the study examines the extent to which quality managementpractices are adopted, the impediments to implementation of quality improvement processes, thequality management tools employed, and the methods used to measure customer expectations inmanufacturing companies and logistics firms. The results show that the most important componentthat identifies quality in logistics is ‘on-time delivery’. The primary obstacles for not implementingquality programs in logistics firms are ‘changing corporate culture’ and ‘training and education ofemployees’, whereas, ‘establishing employee ownership of the quality process’ and ‘changing thecorporate culture’ are the two most significant impediments for the manufacturing companies.Overall, the findings indicate that the application of quality practices in manufacturing companies ismore extensive than the logistics firms. The Pearson chi-square test is conducted to find thesignificant differences between the two categories of organisations.

Keywords: Australia; logistics quality; logistics firms; manufacturing companies; survey

Despite evidence from around the world suggesting that effective quality management practices

can lead to improved organisational performance (Ahire et al., 1996; Kumar & Gupta, 1993;

Samson & Terziovski, 1999; Taguchi & Clausing, 1993), the importance of quality management

to logistics systems is yet to be fully realised. Quality is acknowledged as a critical component in

the value-adding process of product creation and delivery. Orders requiring rework have

been estimated to cost in excess of eight times the cost of those properly produced and

delivered (Bowersox et al., 1985). The importance of quality in this context is obvious.

Total Quality Management

Vol. 19, No. 5, May 2008, 535–550

�Email: shams.rahman@rmit.edu.au

1478-3363 print/1478-3371 online# 2008 Taylor & FrancisDOI: 10.1080/14783360802018202http://www.informaworld.com

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Quality management involves being proactive in performing the right activity, the right way

the first time, and continuing to perform tasks to the required level. In logistics, this could

translate into strategies aiming to make order cycle times shorter and more predictable, as

well as maintaining certain levels of in-stock availability and specific fill rates on customer

orders. More recently Anderson et al. (1998) and Forker et al. (1997) demonstrated that a

significant relationship exists between level of quality management practices and logistics

operational performance.

Previous studies in quality practices in logistics

Over the last two decades, a large number of studies have been conducted in the field of quality

management. These include studies aimed to identify critical factors of total quality manage-

ment (TQM) (Saraph et al., 1989; Black & Porter, 1996), develop and validate quality manage-

ment implementation models (Flynn et al., 1994; Ahire et al., 1996; Dow et al., 1999),

investigate the relationship between TQM practices and organisational performance (Flynn

et al., 1995; Powell, 1995; Samson & Terziovski, 1999), develop case studies (Kumar &

Gupta, 1993; Maul & Gillard, 1994), and assess the impact of ISO 9000 standards on organis-

ational performance implementations (Brown & van der Wiele, 1995; Rahman, 2001; Singels

et al., 2001). However, only a limited number of studies were conducted in the context of

supply chain and logistics services. This section provides a summary of these studies.

It has only recently been recognised that high quality logistics supply networks are an essen-

tial component in supply chain systems (Coyle et al., 1996; Choi & Rungtusanatham, 1999).

Despite this, most recent studies on quality and logistics have focused on a single company

or on its immediate suppliers and customers (Ebrahimpour & Johnson, 1992; Tan et al.,

1998). It is important to note that the quality level delivered to a final customer is the result

of the quality management practices of each partner of the supply chains, and hence each

partner plays an important role in the production and distribution process. There is evidence

to suggest that improving the quality of all logistics operations across supply chain stages

results in reduced costs, improved resource utilisation, and improved system efficiency

(Beamon & Ware, 1998). Beamon & Ware (1998) developed a conceptual model for the assess-

ment, improvement, and control of overall quality of supply chain systems. There are only a few

empirical studies that have investigated the effect of quality practices on logistics performance,

from a supply chain management perspective. Through an investigation of the supply chains of

the US electronics components industry, Forker et al. (1997) demonstrated that quality manage-

ment practices are related to organisational performance and suggested that companies should

continue promoting quality management practices throughout their supply chains. Anderson

et al. (1998) developed a causal model based on the criteria of the Malcolm Baldrige Award

to investigate the influence of quality practices on logistics performance. Their results

showed that a significant relationship exists between the level of quality practices and the logis-

tics outcomes, especially in the context of logistics operational performance and customer

service.

The study by Choi & Rungtusanatham (1999) is one of the few empirical studies that com-

pared quality management practices of manufacturing companies at different levels of supply

chains and across different industries. This study found no statistical difference in the level of

quality management practices across the supply chain. However, the results revealed an industry

effect on quality practices. The manufacturers in the automotive industry were more active in

strategic quality planning than their counterparts in the electronics industry. In a recent study

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of the apparel industry, Romano & Vinelli (2001) found that quality management practices and

continuous monitoring of quality parameters in logistics activities can improve a company’s

ability to meet its customers’ expectations.

A comprehensive survey of the state of quality practices in logistics was conducted by Read &

Miller (1991). This study investigated the application of quality practices in the logistics activi-

ties of North American and European companies, with the aim of gaining an insight into the

extent to which quality initiatives were practised, how such programs were structured, and

their main results. The study found that lack of pressure to initiate programs and lack of manage-

rial support were the major obstacles to implementing a logistics quality program. One of their

critical findings was that logistics quality programs are not driven by overall business success

factors.

Using a similar survey instrument, Millen & Maggard (1997) conducted a follow-up study to

the Read & Miller (1991) study and provided a comparison of quality management practices

between the two samples. The results showed much dissimilarity between the two studies.

For example, the major obstacles for the implementation of quality programs found by Millen

& Maggard (1997) was a lack of human and financial resources, as opposed to lack of pressure

to initiate and managerial support, as found by Read & Miller (1991). In addition, the Millen &

Maggard (1997) study found a greater degree of implementation of quality practices and quality

tools usage across different areas of logistics operations compared with the Read & Miller

(1991) study. A number of similarities between the two studies were evident, however. Man-

agers in both studies agreed that, in the future, the role of quality management in logistics ser-

vices will be much broader, encompassing all aspects of TQM. They also indicated that the

quality programs will receive greater support from the senior management in the future. More

recently, Sohal et al. (1999) investigated the adoption of quality practices in the logistics activi-

ties of Australian firms. The results showed that on-time delivery and total support to customer

needs were the two most important elements that define quality in logistics. The study also found

that lack of management support and lack of financial resources were the major obstacles to

implement quality programs in their logistics functions.

This study examines the status of quality management practices in logistics in Australian com-

panies and compares the extent of quality practices between manufacturing and logistics firms.

The manufacturing companies are the primary users of logistic services and the logistics firms

are the logistics service providers. Thus, the study aims to compare the quality practices between

the users and providers. Taking a sample of Australian companies, this study investigates the

extent to which quality management practices are adopted, the impediments to implementation

of quality improvement processes, the quality management tools employed, and the methods

used to measure customer expectations in both categories of organisations.

Research method

Sample

The sample was drawn from companies listed in two published: Australia’s Top 500 companies

(Hardwick, 2001) and firms enlisted as members of the Logistics Association of Australian

Logistics. A total of 223 firms were selected for the study, consisting of 120 logistics and 103 man-

ufacturing companies. Logistics/Operations managers were identified and sent copies of survey

questionnaires, together with a covering letter and a pre-paid reply envelope. In order to maximise

the response rate and to avoid non-response bias affecting the transferability of the findings, the

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following procedure was used: first, companies listed in the database of participants were contacted

by phone. The names of the relevant managers and their current contact details were obtained.

Where possible, an attempt was made to speak to the relevant manager about the aim and the

content of the survey. Then a reminder call was made to the relevant managers approximately

two to three weeks after the mail-out. Those who had not responded were encouraged to do so,

and those who had not received the package were sent a second copy. The survey resulted in 49

responses, a response rate of 22%. In this study, the survey instrument developed by Millen &

Maggard (1997) was used with only minor modifications.

Demographic profile

The managers of manufacturing companies were asked in which market niche their companies

operated. Figure 1 shows that the responding organisations were distributed over a large number

of industries including automotive, computer, telecommunications, food and beverage, publish-

ing and printed, pharmaceuticals, and chemicals industries. About 22% of the organisations were

automotive companies, followed by 15% pharmaceuticals and 13% chemicals companies. The

responding logistics firms were involved mainly in activities such as transport-distribution

management, and warehousing. They provided these services to companies which include

chemicals, pharmaceuticals, automotive, electronics, food and beverage, and other industries

(Figure 2).

Figure 3 shows the comparison of the distribution of employees between manufacturing com-

panies and logistics firms. The majority of the logistics firms (85.7%) had between 45 and 100

full-time employees and a large proportion of manufacturing companies (44%) had between 101

and 500 employees. Over 7% of the logistics firms had over 1000 employees and about one-

quarter (24.4%) of the manufacturing companies had over 1000 employees. Over one-quarter

Figure 1. Niche markets for the manufacturing companies.

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of the manufacturing companies had between 501 and 1000 full-time employees, whereas no

logistics firms belonged to this employee segment. Over 50% of the logistics firms operated

globally, and 52% of the manufacturing companies operated globally (Figure 4). About 25%

of both manufacturing and logistics firms operated in the Australian region.

Quality management practices in logistics services

This study compares the extent of quality practices in logistics services between manufacturing

companies and logistics firms. To ascertain any significant differences between the two cat-

egories of firms, a chi-square test was employed either at 0.05 or 0.01 level of significance.

Figure 2. Industries where logistics companies provide services.

Figure 3. Number of full-time employees.

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On-time delivery is the most important aspect of logistics quality

Managers were asked how they define logistics quality by identifying its three most important

components from a total of eight different components (Figure 5). The top three components

that identified quality for logistics firms were on-time delivery (87.5%), total support of custo-

mers’ needs (68.8%), and error-free transactions (43.8%), whereas the top three components for

manufacturing companies were on-time delivery (80.6%), consistency of order cycle (47.2%),

and total support of customer needs (30.6%). These rankings are found to be statistically

significant at p , 0.01 for manufacturing firms and at p , 0.05 for logistics firms.

The results also showed that, compared with other components, on-time delivery is by far the

most frequently used measure that identified quality in logistics for both categories of firms.

This is consistent with the findings of other studies (Millen & Maggard, 1997; McMullan, 1996).

Figure 4. Geographic coverage of companies.

Figure 5. Definition of logistics quality.

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On-time delivery, and order cycle are frequently cited in the literature as critical measures of

logistics performance (Gunasekaran et al., 2001; Beamon, 1999). These non-cost measures

are used in practice along with cost measures within the balance scorecard (Brewer & Speh,

2000) and supply chain operations reference (Supply Chain Council, 2003) performance

models. Compared with the logistics firms, a high proportion of manufacturing companies

(30.6%) viewed accurate inventory information as an important logistics quality indicator.

This finding suggests that accurate information on inventory is becoming increasingly important

(compared with the findings of Millen & Maggard, 1997 and Sohal et al., 1999), probably

because of the increased uptake of vendor-managed inventory (VMI) and efficient customer

response (ECR) management practices in Australian businesses (Harris et al., 1999; Kurnia

and Johnston, 2003).

Companies use several forms of organisational structure and administrative approaches tosupport quality programs

To understand the organisational aspects of quality programs, managers were asked to indicate

the forms of organisational structure used and people involved in them. Figure 6 shows the forms

of organisational structure used to manage the quality management and improvement processes,

and the results they have on performance. The results suggest that both logistics and manufac-

turing companies use several forms of organisational structure to support quality programs.

When the two categories of firms were compared, it was found that steering committees were

used frequently (28%) by logistics firms, whereas quality control departments were commonly

used by manufacturing companies (30%). However, these differences were not statistically sig-

nificant. Since manufacturing companies in Australia have adopted JIT approaches to managing

production processes (Gilmour & Hunt, 1998; Power & Sohal, 2000), it is not surprising to see

that manufacturing companies were more frequently using quality control departments as an

organisational structure to support their quality programs.

Respondents were provided with four approaches that could be used to administer a logistics

quality program, and were asked to choose those alternatives that applied to their organisations.

The results are shown in Figure 7. The two most frequently used approaches were specific employ-

ees dedicated to quality projects and all employees having some quality project responsibilities.

Although the intensity of usage of different approaches in this study differs from the findings of

Figure 6. Organisational structure used to support quality programs.

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Millen & Maggard (1997), the overall ranking of the approaches were the same. Compared with

the manufacturing companies, managers of the logistics firms more frequently used specific

employees dedicated to quality projects (58.3%) and all employees having some quality project

responsibilities (50%) approaches to support their quality programs. Very few programs of the

manufacturing companies (16.1%) were managed through an external department and no pro-

grams of logistics firms were managed through an external department. It is important to note

that although the employees in logistics firms were more frequently involved in quality projects

(50%, Figure 7), their usage of quality circles to support quality programs was not high (13.3%,

Figure 6). This may be related to the popularity of the term ‘quality circle’. In Australia, the

term is more popular in manufacturing companies than in logistics firms (Gilmour, 1993).

Quality programs are more integrated and more extensively implemented inmanufacturing companies

Managers were asked the extent to which quality programs are integrated into the company as a

whole (Figure 8). The managers of manufacturing companies were significantly more confident

Figure 7. Approaches employed to administer logistics quality programs.

Figure 8. Integration of quality programs.

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that the quality programs would be fully integrated into the corporate strategy (55.6%) than the

managers of the logistics firms (6.7%) ( p , 0.01). Also, compared with the managers of the

manufacturing companies (8.3%), managers of the logistics firms were more concerned with

the fact that quality programs were receiving only ‘some management attention with little inte-

gration’ with the overall business strategy (26.7%). One possible explanation for this is that

senior managers of many logistics firms may not yet see that the pursuit of quality should be

an integral part of the overall business process. Interestingly, 20% of the logistics firms believed

that quality would resume a traditional role in the future compared with only 3.8% in the man-

ufacturing companies.

Five different functions within logistics were listed in the questionnaire, and managers were

asked to indicate the extent to which a logistics quality management program was implemented

in these functional areas. Figure 9 presents these results. The two top logistics functions that

received extensive usage of quality programs in logistics firms were customer service

(73.4%) and transport-distribution (71.4%), whereas, the two top functions where quality pro-

grams were extensively implemented in manufacturing companies were purchasing (88.9%)

and warehousing (86.1%). These findings are similar to the findings of Sohal et al. (1999)

and Millen & Maggard (1997). Overall, the managers of manufacturing companies indicated

a greater degree of implementation across all areas of logistics management compared to the

managers of the logistics firms. However, these differences are not statistically significant.

Quality measurement and improvement tools are less frequently used in logistics firms

Three questions were asked to assess the effectiveness of quality programs, performance

benchmarks, and tools used to measure improvement. Organisations use a variety of procedures

to learn about the effectiveness of their quality efforts and to set targets (Figure 10). The most

frequently cited method by managers of the manufacturing companies was quality audit by

internal resources (82%) and the most frequently cited method by managers of the logistics

firms were competitive benchmarking (46.7%) and quality audit by internal resources

(46.7%). These findings are consistent with the findings of previous studies (Sohal et al.,

1999; Millen & Maggard, 1997; Read & Miller, 1991). Compared with logistics firms (46.7%),

Figure 9. Extent to which a quality program was implemented.

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a significantly high proportion of manufacturing companies used quality audits by internal

resources (82%) ( p , 0.05). While the use of third-party audits (i.e. external quality audits)

was common among the manufacturing companies (47.2%), none of the logistics firm used

this procedure ( p , 0.01). The managers of manufacturing companies indicated a greater

usage of all procedures except competitive benchmarking.

Figure 11 shows the extent to which various methods are used by companies to benchmark

performance against customer expectations. The three most frequently applied techniques

were line management visits to customer sites, customer surveys, and internal measurements

of repeat business. These results suggest that the participating organisations are customer-

focused and utilise a variety of methods to assess customer needs and expectations. Compared

with the logistics firms, more manufacturing companies employed customer survey techniques

to ascertain customers’ expectations. However, logistics firms use methods such as line

management visits to customer sites and measurements of repeat business more extensively

Figure 11. Methods used to measure performance against customer expectations.

Figure 10. Processes employed to measure quality performance and set targets.

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than the manufacturing companies. In general, logistics firms did not use market research data

and published information in trade and business journals, whereas a small number of manufac-

turing companies used such techniques (5.6%).

Managers were asked to indicate the tools they used to identify and track improvements in

processes (Figure 12). The most commonly used tools in both categories of firms were flow

charts, and statistical process control. These results are similar to the findings of Millen &

Maggard (1997). Overall rankings of the tools employed were similar for both categories

of firms. However, the managers of manufacturing companies indicated a greater degree

of application of these tools across all areas of logistics management compared with the

managers of the logistics firms. The results also showed that the logistics firms do not use

tools such as cause-and-effect diagrams, pareto charts, and scatter diagrams. Compared

with logistics firms, significantly more manufacturing companies use statistical process

control (67% compared with 33.3%) ( p , 0.05) and flowcharts (77% compared with

53.3%). Since the control chart is traditionally used in the manufacturing area, this result

does not come as a surprise.

Establishing employee ownership, changing corporate culture and the lack of humanresources are the major factors that impeded the institution of quality programs

The factors that impeded the implementation of quality management programs in logistics were

also investigated, the results of which are shown in Figure 13. The managers of logistics firms

saw changing the corporate culture (40%) and training and education of employees (40%) as the

two most significant factors obstructing the institution of quality improvement process in their

organisations. Establishing employee ownership of the quality process and changing the corpor-

ate culture were the two most significant impediments for the manufacturing companies. A sig-

nificantly greater number of manufacturing companies rated this factor as being the impediment

(64.7%) than the logistics firms (26.7%) ( p , 0.05). In addition, the result showed that

Figure 12. Tools and techniques used to measure improvement.

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executive commitment was the least likely impediment to quality improvement process for both

groups.

Figure 14 shows the reasons given by managers for not implementing a quality management

program in logistics functions. Lack of human resources and lack of financial resources were

identified as the major reasons for not implementing a quality program. When comparisons

were made between manufacturing and logistics firms, the results indicated that the reasons

such as lack of human resources, lack of financial resources, and lack of training were more

severe in the case of logistics firms. Lack of management support is not considered by the

Figure 14. Reasons for not implementing a quality program in logistics.

Figure 13. Impediments to quality programs implementation.

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managers of logistics firms as a reason for not implementing a quality program, whereas 20% of

the manufacturing companies believed that it is a concern.

Summary and implications

This research examined and compared the extent of quality management practices in logistics

between the manufacturing companies and logistics firms. The most important component

that identified quality in logistics was on-time delivery. The participating companies used

several forms of organisational structure to support quality programs, including the steering

committee of senior management, and quality department. However, steering committees

were used more frequently by logistics firms, whereas, quality circles were commonly used

by manufacturing companies. The primary obstacles for not implementing quality programs

in logistics firms were changing corporate culture and training and education of employees,

whereas, establishing employee ownership of the quality process and changing the corporate

culture were the two most significant impediments for the manufacturing companies. The

most commonly used tools to identify and track improvements in logistics management pro-

cesses were flowcharts, and statistical process control. The results also showed that tools such

as cause-and-effect diagrams, pareto charts, and scatter diagrams were not being used in the

logistics firms. Moreover, the managers of manufacturing companies indicated a greater

degree of application of these tools across all areas of logistics management compared with

the managers of the logistics firms. While the use of third-party audits was common among

the manufacturing companies, none of the logistics firms used this procedure.

These results indicated that many companies of both categories of firms have successfully

implemented quality programs in logistics functions. However, for further improvement in

their implementation of quality programs managers should focus on the following.

Integrate quality programs with corporate strategy

Overall, manufacturing companies are ahead of logistics firms in the application of quality man-

agement practices in the logistics functions. No respondent in either type of company believed

that their quality programs would not be supported by management in the future, however, the

two groups disagreed as to how integrated the quality programs would be. The managers of the

manufacturing companies were significantly more confident that the quality programs would be

fully integrated into the corporate strategy (57.6%) than the managers of the logistics firms

(6.7%). To achieve satisfactory results through quality practices, managers of logistics firms

must understand that the quality programs must be integrated into the corporate strategy. This

view has also been frequently expressed in the quality management literature (Deming, 1986;

Juran, 1989; Belohlav, 1993).

Develop closer links with suppliers

The results of this study indicate that participating companies assigned less importance to the

reliable suppliers (5.6% in the case of manufacturing companies and 12.5% in the case of logis-

tics firms). Supplying the right product at the right time in the right quantity at the right place is

critical to running effective logistics systems (Lambert et al., 1998). There is evidence to suggest

that closer links with suppliers ensure high quality services and improves return on investment

for the partners in supply chains (Dyer, 1994, 1996). The results of this survey suggest that

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logistics managers of both manufacturing and logistics firms need to improve their perception on

this aspect of logistics quality.

Concentrate on order cycle consistency and develop accurate inventory informationsystems

The results show that the managers of the logistics firms rate quality indicators such as consist-

ency of order cycle (18.8%) and accurate inventory information (6.3%) poorly. These two logis-

tics service quality indicators are equally important and as critical as measures such as on-time

delivery. Accurate inventory information is critical to avoid overstocking and understocking

situations and to maintain a steady flow of products through supply chains (Lee & Billington,

1992). On the other hand, consistency of order cycle helps managers to minimise uncertainties

related to order processing and order lead time (Lee et al., 1993). Managers of the logistics firms

should give appropriate attention to these quality indicators.

Acquire quality management skills through training and education

The managers of manufacturing companies indicated a greater degree of implementation of

quality programs across all areas of logistics management compared with the managers of logis-

tics firms. Manufacturing companies are ahead even in areas that are traditionally considered to

the core business areas of logistics firms, such as transport-distribution, warehousing and inven-

tory management. Managers of logistics firms must learn skills of quality management and

effectively apply these skills in various areas of logistics management. The results of this

study show that both groups of firms have applied simple quality tools to monitor and

measure improvements in various areas of logistics functions. However, the managers of man-

ufacturing companies used these tools more frequently than the managers of the logistics com-

panies. Tools such as flowcharts, histograms, and pareto charts are some of the simple but useful

tools for logistics functions. The managers of the logistics firms must develop skills in these

tools and apply them more frequently, particularly in areas such as transport-distribution, ware-

housing and inventory control, which are considered to be the core functions of logistics firms.

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